steps to achieving financial freedom
Being financially free allows the person to make decisions on money in a more relaxed way without major concerns. However, the steps to get there depend on one crucial detail: the starting point of this journey. Still, some actions can be adapted and applied to each individual’s reality.
Read on to discover what steps you should take to achieve financial freedom.
What is financial freedom?
Simply stated, financial freedom would be the freedom of making choices free from other issues, leaving aside the money-related issues. A financially free person can decide either to go on a trip or not to do it, to attend an event or do anything else without bothering about his finances.
Of course, what financial freedom means differs from one’s eyes to another’s. Really, while it may mean a life of comfort and nothing much more for some people, for others it means living in affluence. As we continue to enumerate, we have emphasized that the meaning varies based on each person’s starting point and his or her desire to reach.
It is also worth differentiating the concept of financial freedom from financial independence. The latter means reaching a point where you have the option of stopping working forever and living solely on the income from your accumulated income. The idea of financial freedom is a little broader and is linked to each person’s understanding of being free.
10 Steps to Achieving Financial Freedom
Now let’s look at the steps which will enable you to begin planning for achieving financial freedom. However, as each individual must work them into his own set of ideas on the matter, however, everybody should find them to his taste.
1. Live below your means
First and foremost, live within your means but still have room to save up for the future. Never live a lifestyle that will compromise your whole budget just to keep up appearances.
Find a balance between comfort in the present and prudent planning for the future. Do this by checking if you are spending money on certain luxuries that can be dispensed with or adapted. It’s all a matter of considering what your priorities are.
2. Know exactly what your financial life is like right now
Most people spend their lives never paying attention to their finances. They never know how much they earn, not to mention how much they spend. You need to know this in order to achieve financial freedom; it is going to be what you use to make your plans. You need to know how much money you are making and how much you are spending so you will know exactly what changes you can make to your routine in order to actually achieve your goals.
3. Track each and everything you spend
You should track your expenses in order to be able to manage your finances. Use a spread sheet for this, or you can download any one of the numerous phone apps that is meant for this specific purpose. Include all the money going out and also pay fixed expenses, food, entertainment-every thing in the chosen region.
It shall make your everyday life easier and prevent you from forgetting to pay a particular bill; besides, this record will be helpful when you want to track unnecessary expenses that can be cut or reduced. The secret is to have all the information visible and not just in your mind.
4. Invest your money well
To gain financial independence, you have to save enough per month and put it into an investment opportunity. Today, there are lots of investments where returns vary based on many factors. Having a Financial Coach will help you make the proper choice so that they offer you options according to your goal.
5. Have an emergency fund
In addition to saving for the future, it is important to consider that emergencies may arise in the present. To avoid having to worry about both the issue itself and money, it is essential to have a reserve to use in these cases.
Set aside another monthly amount for your emergency fund and keep it separate from the amount earmarked for the future. This way, you can use it for health reasons, if you need to make unexpected repairs to your home or car, and so on.
6. Plan to pay off debts
If you have debts, plan to pay them off so you can focus solely on your goals. If you have outstanding payments, you need to analyze the interest and do everything possible to get paid as soon as possible.
If there is no delay, it is worth analyzing the discounts that would be offered for advance payment. If there is no benefit in this advance, it may be more interesting to keep the amount that you would use to pay invested and earning interest.
7. Analyze your current financial gains
Another fundamental activity is to review the income you have at your disposal, based upon the money that you currently earn. Would it suffice for you to reach your goal? Could your income potentially increase, perhaps through an additional job or maybe within the job you already have? Analysis like this will reveal just how well you sit and what is within reach.
8. Identify your limiting beliefs about money
Most people carry limiting beliefs related to money. These beliefs were often created throughout life, through family experiences. Some examples include: “investments are for rich people”, “rich people are not good people” and so on. Identify if you have any and work to free yourself from them.
9. Set financial goals
Setting goals is essential to achieving any objective, because it is by looking at them that you stay motivated to move forward. When it comes to financial freedom, these goals need to involve values and dates. It is essential to know how much you want to achieve in a given period.
10. Adapt plans whenever you feel it is necessary
Finally, it is important to consider that life is constantly changing, so it is natural that plans need to be adapted whenever necessary. Just be careful not to make adaptations with the aim of making things easier in the present, which will harm future results. Try to make changes when it is really necessary.