by Elfriede in Finance Posted on 09/14/2021 06:00 AM
Financial freedom lies in having the amount of money that is enough for the life you dream about. What should be done in order to have this financial freedom? I bet that more than half of adults asked this question but only a few found the answer. Therefore, I decided to write about those seven steps that can lead you to be financially liberated.
Before we proceed, I need to tell you this, that the secret of a wealthy life lies not in earning more, but in wisely managing your hard-earned money. These 7 simple steps will help you achieve financial independence, save for the desired goals, and create savings for the unexpected.
I’m Elfriede A. I’m the Life Coach and CEO of Diamond Outcome. Diamond Outcome is a learning platform to help you increase the quality of your life and well-being.
STEP ONE: DETERMINE YOUR FINANCIAL OBJECTIVES
Think about what you really want to get unfailingly. Pay for your children's school fees? Provide children with a beautiful living space? Ensure yourself a comfortable old age? Travel or start your own business? Each goal must have two parameters: the term in years and the amount it will cost you.
When you think about goals, it triggers many other thoughts in your mind; you become aware of a lot of details that are indirectly related to the goal, and this is an opportunity to lay aside other irrelevant and unimportant financial hurdles. Through this, you suddenly begin to notice the possibilities around you, everything begins to help you to embody the goal. And finally, you just get a lot of energy and strength, because this is how our goals work - they inspire.
STEP TWO: PAY YOURSELF FIRST
You've probably heard the statement “pay yourself first”. In case you've not, “pay yourself first” means putting a certain amount of money into your savings account before paying for anything else. The very fact of paying yourself has helped countless people move closer to achieving financial freedom in the first place.
Because if you pay yourself first, you can only use what is left to pay for everything else. And if you don't have enough funds to cover the rest of your bills, you will have to earn extra income to cover the costs.
By paying yourself first, you ensure that you are always saving money to invest in yourself. By doing the opposite, you only get what's left, which is usually not enough to feel financially free.
STEP THREE: SPEND LESS AND SPEND WISELY
In 1958, Warren Buffett bought a five-bedroom home for $31,500 and has not moved out since. His net worth? An astonishing $90.3 billion. He can afford a larger, more expensive home but, his frugality may well be the reason that he is one of the richest people in the world.
Kanye West, on the other hand, isn't afraid to flaunt his money. He lives in a $20 million mansion. And at some point, with $53 million in debt, he decided to ask Mark Zuckerberg for $1 billion... on Twitter.
How are these two gentlemen different? Buffett hasn't spent more than he needs, and West spends money he doesn't have.
In truth, many truly rich people do not look like rich people. Zuckerberg wears the same boring T-shirt and jeans every day. By buying fewer things, you can actually get richer!
The less you spend, the better two things work; firstly, you will have more money on the road to financial freedom and secondly, you will learn that you really need a lot fewer things to live, which also helps you save more money.
STEP FOUR: PAY YOUR DEBTS
Some people will tell you that it is wiser to invest in stocks rather than pay off debt. If you are a seasoned investor, this is probably true. But, if you've never invested in stocks before, you may run into even more debt. Many people feel the same thing after paying off their last debt: RELIEF.
If you have a debt of $50,000, even if you have $30,000 in cash in the bank, you cannot call yourself financially free because you still have a debt of $20,000.
Paying your debts will help you stay motivated. You can begin by paying the least debt. If you can get rid of your first debt a sense of accomplishment will help you to work towards other debts.
Paying off a big debt takes a huge burden off your shoulders. After paying off the debt, you see that the amount of money in the bank increases. Watching a number grow (even if you had to watch it fall in the beginning) is an amazing feeling, and it keeps you motivated to keep building it up.
STEP FIVE: CREATE ADDITIONAL SOURCES OF INCOME
Okay, at this point, you're probably thinking, "My debt is much more than my salary, how can I pay it off if I don't earn enough?" If you are serious about financial freedom, you will have to sacrifice your sweat and tears. Your 9 to 5 job is unlikely to do this. If so, you need to step up your efforts and look for money outside of your current job.
Some experts recommend seven sources of income. If you have a 9 to 5 job, congratulations, you have one, only six left! You can now look at your sources of income in two ways: active income (exchanging time for money) and passive income (money that can flow even while you sleep). If you trade your time for money, you are limited by the hours of the day. Here are some additional tasks you can do to generate active income:
• Become a freelance writer.
• Help the business owner as a virtual assistant.
• Learn new skills with online courses and monetize them.
• Become a taxi driver.
• Provide help around the house.
• Find a casual job.
If you don't have much time to generate active income, you can focus on increasing your income streams with passive opportunities, for example:
• Launch an online dropshipping store.
• Sell profitable content (blog, ebooks, courses, webinars, audiobooks, podcasts, apps).
• Become a Marketing Partner.
• Buy property and rent it out.
• Invest in stocks.
Fortunately, all of your seven sources of income can come from a single source. For example, if you're an eCommerce expert, your revenue streams might come from building seven different stores. And remember, you don't have to start with seven streams, you can build them up over time.
STEP SIX: DON'T INCREASE COST
As income rises, people tend to change their lifestyles. But because of this, the increase in income can be offset by the increase in expenses. Care must be taken to ensure that this does not happen, as it undermines progress and postpones the achievement of the main goal.
STEP SEVEN: INVEST IN YOUR FUTURE
This last piece of advice on financial freedom is very important. Let's say you follow the tips and tricks from this article, pay off your debts, and increase your savings. They may be enough to help you right now but what if the unexpected happens? Are you ready for it?
It's important to save money for rainy days, retirement, and (sorry for the pain) in case you die so your family doesn't drown paying for your funeral, debt, and taxes. Okay, now let's go back to the "happy place."
If you have a 9-5 job, talk to your company about adding a retirement plan or check to see if any deductions are being made in favor of it. The deduction is debited before it's credited to your account, so you never feel like you're losing money. And it's pretty cool to check it out periodically and see your savings grow.
Next, you must save enough money for an emergency fund. The emergency fund is only for unplanned occurrences such as a car accident that you have to pay for out of pocket, or a hospital visit.
By saving money for rainy days and retirement, you are less likely to return to where you were before: strive for financial freedom.
IN A NUTSHELL
Implement everything that was written above, and live on following all the recommendations. At the same time, do not pay attention to all the difficulties and hardships that will surely be encountered on your way. Even if you have an irresistible desire to give up everything and leave, understand that you can achieve financial freedom only if you constantly move towards your intended goal.
And you will achieve financial freedom! I sincerely wish you this!
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