Why and how you need to invest to find financial freedom

Most people strive for financial freedom, but not everyone finds it. For some, bad spending habits get in the way, while others don't feel that they make enough money to save anything. Whatever your situation, there are some things you can do to work toward financial freedom, and investing should be part of the plan.rnWhy investing plays an important role in financial freedomrnFirst it helps to understand what is meant by financial freedom. Freedom is being able to handle a crisis without having to worry about where the money to deal with it will come from. There will always be things that come up, but if you have plenty of money saved, you don't have to worry about having enough to deal with emergencies.rnWhen it comes to financial freedom, the first thing that comes to mind is saving money. That is the first step toward financial freedom, but it isn't the only step. The only way to be truly free is if your money is working for you, and with interest rates at zero, the only way to put your cash to work is by investing it.rnFinancial freedom can also mean being able to quit your full-time job if you wish to do so. If you have enough passive income streams set up, this could be possible, but it depends on what kind of investing you do and whether you are successful enough at it to have a stable income without working.rnYou may have other ideas about what financial freedom means, so it's important to get a firm picture of what you want to see in your own life before you start working on a plan to get there. For example, paying off debt can be an important stepping stone on the path to financial freedom. rnWhere to start investingrnNow that you have a solid picture of what financial freedom will look like in your own life, it's time to start making a plan. The first thing to do is to build up some savings if you haven't already done so. If your income is low, it will take you longer to save up enough money to start investing, but you should make an effort to save something every month, even if it's only $20.rnBefore you begin investing, it's important to understand that you should never invest money that you can't afford to lose. This means that you shouldn't invest your entire life savings at one time. You should always have a safety net of emergency funds, so all of your extra money isn't tied up in the investment markets. rnThere is one way you can start investing even before you have money saved up, and that is with the retirement plan at work. Many employers offer a 401(k) or other retirement plan, and some even contribute to it on their employees' behalf. rnThe best place to start investing is with your 401(k) or other retirement plan at work because it automatically takes money out of your paycheck every month. You should contribute as much as possible to the retirement account, especially if your employer makes matching contributions.rnInvesting in the marketsrnAfter you have savings built up, you can start investing in the markets alongside your 401(k). The key is to diversify your portfolio, so your money isn't all in one asset. If you have a wide array of assets, you will be somewhat protected because when one asset's price is falling, another asset's price is usually rising. rnBefore diving into any investment, take the time to understand the options. You can opt for traditional assets like stocks or bonds. If you have enough money saved, you can look at alternative options like real estate or hedge funds, which require larger minimum investments to get started.rnIf you are just getting started in the markets, a great place to start is with an online brokerage account. There are many different options, such as E-Trade, Charles Schwab, TD Ameritrade and Merrill Edge. Many of these accounts don't charge a fee per trade and require very low minimums to get started. Online brokerage accounts will put a variety of assets at your fingertips and help you learn how to trade and diversify your portfolio. rnAnother option for those who are new to investing is an exchange-traded fund that tracks the S&P 500 or another stock index. Just be sure to diversify and invest some money in bonds and other assets too if you go this route. rnAbout the Author: