9 Steps to Financial Freedom,10 Mins Read to Rich and Rewarding Life
Well, What is Financial Freedom?
If You don’t know or haven’t heard about the term let me explain a little bit about financial freedom.
Financial freedom is the ability to pay your necessary basic living expenses without depending on a constant source of work for income.
Financial freedom implies you have the means to pay for necessary basic expenses of housing, food, Transportation, Childs education without working every day or worrying about money daily.
I would also like to make it clear that achieving financial freedom doesn’t imply becoming rich or about a specific amount you make monthly or yearly
It’s just about a basic automatic income which you are getting from various financial investment seeds that have grown over years.
Now, Why would anybody want to achieve financial freedom?
Obviously, it increases your ability to pursue your passion, you can experiment while switching careers or you can take some risk and start your own business. You can take some break to pursue your travel plans or have more time for your family and loved ones.
I strongly recommend you to include achieving financial freedom in your financial plan or goal, as soon as possible.
Here are some of the steps you take to achieve your financial freedom and get closer to your life goals.
1. Goal Setting
Apply SMART Technique, Yes SMART is a useful management technique that you can apply in achieving your financial freedom in a more scientific manner.
’S’ stands for Specific, So defining your goal is the first step in applying this technique, Here your goal is to achieve financial freedom.
‘M’ stands for Measurable that means your goal should be measurable so you can track your progress and will be able to know when and how you can goal is achieved.
‘A’ stands for attainable, Yes, you have to ask how much you need for a financially free life and of course check whether the goal is attainable or not.
You should make sure not to define a basic income as per very high standards of living.
‘R’ stands for relevant, So ask yourself whether the goal will meet your needs or whether its worth to achieve and whether it’s in the alignment of other goals you have kept for your life.
In this case, your goal is attaining financial freedom so it’s a completely relevant goal.
’T’ stands for time bounds i.e your objective should have a time limit and obviously a definite time frame to achieve financial freedom will install a sense of urgency and you would better utilize your time.
So use this principle in achieving your goal of financial freedom.
2.Changing the Mindset about Money.
There are some of the common mindset you need to change about money and you will feel a sudden improvement in your financial life.
Some of the changes in the common mindset I would try to advocate are that-
*There is enough of money to be made in the universe, You don’t need to compete with everybody you brush your shoulders with
Stop Comparing Yourself with others and Once you believe it your actions will change and will be aligned to achieve your goal.
*Create value in the system and your work instead of doing anything just to earn money.
*Get out of your past beliefs and failure mindset, If you have failed in acquiring wealth in the past it doesn’t mean you would not succeed in the future too.
*You can always create multiple sources of income or a side hustle to supplement your income
*Always ask whether you are investing in a product or spending on a product, If a product or service is a good investment and provides value only then go for it. Don’t go for things with a consumer mentality.
*Try to get things done and coming to a solution instead of complaining.
*Have a long-term mindset instead of earning quick money or quick profits.
3. Always Pay Yourself First before Paying Others.
What do you do when you get your salary or What do you do first with Your Income?
This is a pertinent question to ask yourself, you get your earning and your bills are out there to be paid.
So it seems basically you are earning for your landlord, your banks, and other producers whose products you are consuming.
Paying yourself first means fixing a portion of your income to grow your net worth and investments and moving forward in your future financial plans.
I recommend saving at least 40% of your take-home income and invest so as to achieve your financial freedom in your early days.
Read: How to Save Money
You can increase the amount If you want to achieve it earlier.
4. Start Investing Early
Start your investment in future automatic income portfolio as soon as you can.
By investing early you can leverage the benefit of compounding interest on your investments.
It will make a huge difference in your portfolio.
starting a year early can also make a marginal difference in your net worth.
Buy real estate, save for downpayment of rental properties, Give your extra room on Airbnb,
Invest in stock markets, bonds, Index funds, peer to peer lending and create as many multiple streams of income.
Start investing your time and energy into a side hustle like a blog or website or a business you always like to start or think about.
In these ways investing at the right time and at the earliest can help you achieve your goal of financial freedom in a short time frame.
5. Developing Right Habits.
Achieving financial freedom is not difficult once you develop the right habit to attain it.
Just knowing about and implementing some of the habits can give you a head start
you can get the life of your dreams just by tweaking some of your lifestyle habits.
*Always have a habit of spending less than you earn, Always Invest than spend rather the remaining. Keeping a modest lifestyle is the key habit in attaining your financial freedom early.
*Be Patient with your investments and always have the habit of investing for a longer period of time.
Don’t be a restless investor and don’t be mindless in switching investments quickly into various asset classes.
*Always Pay off your credit cards full amount due within due date.
Most people have the habit of only paying the Minimum amount due on credit card balances this will lead to siphoning your saving balance as banks charge very high interest rates on credit card dues.
*Remove the shiny object syndrome from your mind, don’t go after every shiny object your neighbor is purchasing.
*Have a habit of negotiating all your purchases, whether its the rent, bank fees, investment fees, grocery prices or other expenditures.
*Using the professional services of a financial advisor and do not take every decision by yourself.
*Chart out a monthly and yearly budget to track your spending pattern and cut the unnecessary expenses
So try to develop the habits outlined above.
6. Have Some Good Company
It is always better to be among people who have common goals and aspirations in life.
In this case, your goal is to achieve financial freedom, So you can start creating your mastermind group.
Start getting in touch with the people who have achieved it and find what they have done to achieve their financial freedom.
Find success stories and note down the exact steps taken by the people who have started like you and are leading a financially free and rewarding life now.
Once you create a group and be its part you will get inspired and would remain in the flow of achieving your objective.
7. Start Tracking
Start tracking everything related to your personal finance, your net worth, how much you earn per year, how much you pay taxes, how much you spend and how much you invest
In this way, you can project your portfolio and make the necessary adjustments to your saving and spending rates and allocate more for your financial objective.
Tracking and being mindful of your unnecessary expenses and cutting them is the key step in achieving your defined financial objective.
8. Credit Ratings
Well, the credit rating will not directly influence your goal of earning Financial freedom but it has a significant indirect role to play.
Basically, credit rating signifies the creditworthiness of an individual.
Credit ratings are assigned by credit rating agencies to an individual which denotes an individual spending pattern and whether they are paying for their debts regularly.
Data is provided to credit rating agencies like Experian by banks and financial institutions and based on various parameters they assign a credit rating to an individual.
So how credit ratings are important
*A good credit rating helps in getting cheaper loans from banks and financial institution.
when you approach them for loans such as Business loans, property loans or other financial requirement loans they check your credit rating and payment history.
*Nowadays even employers check about the credit rating of an individual before offering them a job.
*A good credit score leads to a reduction in insurance and Credit card fees for a person by banks.
Keep in mind it is not hard to maintain a good credit rating, Just maintain a good financial discipline.
So, start tracking your credit score and develop a financial discipline to improve and maintain it well.
9. Constantly Learning about Money
Market and Money is evolving every day.
Constantly learning about personal finance and money management is a great way to be always aligned with your objective of gaining financial freedom.
Read books, attend seminars, to develop your financial intelligence.
I have already read a ton of books and I am confident that has improved my financial IQ.
So as you should do and be confident that this will make you closer to your goal of earning your financial freedom.
I have included most of the significant steps you can take to achieve financial freedom in a short time. Do comments about the article and share it if you like it.