How to Achieve Financial Freedom
Before discussing how to achieve financial freedom, let’s take a look first at what this is. In its simplest form, financial independence is the ability to afford the lifestyle you desire without having to work.
Why do you need to be financially free?
Well, it’s undisputed that the vast majority of people spend their waking hours doing things that are required to earn money to support themselves and their family. Statistics show that more than 80% of these people do not enjoy their job; they are hanging on only to earn their livelihood.
How about you?
If you are part of the 80% who are not concerned about how to achieve financial freedom, you could argue that you don’t need more money and you just want to do ‘good’ things. Most people link pain, poverty and suffering with ‘good’ and money with ‘evil’ (remember the movie Titanic??)
Being financially independent gives you the freedom to do whatever you truly desire with your life.
You no longer have to worry about the money to support yourself and your loved ones.
Financial freedom enables you to find your life purpose and live a life you truly love!
How to Achieve Financial Freedom: Passive Income
In order to be financially independent, your monthly earnings from passive income must cover ALL of your expenses, each month.
What is passive income?
This is money that you earn without having to do any work on a regular basis. Some examples of passive income are:
- Rental income
- Interest income on your deposits
- Mutual funds / stocks / bonds
- Business ownership / partnership
So, how to achieve financial freedom starting from your current situation? You might say… “I am too old”, “I don’t have a steady job”, “I don’t earn much”, “I have too much debt” and so on. But believe it or not, you can become successful at setting and achieving goals and progressively become financially independent with one single act today.
And that is, your no-nonsense decision to achieve financial independence!
Once you decide, take the following actions immediately – remember, as James Allen said, “Intention without action is useless”.
How to Achieve Financial Freedom: Take Decisive Action
- Start saving 25% of your monthly income – it’s best to have this money taken away from your paycheck directly every month; keep it in such a place that it is hard to take the money away
- Make a list of absolutely necessary expenses that you incur each month (rent, mortgage, utility, food) and compare it with what you’ve actually spent in the last 3 months; knock off all unnecessary expenses
- Diversify your savings – don’t put all your eggs in one basket
- Look for sensible investments, like real estate, but don’t be greedy
- Invest in yourself – learn a new skill that can earn you money
- Analyze the way you spend time outside of your work – you already know the importance of time management, can you do something on the side to earn extra income? Remember, it’s neither immoral nor unethical to do more than one job to increase your earning
- Setup multiple sources of income
The concept of financial independence is easy to understand and makes a whole lot of sense, right? The actions outlined above are simple to follow and implement. However, you have to watch out for inevitable stumbles and myths associated with this exercise, so here are some tips.
How to Achieve Financial Freedom: 9 Useful Tips
- There are NO shortcuts: you simply can’t become financially independent overnight – remember: “Slow and Steady Wins the Race”
- Beware of debts: debts (specifically credit card debt) can mess up your plans and life; disciplined spending is the only way to avoid credit card debt – don’t spend money you don’t have!
- Say NO to impulsive spending: this is about changing a bad habit(impulsive shopping) and it’s related to the previous point but is worth the mention, as so many of us buy things that are not required for a decent living
- Never withdraw money from your savings: once you make an exception, it won’t take much time to form a detrimental habit of spending from your savings
- Look for multiple sources of income: when you learn how to achieve financial freedom, always be on the lookout for opportunities to create passive income. For example, you can turn your lifelong knowledge, passion, hobbies or talent into passive (online) income
- Give back: never ever forget this! The richest people know very well that the more you give back, the more you will get. This will also increase your sense of worthy living and it is one of the keys to happiness. Choose a charity of your liking and make a conscious effort to donate time and money – this is probably the most useful tip of all!
- Say NO to “Get-Rich-Quick Scams”: remember the first tip, there are no short cuts, it takes time to build your nest egg and to become financially independent, but you WILL become one if you meticulously follow these tips
- Don’t be greedy: for your own sake, never ever gamble – either in stock market or any other area – it’s simply not worth it!
- More money doesn’t guarantee financial independence: who will become financially independent, someone who earns $500,000 but spends $550,000 or someone who earns $100,000 but spends $75,000? The answer is obvious isn’t it?