Move Closer to Financial Freedom With These 8 Great Tips

Most Americans know all too well that here in the United States, we celebrate our nation’s independence each year on the Fourth of July. (In fact, the holiday is marked by such star-spangled celebrations and red, white and blue revelry that — even for the uninitiated — the explosive observation would be hard to miss.) But did you know that there’s another national observation in July that celebrates a different and more personal type of freedom? Marked each year on July 1, National Financial Freedom Day is meant to bring awareness to the importance of someday achieving financial freedom. And while this can mean different things to different people, it is generally defined as the ability to live as you desire without having to depend on outside assistance, without carrying the burden of substantial debt or, eventually, without even having to worry about full-time employment any longer.

8 solid steps toward financial freedom

No matter how you define financial freedom, the steps to getting there are similar for most people, as how to become financially independent typically involves practicing financial discipline, planning ahead and setting money aside.

Are you ready to start making your own vision of financial independence a reality? Consider implementing these eight money-smart practices that can help you achieve your goal of financial freedom:

  • Become familiar with your finances.

    • To start moving toward financial freedom, you must first have a keen awareness of where you stand financially, along with a strong understanding of how much money you have coming in and going out each month. One of the best ways to do this is to create a household budget. In the process, you’ll gain powerful insights on details such as how much income you bring in each month, how much you spend paying off debts each month and how high your monthly expenses are. Perhaps most importantly, you’ll learn where you might be able to cut down on your expenses and save.
  • Live within your means.

    • No matter what your personal definition of financial freedom may be, you won’t be able to achieve it if you’re consistently spending more than you make each month. And of course, if you can find ways to live well below your means, you’ll have more money available for making regular and substantial contributions to your savings and other financial goals. This all starts with the budgeting step mentioned above, which can help you minimize your spending and maximize your savings. (And if you still find yourself falling short financially after budgeting and implementing spending cutbacks, you’ll need to find ways to increase your income — more on that below.)
  • Pay down your debt.

    • For many Americans, existing debts can be a leading obstacle to achieving financial freedom, and paying them down (or eliminating them altogether) can cut monthly expenses and free up money to devote to savings and other financial goals. A wise place to start is to initially focus on paying down any high-interest debts you may be carrying, such as credit card debt, as doing so can help you avoid accumulating the compound interest that can cost you more money. Another smart tactic to implement, especially after any high-interest debts are paid down, is to focus on paying off any large debts, such as mortgages and car loans, to lower your monthly expenses and free up money for other financial goals.
  • Elevate your income.

    • Of course, if you can find ways to generate more income, you’ll have more money to devote to achieving your financial goals. This can be accomplished by elevating your active income with raises, promotions, higher-paying employment, side jobs, etc., or by earning/increasing your passive income via things like an investment portfolio or rental income. One solid strategy for building wealth is to channel as much money as you can from your active income (the money you earn from working) into investments that raise your passive income (money accrued without having to do work). If done successfully over time, this can contribute greatly to your financial independence.
  • Keep an eye on your credit score.

    • Lenders use your credit score to determine how risky it is to provide you with a loan. And by improving your credit score, you can reap financial benefits such as lower interest rates and better terms on your mortgage, credit cards, car loans and other personal loans you may have or that you may want to take out. This, in turn, can contribute to your financial freedom by reducing the amount of money you have to devote to paying off debts each month. It can also help you more quickly pay off your debts and build more equity in the valuable things you own, such as your home and other financial assets.
  • Build up an emergency fund.

    • Even the best-planned paths to financial freedom can be derailed (or at least sidetracked) when major unexpected expenses arise. But by building an emergency fund, you can have easy access to the savings needed to cover many surprise expenditures, helping you avoid financial instability. (An emergency fund can also deliver a range of additional benefits, including added peace of mind.) Experts recommend saving enough in your emergency fund to cover three to six months’ worth of expenses, which can help you keep your budget on track should you lose your job or need to make major (and unanticipated) auto or home repairs, etc.
  • Invest for the future.

    • As alluded to above, one of the best ways to forge a path to financial freedom is through investments that generate passive income. Should you choose to start investing, whether your preferred investment choices involve stocks, bonds, real estate, certificates of deposit (CDs) or something else, experts advise that you aim to create a diversified investment portfolio. By including a mix of higher- and lower-risk assets in your portfolio, you can target growth while better protecting yourself against any potential losses in value with specific individual investments.
  • When needed, get financial guidance.

    • Financial know-how can, of course, vary greatly from person to person. But sometimes, even the most money-savvy of consumers can use the guidance of a financial expert. When it comes to important—and sometimes complicated—financial matters, be aware of what your limits are, and don’t hesitate to seek the help of a financial professional when you feel it could be beneficial. Sometimes, a bit of advice from a financial expert can go a long way toward putting (and keeping) you on the path to financial freedom.

Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.

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Man doing his banking online

AnnualCreditReport.com is the only source for free credit reports authorized by the federal government. Every 12 months, you can get a free copy of your credit report from each agency.

Your credit report has your credit history for all of your credit accounts as well as any credit inquiries and public record court information such as collections. In addition, the report provides personally identifiable information such as your name, address, and employment.

Be sure to carefully review all three reports to identify any problem areas that you may need to clean up prior to applying for a mortgage. If there is any incorrect information, follow the reporting agency’s rules to correct it or add a notation to the report to explain the situation.

Your FICO Score is a score combines data from several areas include payment history, the amount owed, length of credit history, new accounts. Many lenders use this score as a guide. This score is not provided as part of the free annual credit report.

Learn more about how your credit score impacts your ability to secure a loan.

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Couple looking over finances

Primary considerations for setting your housing budget require an assessment of your income, debt and current savings for the down payment on the home. The following are generally recommended guidelines; however, you should meet with an Arthur State Bank lender to get personalized mortgage information.

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Couple meeting with lender

The pre-qualification/pre-approval letter is included with any offer you make on a house to inform the seller that you have met with a mortgage lender and you are prepared to make an offer. The letter states that based on certain assumptions, the bank is prepared to lend you up to a specified amount of money for a home mortgage.

When choosing a loan officer, we recommend going local to work with someone who understands your community’s real estate market. This blog on first-time home purchases includes questions to ask your lender that may be helpful when preparing for your meeting.

Helpful Resources:

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Realtor shaking hands with a client

When a house is sold, the seller typically pays real estate commission to both the listing agent and the selling agent. It is extremely beneficial for the buyer to use their own real estate agent. Loan officers can often recommend selling agents in the area; ask your officer about realtor referrals when discussing your loan.

A good realtor will know the local market and can help you find an ideal home based on your budget, location and desired features. During your search, understand that you will most likely need to compromise on some items, so it’s important to identify your critical needs versus your wants.

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Couple searching online for a home

Additionally, when you start with the house search and work backwards, homes can often go off the market while you’re completing steps 1-4. While browsing homes immediately can be tempting, we recommend following these steps in order so that, once you find your dream home, you’ll be well-positioned to take action immediately.

When you find the home you want and you think you are ready to put an offer on it, you will want to make sure you have all the information you need to make a solid offer.

  • Evaluate the neighborhood.
  • Drive by the house at different times of the day.
  • Examine how other houses in the neighborhood are maintained.
  • Consider any potential traffic or other disruptive noise.
  • Is there ample parking for you and visitors?
  • Read the details in any Homeowner Association agreements (HOA fees and rules).

Make sure to do a preliminary check of house details:

  • Check the water:
  • Does it have good pressure?
  • How long does it take to get the water hot?
  • Is it well water or city water?
  • Turn light switches on and off.
  • Open and close doors and windows to make sure they work properly.
  • Review previous utility bill expenses.
  • Consider the property tax bill.

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Family meeting with realtor at new house

When writing an offer contract, be sure to pay attention to all of the details.

Offer Price:

Your agent should do a market analysis that pulls data on recently sold comparable houses. The best comparisons will come from the same neighborhood.

If you are asking for the seller to pay some of the closing costs, remember that this cost plus the sales commission determines the net amount you are offering the seller for the house.

Work with your agent on your negotiation strategy. There are many things to consider, such as how badly you want this particular house, whether it is a buyer’s or seller’s market and an assessment of the seller’s motivation to get the property sold.

There isn’t one best strategy.

Be sure to document in writing everything you want included with the house, such as appliances, etc. Your agent should guide you through the contract step-by-step.

Contingencies:

  • Home inspection.
  • Mortgage.
  • Final walk through (24 hours prior to closing).

Proposed closing date. Typically, this is 30-45 days from an accepted offer.

A good-faith deposit is required for the offer. This is typically between 1-10% of the purchase price of the house. The deposit is kept in escrow until closing and the money is applied to the purchase price of the house at closing. If the house does not close due to one of the contingency clauses, the buyer receives their money back. However, if the buyer decides not to close on the property, the seller may get the deposit money.

Attach your pre-approval letter to the offer.

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Two people in professional meeting

The clock starts ticking for everything documented in the contract, including mortgage application, inspections and closing date.

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Woman advising other woman on mortgage application

You will need to decide which mortgage to select prior to the application.

Plan for the following potential fees:

  • Application fee (many banks and mortgage companies charge an application fee; however, there is not an application fee at Arthur State Bank).
  • Credit check.
  • Appraisal (may be paid at closing).
  • Loan origination fee (paid at closing).

Once you have approval for your loan, make sure you don’t change anything that will impact the status of your mortgage. Banks do a final check on credit and jobs just prior to closing, so now is not the time to change jobs or make another purchase on credit such as a car or furniture.

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Home inspector going over findings with home owner

Depending on the size of the house, an inspection can cost on average between $300 to $1000.

Many real estate contracts specify how problems uncovered in the inspection will be resolved, up to a certain dollar amount. Should necessary repairs exceed that amount, the buyer has the option to cancel the contract without penalty and receive their deposit money back. Another option is for the buyer and seller to renegotiate who will pay for additional repairs.

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Woman happily holding keys to her new home
  • Homeowner’s insurance is required by the lender prior to closing on the loan.
  • Turn on utilities in your name, effective the closing date.
  • Change your address with the U.S. Postal Service.
  • Make moving arrangements.

Three days prior to closing:

  • You should receive your final Closing Disclosure from the closing agency. The final Closing Disclosure shows a column for the seller and a column for the buyer. All closing charges and credits for both the seller and the buyer are documented in the closing statement.
  • Review the closing statement for accuracy prior to coming to closing.
  • The final amount in the buyer’s column shows you the amount of money you need to pay at closing.

The closing office will provide specific payment instructions. Closing funds have become recent targets for cybercriminals. If you are asked to use a wire transfer, call the office and ask to speak to someone you have been working with to double-check the instructions.

Closing day:

In South Carolina, the closing will usually take place at the attorney’s office. Everyone signing for the mortgage must be present to sign the closing paperwork. Make sure you bring the following:

  • Cashier’s check or proof of payment for wire transfer.
  • Driver’s license.
  • Checkbook, just in case there are any additional items that were not on the closing statement.

Be sure to understand this information:

  • How and when you will pay:
  • Your mortgage.
  • Your property taxes.
  • Your homeowner’s insurance.
  • Any HOA dues.
  • Who to call with any questions.

The best practice is to go through the homebuyer’s roadmap in this sequence. However, if you jumped ahead early in your journey, just circle back to address the steps you missed.

Arthur State Bank’s loan officers are closely tapped into local real estate markets and experts at helping clients get what they need on terms that work for them. We also offer mortgage specials for first-time homebuyers.

To start planning your journey to your dream home, try out our mortgage calculator. If you’re ready to talk to a loan officer, contact Arthur State Bank to request personalized mortgage information today. Don’t forget to ask about our first-time homebuyer offer.

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