Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr Achieving financial freedom is one of the main concerns of recent graduates. As we are growing up, we hear that we must go to school and then get a job. However, we are never taught exactly how to be financially free. That is a major worry of many recent grads, especially because of student loan debts. According to Forbes, student loan borrowers graduate with an average of over $28,000 in student loan debt. Recent graduates often feel overwhelmed and discouraged by this financial burden. Many college graduates feel that they will never know what it is like to live without debt hanging over their heads. However, if you see yourself in this situation, you can rest assured that there are many alternatives to lead you to financial freedom. Follow these steps to enjoy long-term financial stability: Step 1: Understand Where You Are And Where You Want to Be The first step in any problem-solving process is to understand the current situation before determining the ultimate goal. Getting a handle on your finances is a matter of figuring out where you stand financially. Building a budget is the perfect way to get started. Your budget begins with a simple balance sheet. Start by listing all of your sources of income and all of your expenses. When you are just getting started, you may want to stick with necessary expenses and add in extras like entertainment later. You will also want to create an achievable goal. For example, if you want to buy a home within the next 5 years, and you have $30,000 in debt, you must make goals such as paying off at least $6,000 off per year. Understanding your budget gives you the opportunity to examine your income and expenses and determine whether any expenses can be cut. Step 2: Get Rid of All Your Student Loan Debt One of the biggest financial barriers that new graduates face today is the overwhelming burden of student loan debt. It is hard to focus on the next steps of your career if you have to make massive monthly payments towards your debt. While some people choose to make minimum payments on their debt, this option often drags out payments for 20 years or more. Fortunately, there are many alternatives that make it is possible to get rid of your student loan debt in a short period of time. One of the options is to enroll in automatic payments. This means increasing your payments to try to get a discount on interest from the lenders. This option allows you to ensure your payments are made on time each month while reducing the total amount you pay on your loan over time. However, keep in mind that borrowers who choose to make big monthly payments often have to recur to an alternative source of income. There are also multiple student loan forgiveness programs that can help you to achieve your financial freedom faster. Around 50% of student loan borrowers qualify for some type of student loan forgiveness program. It is worth it to look into these programs. If you want to focus on your career growth while taking care of your student loan debt, a great option is to find a job that offers student loan assistance as an employee benefit. Many companies have been adding this type of compensation to their employee benefits package as it is a great way to invest in their employees’ wellness as well as contribute to the country’s economy. Step 3: Create Sources of Passive Income While your full-time job may take care of ongoing living expenses, padding your bank account with passive income is an important step to achieving long-term financial freedom. Passive income does not require your attention on a day-to-day basis, and you do not have to put in hours at the office or laboring away to earn this type of income. There are multiple ways to keep cash flowing with minimal effort. If you already have a website or blog, affiliate links, display ads, and cost-per-click advertising can net you a profit without requiring you to make calls or send emails. Advertising through content creation is another passive way to earn money online. For example, content that is frequently viewed on YouTube can generate significant income for the people who create such content. If you are looking for a more traditional option for creating sources of passive income, consider investing in a rental property. Property owners can hire a property manager to take care of maintenance requests and rent collection for a modest fee. When you opt for rental property investment, you double your investment by adding real estate to your portfolio while collecting passive income in the form of rent. Step 4: Build an Emergency Fund Once you have your debts paid off and your income sources established, it is time to plan for emergencies. It is recommended that you save enough in an emergency fund to cover a minimum of three months of living expenses. When you calculate how much to save to cover expenses, remember that luxuries do not need to be factored into the equation. The goal is to save enough to satisfy all of your financial obligations for at least three months in case of an emergency such as an unexpected job loss or the need for a major medical procedure that is not covered by insurance. One way to get your emergency fund started is to put any proceeds from your annual tax refund into a special account. It is also recommended that you decide on how much to contribute to the fund each month until it grows to the desired target. The money you earn through the passive income sources you have established can be a great option when it comes to emergency fund contributions. When your emergency fund has grown to the appropriate size, be sure to put it into a low-risk investment account to earn interest. There are savings accounts available that pay up to 2 percent in interest each year without compromising the liquidity of your funds. Step 5: Save for Retirement Saving for retirement is an essential step to maintaining your financial freedom as you transition out of the workforce. While it may seem like retirement is a far-off chapter that does not require your attention shortly after college, the fact is that saving now enables your savings and investments to grow substantially over the decades. Many financial advisors recommend that you save at least 15 percent of your income to pay for retirement. If you work for an employer that offers a company match program for your retirement fund, you can count the percentage that your employer puts into your account as part of the 15 percent. If you are considering putting off saving for retirement until you are older, keep in mind that retirement investments typically offer compound interest. Compound interest is applied and added to the principal investment, so you will start to earn interest on the interest that has been added to your investment in past years. To put it into perspective, imagine that you decide to save $1,000 per year for retirement. In this scenario, imagine that your investment grows at a rate of 5 percent per year. You plan to retire at 62. If you start saving at 20, you will end up with $149,755. If you wait until 30 to start saving, you will only end up with $83,829. Putting your investment off for 10 years may save you $10,000, but it ends up costing you over $60,000 at retirement. Enjoy Your Financial Freedom Investing in your financial freedom is one of the best decisions you can make. The earlier you start taking steps towards this goal, the earlier you will be able to enjoy its benefits. Remember that you cannot achieve ultimate peace of mind without being financially free. And that is not only about covering your own expenses. It is about being able to make choices and even meet the needs of your loved ones. Financial freedom will enable you to leave your legacy.