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My 12-Step Financial Freedom Checklist

Put yourself on the path to financial freedom with this financial checklist to cover everything from debt to investing and enjoying life.

Quotes about planning and failing have been attributed to everyone from Albert Einstein to Winston Churchill. I won’t add my own notable remark to the list but will say that without planning, I never would be where I am today – doing something I love, living where I want and getting paid in the process. I’ve achieved a level of financial freedom because I made a plan early on and set realistic goals.

Don’t get me wrong. It wasn’t a straight shot to paying off my debt, saving the money I needed and learning the trade that would allow me the freedom to work wherever I wanted. I highlighted my first money blunder in a previous video post and I’ve made enough money mistakes for many more posts. But I stuck to my financial checklist and am doing pretty well.

Your own path probably won’t be a smooth ride either but if you stick with some of the ideas in the checklist below, you too can achieve financial freedom. Some of the tasks will take longer than others so it’s best to hit on a few at the same time, for example don’t wait until your debt is paid off to start investing. Remember to reward yourself when you’re able to check something off the list and make it a family goal.

Your Step-by-Step Financial Checklist for Financial Freedom

Financial Freedom Checklist

Financial Freedom Checklist

The first few ideas on the list are more basic and it’s easiest to start there but the financial freedom checklist is not necessarily in order. Check out the full list before you begin and plan on which you will tackle first and which can be done at the same time.

It’s important to set goals and to follow your progress on the financial checklist, otherwise you could find yourself procrastinating some of the more difficult points to financial freedom. Set milestones like, “Achieve an amount of money saved or cut expenses by %,” by a certain date.

Financial Freedom Checklist #1: Set realistic goals and a budget you can keep

This is based on one of our most popular articles on the site. As I found out in my first money blunder, it’s not enough to set goals, you have to set realistic goals. Too many people get carried away saving and skimping. Unrealistic goals and a nose-to-the-grindstone budget just sets them up for failure because they burn out quickly. Check out how to set realistic financial goals and a budget you can keep. Learn which important goals you need to set for long-term financial freedom and add them to your financial checklist.

Financial Freedom Checklist #2: Figure out which expenses you REALLY need

More than a year after moving to Medellin, a city the size of Chicago in Colombia, my wife still misses having a car but I love the freedom from gasoline, insurance and constant maintenance. There are a ton of things we pay for that we really don’t need and may actually be making you miserable. Cutting out unnecessary expenses isn’t about living life like the Amish or denying yourself convenience, it’s about learning what is really important to you and what makes you happy. If you’re unsure about a few, try giving up the expense for a month and see how you feel with your new financial freedom.

Put this neat budget trick on your financial checklist. Write down your monthly expenses from most to least important. Don’t write down how much they cost each month, just focus on how important the expense is and how much enjoyment you get from it. By putting the cost of expenses on a budget, it’s easy to let the little stuff slide because, “it’s only a few extra bucks a month.” Drop the stuff that’s not important, no matter how cheap.

Financial Freedom Checklist #3: Turn your “stuff” into something real

We all have “stuff,” those things sitting around the house that you thought would be cool to have but rarely use. Some may be relatively small like a pen that writes upside down while other stuff, like that new treadmill that you know you’ll never use, may be worth some extra money. Sell your stuff on Craigslist or take it to a consignment shop and turn it into something real. Put the money to your financial checklist goals or spend it on something you are really going to use.

Financial Freedom Checklist #4: Create an Investor Policy Statement

This is a big one and the subject of another post on putting together your investment goals and plan. Most people understand they need to be investing to reach their financial goals but very few actually have a plan on how to get there. An investor policy statement (IPS) is a formal plan of the factors around your investment strategy. In it, you’ll balance your need for return with your tolerance for risk to make sure you are not investing all your money in the next internet craze. You’ll also use it to understand when you need your money and other limitations to investing to reach your goal of financial freedom.

Avoid the complex trading strategies and stock-picking schemes. They’re just going to lose your money and enrich the people collecting trading fees. Look for a discount online broker like Motif Investing and use a simple buy-and-hold strategy.

Click for this special offer from Motif – Get $150 cash back on a new retirement account

Financial Freedom Checklist #5: Pay off bad debt, keep good debt

This is an important one for me because so many other bloggers and people in the financial community will tell you to pay off all debt immediately. Debt is a great financial tool and not using it properly is denying yourself a great financial future. It’s like trying to build a house without power tools. You can do it but you’ll likely not get the house you wanted.

Check out my earlier post to learn the difference between good debt and bad debt and how to be debt free – the right way. It starts with understanding how to use good debt to get the things you need while avoiding bad debt and the oppression that it brings.

One way to use good debt is through a consolidation loan, using a personal loan to pay off high-interest credit card debt. Peer Lending sites like PersonalLoans.com offer loans up to $35,000 at rates around 8% depending on your credit. There’s no origination fee and you get a loan with a fixed payment instead of a building credit card statement.

financial checklist year end checkup

Financial Freedom Checklist #6: Get all the free money you can

There is actually free money out there but a lot of people don’t even take advantage of it. The biggest one is the employer match on your retirement savings accounts. Most employers will offer to match, to a certain percent, the contributions you make to your 401k or other plans. That’s like an instant 100% return but many people risk their own financial freedom by not contributing. Take it from a guy that has spent most of his professional career analyzing stocks and investments, you will never get a better return than the free money you get from your employer match.

Besides the tax deduction you’ll get from contributing to retirement savings accounts, the IRS also offers a credit for households that make under $55,500 (2015) for a portion of your contribution. The credit is called the Retirement Savings Contribution Credit and can save a lot of money in taxes. You need to save for retirement anyway, you might as well do it AND save on your taxes at the same time

Financial Freedom Checklist #7: Start an emergency fund

With all the expenses of our normal life, including saving and investing for the future, it’s hard to put away money that is just going to sit there. Then again, ask anyone that has been unemployed for a long-period or that had an unforeseen emergency and they’ll tell you how hard it is putting your life back on track. An emergency fund is like buying financial insurance, you may not need it but you absolutely must have it if something happens.

Save at least three to six months worth of expenses and put it in very safe investments like savings bonds. These are not going to earn much but you won’t lose money either. Resist the temptation to invest in anything riskier despite the higher return. The value of the funds could easily decrease just when you need them most.

Financial Freedom Checklist #8: Start turning your hobby into a paying gig

While many of the other steps are basic personal finance needs, this one is really going to put you on the path to financial freedom. Being financially free isn’t about not having to work, it’s about doing what makes you happy and getting paid to do it. It’s about having the freedom to shuffle off the 9-to-5 rat race and decide your own financial future.

We did a 5-part series on making extra money freelancing and I shared my experience how I make money writing online. Like any job, it may take a while until you are good enough at your hobby-job to get paid for it. Your passion for the interest will go a long way to keeping you motivated and helping you learn.

Financial Freedom Checklist #9: Get the protection you need

Insurance was the subject of part five in our 5-week personal finance fix series. It’s something few people enjoy talking about or doing but critical to your financial freedom. Health and medical bills can destroy a lifetime’s worth of diligent saving in an instant. It sucks to be paying out hundreds a month for something you may never even need but it’s a small price to pay for the security it brings. You may not need the expensive “Cadillac” plans offered but you need basic coverage for health, home and life.

I like compare.com for its lenders compete model for car insurance. The site shares your insurance application with lenders which then compete for your business, offering the best rates available.

Easy, quick and secure insurance shopping experience at Liberty Mutual!

Financial Freedom Checklist #10: Find out what retirement looks like to you

More than four million American seniors live below the poverty line, less than $1,000 a month and barely enough for food and shelter. Nearly everyone understands the need to save for retirement but few actually take the time to understand what they want in retirement. Not having a clear picture of your retirement goals is what causes most people to put off or stop saving. Check out a prior post on understanding your retirement number and realistic retirement planning.

Financial Freedom Checklist #11: Save more on taxes

financial checklist tax planningMost people cringe at thinking about taxes for 334 days of the year, only spending a month to figure out how to cut their tax bill. Using all the credits and deductions available can be some of the easiest money you’ll ever find. An earlier post reviewed the 16 easy money tax tips you can use for year-round savings.

Financial Freedom Checklist #12: Giving regularly

This is something I struggle with but is important to me. It’s tough to think about others and to donate money, especially when your own finances can be pretty tight. Finding a cause to support can be some of the most rewarding time you’ll spend and can offer much more than just financial freedom. You don’t have to become a saint to make things better for someone else, do what you can and you’ll be happier for it.

These 12-steps to financial freedom probably won’t make you a millionaire but they will put you on the path to a happier, financial life. Set goals for each and a timeline to your destination. It will be difficult at times but you should gradually see yourself closer to your financial checklist goals. I’d love to hear what other steps you’ve made on your financial checklist. Add them to the post by commenting in the box below.

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Joseph Hogue, CFAAbout Joseph Hogue

An investment analyst by profession, I run two blogs (Crowd101 and PeerFinance101) in personal finance, peer lending and crowdfunding. I've been on both sides of the table as a lender and a borrower and am excited to be a part of the peer movement. With the power of the internet, people are helping other people manage debt and raise money in ways never before possible.

A veteran and Iowa-native, I now live in Colombia with my wife and son. Like so many people, I was once trapped into the money myth and what it means to be successful. After taking control of my finances and learning how to make money in a job I love, I found a level of financial freedom that just has to be shared.

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