Do we overestimate the importance of money in our life? The people who talk about it the most are socially prejudiced and treated as materialists. The truth is that we have to appreciate the role of money and respect money because it is the coefficient of appreciation of ourselves for the labor market. So when can we assume that we are financially independent? In case of a high salary? Or the income of a large business? this is not precisely the case. We are totally free when we can have our normal lifestyle without having to work for it. So let’s observe the notion of Financial freedom.
- Understand Where You’re At The Present
- Conceive Money Positively
- Have Your Goals Written
- Manage Your Spending
- Pay Yourself First
- Spend Less
- Don’t Procrastinate
- Pay off Debt
- Diversify Your Sources of Income
- Invest Persistently The 10% of Your Income
Financial freedom. How appealing it sounds and frequently very nice to be real. But the truth is, it’s achievable for anyone. And I mean anyone – even someone who is in the worst financial situation we can imagine can figure out some way to get rid of it. Regardless of what financial troubles you are enduring today, there’s always a way to get back to black. Perhaps trying a budgeting app is your first step.
In this article, we’ll immerge into the value of financial freedom and share some financial freedom tips, including a few that worked for me.
What is Financial Freedom?
Financial freedom is about being fully capable to manage your own finances. You have a reliable cash flow that allows you to live the life you want. All expenses related to your lifestyle are covered by your passive income source and never bother you, and you aren’t burdened with a pile of debt.
It’s about recognizing that you need to spend less than you earn and invest constantly a certain amount of your earnings in order to possess passive sources of income. True financial freedom can happen only when you are totally free from various risks such as unemployment or physical disabilities, and the only path to achieve that level is the creation of passive income sources such as real estate investments.
1 Understand Where You’re At The Present
You can’t achieve financial freedom without knowing your starting point. Evaluate your monthly earnings and spendings also your actual debt, it can be a little bit boring but this is an indispensable step in the right direction.
Compile a list of all your debts: mortgage, student loans, car loans, credit cards, and any other debt you may have accumulated. Don’t forget to include any money you may have borrowed from friends or family members over the years.
Now, take a deep breath. And another one. Then add up all the numbers.
How much debt do you have?
If it’s a big number, don’t freak out, I promise I’ll share some ways to pay that down later in this article. If it’s a small number, congratulations! Feel free to share your financial freedom tips in the comments below.
Next, take a look at all the money you have saved up.
Compile a list of all your savings: savings accounts, stocks, company stock-matching programs, company retirement-matching programs, and retirement plans. Then we’ll add the recurring monthly payments you receive such as salary, side hustle money, and so on.
2 Conceive Money Positively
Debt can definitely be a little bit depressing.
But remember that money is a good thing, even if it seems to carry a lot of burdens right now.
You deserve to enjoy financial freedom.
According to You Are a Badass at Making Money by Jen Sincero, people who don’t make a lot of money often feel shame when it comes to making money. And so the biggest obstacle that many people experience when it comes to making money is that they feel like having money is bad. Many feel guilty for having it and guiltier for wanting it. Sincero has said about money, “We use it every day to enhance our lives, yet we always seem to focus on the negative about it.”
Money is simply a necessity like food or water. It enables you to buy the things you need and live the life you want.
To experience financial freedom, you’re going to need to look at money as a tool to help you achieve your dreams, fuel your energy, and live a stress-free life you can enjoy.
Because if you treat money negatively, you’ll subconsciously sabotage your chances of making it and keeping it.
3 Write down Your Goals
Do you want to get rid of debt definitely? Are you desperate to escape the 9-to-5 grind? Is there a place you’ve always wanted to travel to? Do you need to save for some purpose?
When I achieved financial freedom, it was because I tied it to an emotional goal. My goal was to get out of student loan debt and save for my first home. And honestly, it was a euphoric experience watching the debt dwindle away and my savings rise.
I got so excited by seeing the numbers change that I worked harder to make more money to see a bigger change in my personal finances. Would I have achieved my goal of financial freedom if I hadn’t tied the goal to something emotional? Probably not. I was desperate to get out of debt and move out of my parent’s house. That desperation kept me motivated throughout my journey.
Another interesting thing happened. In February 2016, I wrote on a scrap piece of paper a few of my goals:
Make $100,000 selling products online
Save $20,000 for a down payment
Pay off $24,000 worth of student loans
I ended up misplacing that paper and completely forgot about it. And then one day, just over a year later, when I was already living in my new home, I found it in my notebook. Sure enough, I had accomplished all three things. The funny thing was that I wasn’t even consciously thinking about those goals.
You might not accomplish everything you want in a month. But a year is a long time to make progress on your goals. Make sure your goal is tied to a specific number that you want to hit. Believe it or not, you’ll start working towards those goals without even realizing it.
Knowing exactly what you want to achieve makes achieving financial freedom a million times easier.
4 Manage Your Spending
An important step toward financial freedom is tracking your spending.
You can use a tool like Mint, which will let you know how much money you’re spending, which categories you’ve overspent in, how much money is in all of your accounts, and how much debt you have.
Another cool thing about Mint is that it allows you to set goals within the dashboard. You can keep track of your goals and know the exact month you’ll be expected to hit the goal based on how much money you put in. Thus, keeping you accountable and reminding you to keep putting money towards it for you.
After using Mint for one month, I managed to save some extra money towards my new wedding fund goal. Mint helped me stay focused on my goal and pushed me towards creating more passive income to hit my financial milestones.
5 Pay Yourself First
You’ve probably heard the expression “pay yourself first” before. But in case you haven’t, “pay yourself first” means putting a specific amount of money in your savings account before paying anything else, such as bills. And the act of paying yourself first has helped countless people inch closer to achieving financial freedom.
Because if you want to pay yourself $1,000 per pay period first, then whatever’s leftover needs to go towards bills. And if you don’t have enough to cover those bills, then you’re forced to pick up a side income to make up the costs.
By paying yourself first, you guarantee that you’re always putting money aside to invest in yourself. By doing the opposite, you only get whatever is left over, which usually isn’t substantial enough to help you experience financial freedom.
You can pay yourself first in other ways too. For example, if your company has a retirement savings program, you can ask to have money withdrawn for your retirement. That way you’re investing in yourself and your future first. The money gets deducted from your pay so everything that’s leftover is money that you can put aside for your bills and expenses.
6 Spend Less
If you want to be rich someday, you need to spend less than you earn, it’s the golden rule of finances, spend less than you earn.
In 1958, Warren Buffett purchased a five-bedroom home for $31,500 and hasn’t moved out of it since. His net worth? An astounding $90.3 billion. He can afford a bigger and more expensive home. But his frugality might very well be the reason why he’s one of the world’s richest people.
Kanye West, on the other hand, isn’t afraid to flaunt his money. He lives in a $20 million mansion. And at one point, with $53 million of debt, he decided to ask Mark Zuckerberg for $1 billion… on Twitter.
The difference between the two super successful gentlemen? Buffet didn’t spend more than he needed to, and West spends money he doesn’t have.
The truth is, plenty of rich people don’t look like rich people. Zuckerberg literally wears the same boring t-shirt and jeans every day.
Buying less stuff can actually help you get richer.
By spending less, two things work in your favor. One, you’ll have more money to put aside for your financial freedom. Two, you’ll learn that you actually need a lot less stuff to survive, which also helps you put aside more money.
And this goes into our next point…
7 Don’t Procrastinate
Procrastination is the corruptive habit of delaying the realization of tasks you need to do immediately. This phenomenon kills all progress in our life, especially financial, because, in order to achieve financial success, we must compete with other people who also want to be rich. Read here how to stop procrastination.
8 Pay Off Debt
Some people will tell you it’s wiser to invest your money in stocks instead of paying off your debt. If you’re an expert stock picker, maybe that’s true. But if you’ve never invested in stocks before, you could wind up with more debt.
A lot of people feel the same thing after finishing their last debt payment: relieved.
If you have $50,000 of debt, even if you have $30,000 cash in the bank, you can’t really call yourself financially free. You’re still $20,000 in the hole.
While paying someone else isn’t as glamorous as having money in the bank, it does bring you closer to financial freedom.
There are two main methods of paying off debt: snowball and avalanche. Snowball is when you pay off the smallest debt first. Avalanche is when you pay off the debt with the highest interest rate.
You need to decide what works best for you. But when I was working towards becoming debt-free, I did the snowball effect. It helped keep me more motivated. Since I was able to get rid of my first debt, a $1,200 credit card bill, in only a month, the feeling of accomplishment helped motivate me to tackle a much bigger, lingering student loan.
And since credit cards were no longer a problem, I would pay about, on average, three times more than the measly $300 minimum payment. In the end, it took about three years to finish paying off the student loans instead of the nine years I was allotted.
Paying off a big debt lifts a massive weight off your shoulders. After paying off your debt, you see the amount of money you have in the bank rise. It’s an awesome feeling watching the number climb (even if you had to watch it fall at the beginning), and it keeps you motivated to continue growing it.
9 Diversify Your Sources of Income
Okay, so at this point, you’re probably thinking, “My debt is a lot more than my salary, how can I pay it off if I don’t make enough?”
If you’re serious about financial freedom, you’ve got to sacrifice some blood, sweat, and tears.
Your 9 to 5 might not cut it. If that’s the case, you need to step it up and look for money outside your current job.
Some experts recommend having seven streams of income. If you have a 9 to 5 job, congratulations, you have one, only six more to go!
Now, you can look at your sources of income in two ways: active income (trading time for money) or passive income (money that can keep coming in, even while you sleep).
If you trade your time for money, you’re limited by the hours of the day. Here are a few side jobs you can do to earn an active income:
Become a freelance writer finding jobs on ProBlogger
Help a business owner as a virtual assistant with jobs on Upwork
Acquire new skills via online courses for entrepreneurs and monetize
Become an Uber driver
Help with household tasks on Task Rabbit
Pick up the odd, occasional job on Craigslist
If you don’t have a lot of time to devote to earning income, you can focus on increasing your income streams with passive income like:
Starting a dropshipping online store on Oberlo
Start your own custom clothing business on Shopify
Sell profitable content (blog, ebooks, courses, webinars, audiobooks, podcast, apps)
Become an affiliate marketer
Buy properties and rent them out
Invest in stocks
Fortunately, your seven streams of income can all come from the same source. For example, if you’re an eCommerce expert, your streams of income can come from creating seven different stores. And remember: you don’t need to start with seven streams, you can build up to it over time.
10 Invest Persistently The 10% of Your Income
A consistent way to build financial freedom is to allocate a portion of your income to investments. Regardless of its size, it will be better for you to choose an investment tool and grow it. The persistent repetition of investments from your side will grow your financial self-esteem and give you more commitment to continue it. It’s not about how big you can progress it’s about to progress consistently each day each month each year and the success will visit you undoubtedly. I recommend you to read a book called (The Richest Man in Babylon) which explains the importance of a consistent investment process of your earnings. Read also how to invest with small amounts.