July has us thinking about freedom, independence, and more quality family time. There’s another kind of freedom – financial freedom. The phrase can mean different things to different people: Maybe it’s freedom from worrying about meeting monthly obligations, retirement goals, or even retiring early so you can spend more time with family.

Whatever it means to you, it can be less meaningful if it requires sacrificing present-day family and personal time to achieve it.

Below are some concrete steps to help you achieve worry-free financial independence without sacrificing a healthy work/life balance.

Step 1: Assess Your Current Financial Situation

This first step might be the hardest because it involves facing reality, but it’s an absolute necessity that you gain a clear understanding of your financial status. This includes:

1. Income – calculate your total monthly income from all sources.
2. Expenses – Track your spending to identify where your money goes each month.
3. Debts – List all your debts, including mortgages, student loans, vehicle payments, credit cards, streaming subscriptions, utilities, and other liabilities.
4. Assets – Take stock of your savings, investments, property, and other assets.

Step 2: Set Clear Financial Goals

Here’s where you define what financial independence means to you. Set specific, measurable, attainable, relevant, and time-bound (SMART) goals. Examples include:

1. Short-term goals – Pay off high-interest debt and build an emergency fund.
2. Medium-term goals – Save for a down payment on a house, college tuition, or enough cash to purchase a vehicle or boat outright.
3. Long-term goals – Accumulate retirement savings, achieve a passive income stream that covers your living expenses – check out some ideas from Fidelity here.

Step 3: Create a Budget and Stick to it!

A budget is fundamental in financial management. Follow these steps:

1. Track your spending – Use apps or spreadsheets to monitor your expenses.
2. Categorize expenses – Divide them into needs (rent and groceries) and wants (dining out and entertainment) and then set limits for each category. Fidelity recommends starting with a 50/15/5 framework: 50% of your take-home pay for essentials, 15% of your pre-tax income to retirement, and 5% of take-home pay to short-term or emergency savings.
3. Review regularly – Adjust your budget as needed to stay on track. Take into consideration the time of year; households usually spend the most money during the holiday season, and also during the back-to-school season in late summer – July and August – for school supplies, clothing, and related items. You may need to temporarily adjust your numbers to account for these spending spikes.

Step 4: Build an Emergency Fund

An emergency fund is essential for financial security and freedom. Aim to save at least three to six months’ worth of living expenses in a dedicated savings account. This fund should be easily accessible but kept separate from your regular savings to avoid unnecessary spending from the account. Ask your bank if it has a high yield savings account and set up automatic transfers to ensure consistency.

Step 5: Pay Off Debt Strategically

Debt can be a significant barrier to financial independence, so ridding yourself of it is key, particularly high-interest debt. Two common methods are the snowball method and the avalanche method:

• Snowball – Pay off your smallest debts first, then use the freed-up money to tackle larger debts.
• Avalanche – Pay off debts with the highest interest rates first to save on interest rates over time.

What method you choose can be a psychological decision: Some people get a sense of accomplishment paying off smaller debts in full, even if the avalanche method might save more money over time.

Step 6: Invest Wisely

Investing is crucial for growing your wealth to achieve financial independence. Consider these options:

1. Retirement accounts – Maximize contributions to employer-sponsored retirement plans like 401(k)s.
2. Individual Retirement Accounts (IRAs) – Contribute to a Traditional or Roth IRA for additional tax-advantaged growth.
3. Stock Market – Invest in a diversified portfolio of stocks, bonds, and mutual funds.

Remember, if you feel overwhelmed, or are just looking for some additional guidance for your retirement savings, you can participate in Fidelity’s Personalized Planning and Advice session on July 30. Log into your NetBenefits account to register.

Keeping the Fun in Financial Freedom

With some planning and discipline, you can pursue both financial independence and a healthy work/life balance. Establish boundaries between work, personal, and family time. Prioritize your health and try not to overcommit to work or social obligations. Remember to enjoy the journey as much as you anticipate the goal.