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How to obtain your financial freedom
- Spend less than you earn.
- Be Frugal – Is what I am buying a need or a want?
- Invest in your financial education
- Start saving as early as possible
- Invest your savings wisely
- Reinvest your investment earnings
- Build Side Hustles
- Keep yourself motivated, by thinking of the end goal.
- Enjoy the journey
Start with building an emergency fund that covers your core expenses. At first, it should cover only a few weeks and slowly build it up to a few months.
An emergency fund is tempting, because it is there, easy and accessible. Define what is an emergency and write it down. This fund should be used to fix things rather than upgraded them. Example: Car breakdown, Roof Leak or Medical emergency.
An emergency fund can be quickly built by skipping your extra expenses. Health comes before money, so healthy food in the form of unpackaged unprocessed vegetables and fruits if avoided can have longer-term costs. Smart expenses management is what you are after.
Downsizing your entertainment, Christmas presents, holidays, coffees and clothes is an easy way to build up a nice cushion that you can fund
Some people prefer to cold “cold turkey”, meaning they work better in radical changes rather than incremental ones. Not spending any money for 5 days a week works for some
Pay off your non-productive debt
- Credit card debt
- Student loans
Debt is expensive because it takes away from your monthly paycheck before you have the chance to pay for yourself first. The debt will stay there until you pay it off, ignoring it does not work. The easy and boldest step you can make is to gather all your debts in one spreadsheet and understand the difference between paying the minimum and paying them off faster.
If you have several loans, you might want to pay off either pay off your smallest loans first or your higher interest rate ones. The advantages of paying off your smallest loans are momentum. Momentum allows you to build confidence, save more and become the owner of your finances rather than giving your way your money to the banks. The other option is to pay your highest interest rate loans first.
Build a Financial Freedom fund
The retirement fund is that thing you have been procrastinating about for a few months or years. Your brother in law mentions it from time to time, and you smile and divert the conversation to the last Super Bowl. These things do not need to be scary and once you get the ball rolling you will wonder why it took you so long to get this going.
Find out what are your options regarding retirement funds through financial advisors. Make sure to check out any free services you have access to on this. Speak to a financial advisor and understand what the options in your country are. In the US there is the 401k.
The key with financial advisors is to double check where is their allegiance. Is it to you their client or the products that they are selling?
Build your Financial independence through Passive income investments
Passive income is generated by creating multiple streams of income from passive income investments. What is passive income and how do you build it? The core idea is that this monthly paycheck from your investments replaces the one from your 9 to 5. This gives you more than financial independence it gives you financial freedom.
There is more to financial freedom than money, learn more about the 7 different types of passive income and how they can enrich your life.
Build Side Hustles which you can turn into passive income investments
You have your full time, you are saving money but you know that your savings will not be enough to give you financial freedom. This could be either because you started saving late or your savings amount is not enough. You still have options. It will require you to pay your financial freedom upfront by investing your time, energy and with into building a side business. Eventually (after a few years) the snowball effect will allow these kinds of business to require less of your time and become somewhat passive. Here are a few ideas.
- How to sell art online and make money
- How to create and sell an online course
- How to create passive income from Free mobile apps.
- Learn how to make a passive income by writing eBooks.
- Multiple Passive incomes from Youtube Channel Videos.
- How to earn passive income from facebook affiliate marketing.
Bonus Tips and Tricks:
- Lifestyle creep and Lifestyle inflation: This means that every pay rise and bonus you get goes to increasing your creature comforts. This effect makes the product sellers riches, and you just having a job with more responsibilities.
- Keeping up with the Jones’s: Spending money to tame your Jealousy and Greed or to inflate your Sexual Market Value artificially is a road that has no clear and final destination. This means that there will always be something more you can do to “improve” the 3 horsemen of financial ruin. We are all human and buying something nice for you makes sense as long as it is carefully thought out and not an impulse buy.
- Financial Education: Reading one personal finance book a year or an article a week. Keep yourself motivated. It is easy to go off course and fall to social media and advertising pressure.
- Financial Independence is a commitment which can only be achieved through hard work and passion through different strategies.
- There are many variants of FI, learn about the difference between leanFI and FATfi
A number of small decisions all in the right direction will make your personal finances better and more solid. This gives you confidence and reassurance that you are able to tackle like better and more productively. The first steps are the hardest, but you can turn this into automatic if you stick with it long enough. Make financial freedom a habit rather than a chore J