A person who has enough money to continue living their life as they like without a
regular employment is said to be financially free. Your goal for financial freedom will let go of you so you can go and do, travel, or retire far ahead of your contemporaries. It, of course, does not happen overnight, but having a good design for a plan
certainly makes the way much easier. Here are five easy steps toward financial freedom:
Step 1: Know Your Current Financial Situation
Before you start working for financial freedom, you now have a better understanding of your financial situation. This can be tracked by tracking income, expenses, assets, and debts. Having a proper knowledge of finances shall be able to set proper realistic plans along with achievable goals.
Getting Started
Track your expenses. You will be able to find out where exactly your money is going, and you would try to cut costs on these areas.
Calculate net worth: Subtract what you owe ($debt) from the total sum of your complete wealth (savings and investments, etc.)
Set goals: What do I want to do with money? Pay off debt? Save for a house? Fund retirement? In my mind, there are both short- and long-term periods.
That is your foundation upon which you can build your way to becoming a free agent leader.
A financial plan helps you to gain financial freedom. One can start by building a
percentage budget of how much to save and invest and which to expend. Additionally, strategies for managing and growing wealth over time should be envisioned.
Step 2: Basic Needs of a Financial Plan:
Budget: Provide a best-fitting budget to help your income meet your goals.
Emergency fund: 3-6 months of expenses you can withdraw to level out any shocks.
Savings for the future: It is another benefit of having an effective financial strategy.
The more you save, the earlier you can have financial freedom. Try to save 20-30% of your income. The more the money that you can set aside, the faster you will
become free financially.
Step 3: Savings Maximization
Reduce unnecessary expenses or discretionary spending like dining out or movie house.
Set up regular payments into the investment or savings account.
This will actually prevent lifestyle creep, which is the increase in your spending when your income increases.
If you are saving for the future and securing your finances, then certainly you are spending less and saving more.
Step 4: Investment for Long-term Growth
Saving money alone will not make you fall in love with being independent financially. It's a smart thing to do with your money investment in a manner that it yields returns over time. Put your savings into stocks, bonds, real estate, or even retirement
accounts, and you're sure to add wealth to your pocket in the long run.
How to Invest
Stock and Bond Mix: You can term this as stock of any kind of security that
represents ownership or title in any form of company wherein investors have
recourse. You can mix stocks with bonds which promise great growth with stability in terms of liquidity.
Index Fund: They should find low-cost index funds so they have a wide exposure to several investments.
Real Estate: Purchasing real estate is an investment, earning passive income through rental income and through appreciation over years.
Your money is more likely to mature the longer you can invest it. Look for
investments that meet both your long-term goals and your comfort level with regard to risk.
Step 5: Repay Debt and Develop Multiple Income Streams
The reality is that you might discover that too much debt is the obstacle that bars you from reaching financial independence. You are paying money that you could have
saved - which in turn means money that could have been invested.
Paying Down and Paying Off Debt
Pay off debts by the debt avalanche method: pay debts that have the earliest
accumulated and highest interest rates to save the most in interest dollars over time.
Debt Snowball: Debt Snowball is deployed clear the smallest debts first since that will give you the momentum as you continue crushing the smaller goals that gives you momentum.
Beyond servicing your existing debt, there are various sources of income that help you accelerate towards your journey of financial freedom. A passive source of
income, such as rental income and dividend income on investments, gives you a cushion and supplements your earnings at the same time.
Income Generating Ideas
Rental Properties: Purchase real properties and collect rent from renters.
Online Businesses: Start by creating a blog, opening a YouTube channel, or starting an e-commerce online store. You'll be earning even while you're sleeping.
Conclusion
Financial freedom is a long journey and very laborious. It must be carried out through laser-like concentration with proper planning and saving. Getting financial freedom is
going to require one to follow these five steps. With time, you will focus and hence make smart financial decisions to get what you have always craved.
