We all must have a financial freedom plan. A precise plan that enables you to clear your debts, save, investment, plan, and have cash at hand to take care of personal and family necessities. However, a lot of us find it very difficult to achieve total money freedom.
We let ourselves get burdened with increasing debt, financial emergencies, unnecessary spending, and worst of all, procrastination that hinders us from achieving our financial freedom plan. Sure it happens to everyone, but that doesn’t mean that your financial situation should remain permanently bleak.
And so I have put together ten essential steps to financial freedom, including a few that worked for me.
1. Have an Overview of Your Financial Standing
To achieve financial freedom, you must take an in-depth look at your financial standing. Look at your debts, the savings you have, and how much you will need to be financially free. The results may seem depressing, but it is an essential and valuable step towards monetary freedom.
List out the car, credit card, student, mortgage loans, and any other accumulated debts you may have. Including money, you owe family or friends. And please don’t fret if the debt is a large sum. You can reduce the numbers following the remaining nine steps that are keys to financial freedom.
Once you have added up the numbers, match it against any savings you might already have. Keep these numbers in mind as we continue through the remaining steps.
2. View Money Positively
Even if you feel like money or the lack of it is a huge burden, you need to remember that money is a good thing.
Our needs are always before us and continuously increasing; this makes money a necessity. It allows you to take care of these needs and have the quality of life you want.
Ultimately you deserve to achieve financial freedom.
If you desire to experience financial freedom, then you need to view money as a tool that will help you achieve your goals. When you consider cash negatively, the chances of creating wealth and sustaining it becomes subconsciously sabotaged by you.
3. Write Down Your Goals
Besides clearing all debts, what’s your aim of having a financial freedom plan? We all have goals to become financially free to escape our regular 9-5 jobs, buy a house, save for your kids, a wedding, take a trip, etc., but without a proper budget plan, it gets harder to achieve these goals.
For me, the path to achieving financial freedom was to write down my motivation. And honestly, it was an exhilarating experience watching how my motivations enabled me to increase my savings to a point where I could achieve my goals.
Looking back, I needed to write down these goals as a motivation to work hard to make more money to achieve financial freedom. Another key takeaway for me during this period was that I needed to be specific about the things I wanted to achieve.
4. Write down a spending plan
Creating a budget on how you wish to spend your money is a compelling and practical way to manage money wisely.
When you fail to have a spending plan, with each paycheck, it might feel like your money mysteriously vanishes into thin air. So it becomes essential to take active steps to track your spending.
There are financial apps out there that can help you keep track of the amount of money you are spending, the amount in your account, what you overspend on, the debts you have, etc.
5. Spend Less
Now that you have written down your goals and spending plan, it is vital to manage your spending habits, lest you get carried away, and squander the money you’ve saved in your kitty.
Take, for example, Warren Buffet is one of the richest men today with a net worth of $89.4 billion, yet he still lives in a five-bedroom home he purchased in 1958 for $31,500. Even though he can afford something much more expensive, his frugality and spending habits might very well be why he is one of the world’s wealthiest people.
You mustn’t spend more than you need or more than you have. By spending less, some things work in your favor, such as more money to put aside to become financially free. Also, you have a sense of actually needing a lot less stuff to survive, meaning you can save up some more money.
6. Expand your emergency fund
Sometimes we are met with unexpected expenses to take care of. There will be an unexpected home or car repair, a job loss, forced retirement, an unplanned medical bill, etc. that we need to deal with.
By expanding your emergency fund, it goes a long way to help take care of the “what if” stresses in your life. Rather than getting worked up under pressure, these unexpected events can be seen as a mere inconvenience.
When saving for an emergency, it is an excellent idea to save up 3-12 months’ worth of expenses, depending on the emergency size funds for an individual or a family.
7. Pay Off Debt
It is much wiser to pay off your debt first instead of investing your money in stocks. If you are an expert stock picker, then probably the reverse could work better for you. But if the stock investment isn’t something you’re familiar with; then you could wind up with even more debt.
There is no telling the amount of relief you feel once all your debts have been paid. Paying what you owe may not feel as glamorous as having money in the bank, but it can’t be compared to the peace of financial freedom you can have. You can pay off your debt using either the snowball and avalanche method.
The snowball method is starting with the smaller debt and then moving up, while the avalanche is paying the debt with the highest interest rate and then moving down. Decide which works best for you and stay on course till you clear all debts and feel that massive weight lifted off your shoulders.
8. Pay Yourself First
Paying yourself first means putting aside a specific sum of money in your savings account before taking care of other bills. This is a great way to steer you towards achieving financial freedom.
When you pay yourself first and realize you don’t have enough to take care of the other bills, you are forced to think of a side hustle to make up the costs.
Also, you can pay yourself first via a company retirement savings program if your job has one. That way, the money gets deducted directly from your pay before it gets to you, so all that is left over is money for your bills and expenses.
9. Create Additional Sources of Income
We have seen from the previous step, that there are times when your debts, bills, or costs outweigh what you earn.
If you are focused on becoming money free, then most often, a 9 to 5 might not cut it. If this is the case, then you need to have a plan on how to make money outside your current job.
An additional source of income could be either active income, which requires you to trade your time for money, or passive income that comes in even when you are not there.
With an active income, you are limited by the hours of the day; some job ideas here could include: Freelance writing or blogging, Uber or Bolt driver, get extra jobs on Craigslist, etc
If you don’t have the time to put in, then you can consider passive income streams such as: investing in property or stock, selling valuable content, starting a clothing business on Etsy, running a laundromat, etc.
10. Find Mentors
My final tip is to find a mentor(s) who have exceptional financial prowess and pay attention to all they do regarding their financial freedom.
Reach out to them and ask as many questions, even when you are not sure if their financial freedom plan is the same as yours. You will be surprised at how vast their wealth of knowledge and experience can help with your business journey, albeit different from theirs.
Your mentors can be family, close friends, an acquaintance, or even an online expert that can be of help. Lastly, you must not blindly follow every advice you are given, try to carry out some more research in addition to what you are learning from others.
Financial freedom isn’t something that happens in a day; you need to be dedicated and open to learning. What is most important is that you make the conscious decision to take action today and get on your way to financial freedom!
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Jamie Fry – Purposeful and promising author. At this moment he is working at writing services review companies, as Pick the writer and Writing Judge and enhances his blogging skills. Confidently goes to his goal. He has a talent for writing original content. The main conviction in his life: «To be the best in the field in which you are developing». Always in search of fresh ideas.