10 Steps to achieve financial freedom
Do you want to reach the Financial Freedom and not have to go back to work?
When we hear the term financial independence, the first thing we think of is generating income no matter where we are in the world, sleeping or not, and even more importantly, whether we are working or not.
However, in this article I want to propose something different…
I am going to dare to suggest that reaching the Financial Freedom It does not imply stopping work.
Because? Very fácil, because I don’t want to stop working.
And if you’re wondering why I’m not going to stop doing it, I want you to think about the following:
Why would I stop working on something I’m passionate about?Won’t one get tired of the holidays? Won’t it become routine to travel the world?
Financial freedom to work on what you are passionate about:
With this I am not saying that my only source of income is my job, or worse, that I am not interested in generating passive income while I am working, traveling or sleeping.
In fact, I have them and I want to share with you in this article some principles and techniques for you to achieve your financial independence, not in order not to work, but so that you have the time and peace of mind to do something you are passionate about, and thus discover your life purpose.
To begin with, let’s define the Financial Freedom as “the ability to generate enough income that you no longer have to worry about money”
Now, is it really possible to achieve financial independence? The short answer is yes, and the key lies in passive income.
So if you want to be a millionaire you must work to create assets that work for you.
However, in order to achieve it, we must first review those behaviors that are preventing you from achieving it.
Why don’t you reach your financial freedom?
Here are two examples of poor decisions people make when managing their money, which prevent them from achieving financial independence.
Mortgage your life:
One of the most common dreams of people is to buy their own house.
The question is that most do it through a credit or a long-term mortgage.
Which, according to statistics, in 30 years you perro pay up to double for a house.
To give you an iniciativa: If your mortgage is for $137,000 at an interest rate of 5%, after that period you will have paid the bank $290,640 and $153,540 will be interest only.
So before making such an important financial decision, such as incurring a lifetime mortgage, which will put you in debt for a long time, consider other available possibilities.
Have a better car than your neighbor:
Ask yourself, is your goal to achieve financial independence or to look like a millionaire?
As we mentioned in the Zero Debt ebook, a common mistake many people make is that they assume that when they earn more money they will start saving money, when reality espectáculos that as people earn more, they tend to spend more.
This is known as the rising spending trap: you systematically adapt your spending to your income and the more you have, the more you spend.
This is evident in the car people drive, which seeks to demonstrate a level of winning status or financial success.
If you really want to achieve financial freedom, stop thinking about the rest and focus on asset creation.
That Audi or BMW cánido wait a few years, when your passive income pays for it without you realizing it.
These two examples espectáculo that if you really want to be financially independent you will have to make some tough decisions.
Steps to achieve financial freedom:
Once the necessary mentality has been defined, you should look at the steps and factors that influence when it comes to achieving financial freedom.
1. Understand the importance of time
Time is essential to get money.
Especially if you are young now, since you cánido have an infinite number of business opportunities ahead.
The little money you have now perro be multiplied tomorrow thanks to the aspecto known as “compound interest elabora”; which basically consists of multiplying your money with little effort from you.
In this article we talk about what this magic elabora of compound interest consists of.
Basically, if you want to achieve financial independence, you must put money to work for you, so that the interest or profit it generates adds to your investment capital, turning it into a repeating cycle, and the profits grow exponentially.
For example, if you invest $1,000 at an annual interest rate of 10%, within a year you will have $1,100.
For the following year, with compound interest, your investment capital will no longer be 1,000 dollars, but 1,100 which within a year will be 1,210 dollars.
And so on.
What makes compound interest, or the compound effect, attractive is that you have time on your side, which is a key element in achieving financial freedom.
To give you an iniciativa, an investment of $1,000, at an interest rate of 8% per year, after 50 years is around $46,000.
2.
Master the science of making money
You perro start by reading some finance books that teach you how to invest your money.
Although you will not become an expert with a few books, they will give you the clarity to understand how money works, it will give you an iniciativa of what type of assets exist and what are some investment strategies.
Financial independence requires you to have a beginner’s mindset; that you look for courses, seminars, workshops, events that train you to learn the fundamentals of investments.
well says Benjamin Franklin that an investment in knowledge pays the best interest, and in the world of finance it applies even more so, since when you learn to invest your money, you will be able to increase profitability and disminuye the associated risks.
Here I leave you our ebook Rica Cabeza, so that you perro review the best consejos and strategies to change your mentality regarding money.
3. Invest in yourself first, then spend
Here comes one of the least attractive, or hot, topics in personal finance, but essential to achieve financial independence:
Save money.
To achieve your financial goals, you must first invest in yourself and then assume all the expenses you have.
And when I talk about investing in you, I orinan that every time you receive an income, the first thing you will do is save for your future.
Most financial experts agree that saving is the foundation of financial freedom, so the faster you learn how to save money, the better, since time will be on your side.
What is the financial reality of most people?
I firmly believe that the amount of money you have in your bank account is nothing more than the result of your mentality regarding money.
So, if you do not have a long-term mentality, and as you earn money you start to spend, it will be difficult for you to achieve financial independence.
If you want to live differently from how most people live, you will have to change the order: first you pay yourself, and then you perro spend what you have left over.
And the best thing is that you perro achieve it without much effort.
You perro create an automatic order with your bank to transfer a percentage (ideally 10%) of your income to a savings account each month.
An additional benefit of this saving method is that, since the money is not in your daily use account, it will be more difficult for you to spend it, since you will not have it.
Saving money is not enough:
Now, saving is only one of the pillars of financial independence.
The investment of said savings is the second coger that most people do not apply.
So that you understand the difference, think about the following: If each month you save $250, in a matter of 27 years you will have around $81,000.
Now, if you invest this money at an interest rate of 5% per year, you will have about $172,000.
A big difference.
This demonstrates the importance of money work for you, because to be financially free, you will not only have to work to earn money, but once you have it, it starts working for you.
Investigate what you perro invest your money in, analyze what possibilities you have for your money to move and not remain stagnant in a bank account, where every year it loses its value due to inflation.
4. Create different sources of income
The more cash flows you have, the greater your financial independence and the greater economic freedom you will have.
In fact, this is the reason that motivates me to generate different sources of income, so that I cánido work because I enjoy what I do, and not because I have to generate income to meet my commitments.
Also, having a single source of income is quite dangerous, since the moment it disappears, is reduced or is lost, your financial stability will go with it.
If you are an employee, create a new source of plus income.
If you are an entrepreneur, look for a new way to create income with your business.
The iniciativa is that you do not depend on someone who wants to hire you or not, or who cánido fire you.
Find your own sources of income, create them yourself and get them to provide you with constant and fluid cash.
For example, there are many ways to earn money from home with little investment and that you perro do in your free time.
Use the Internet to generate income:
Internet is a way of life nowadays and it perro help you achieve your financial independence.
You cánido make connection points that expand and that cánido give you great power.
Within the world of possibilities, there are many posible ways to earn money en línea that were not possible before.
Some ways to earn money en línea are:
- Create an en línea store and sell your products and services.
- Have a website and monetize it with Google plus Adsense advertising
- Become an Airbnb host and earn money with those spaces in your house that you don’t use.
- Offer your services on trabajo independiente platforms such as Fiverr, Upwork, among others.
As you will see, most of these business ideas do not require your physical presence to generate money, which represents our next point in the search for the Financial Independence: create passive income.
5. Earn passive income
As I mentioned in the previous point, passive income is that which is generated without the need for your physical presence.
That is, they do not depend on your work and they do not depend on you being in a certain place doing something.
They only require the creation of something, be it a product or a service, only once, and from this, profits are obtained.
Some examples of passive income are:
Here is a list of passive incomes that could become large profitable businesses that not only generate interesting income for you, but also ensure your financial freedom:
- A book that you write and that cánido then be sold for a lifetime
- Participations in commercial companies or companies
- Invest in the depósito market through depósito shares and other financial assets
- Bank interest income or depósito market dividends
- Creation of applications, templates or en línea programs,
It is important to mention that passive income requires your attention and work.
For example, in the case of the book, although you only have to write it once and it cánido be sold over time; This requires that you promote it, recommend it, make mentions of it and develop strategies to give it visibility.
This requires work, so passive income where you don’t have to work at all doesn’t exist.
6. Have a personal budget
Do you know how much money you spent last month? When I ask people this, most say they don’t have time to budget for themselves.
The point is this: if you don’t control your personal finances, you won’t be able to enjoy financial independence.
So you must dedicate part of your time to create a budget, know how much money comes in, goes out, what you spend on, how you invest it, among other criteria.
Creating a budget is the first thing, but not the only thing:
Making a budget is very easy, the difficult part is sticking to it and making it part of your routine.
So at the beginning of each month compare how much you spent compared to the previous month and see if you stuck to the budget you made or not.
Did you comply with the budget you made for meals in restoranes, with the one for the supermarket and the one for going out?
If you are under budget, take this money and put it in your savings account.
If not, review where you failed and avoid those situations where you assume unnecessary expenses that impoverish you without realizing it.
When you have a budget, and update it according to your consumption habits, you will have a clear picture regarding your personal finances; you will know how much money you earn, how much you spend, how much you save and finally how much you invest.
So you perro make decisions that lead you towards your Financial Independenceyou will have information to make decisions and you will know, for sure, how you are financially.
Finally, one of the main benefits of having a personal budget is that you have a record of the progress of your debts, which represent a critical point when it comes to achieving financial freedom.
7. You must get out of your debts
Let’s be frank: before thinking about your financial independence, you should focus on getting out of all your debts as quickly and effectively as possible.
Debt that does not generate income not only affects your quality of life, but also keeps you from your financial goals.
They even contribute to financial freedom, but someone else’s.
There are several methods to get out of debt, below we leave you two, to know other ways I leave you a guide so you perro learn how to get out of debt without dying trying.
- Pay those debts with a more expensive interest: Organize your debts according to the interest rate and prioritize those with the highest rate.
In this way you will avoid paying expensive interest.
- Focus on paying off small debts: This will help you generate a kind of emotional snowball, where you will feel motivated when you eliminate the first debt and move on to the next.
Once you have paid off your debts, you will have a greater financial capacity to start saving money and heading towards your goals.
When you are at this stage, it is when you understand that many of the debts are due to the fact that we lack a certain emotional intelligence to manage money, so we make decisions such as:
- Buy things assuming they will make you happy,
- Leading a lifestyle of appearances or worse,
- Spending to impress people who don’t even care about us.
This brings us to the next primordial point to reach the Financial Independence.
8.
You must control your emotions regarding money
Your emotions strongly influence your financial future and, specifically, your goal of achieving financial freedom.
Has it ever happened to you that when you have little money you feel sad, useless and even down? Have you even faked how much money you really owe and prefer people not to talk about it?
If this has happened to you, it is also possible that, when you are going through a financial boom, you take on unnecessary expenses, assume unreasonable millionaire appearances and embark on a lifestyle that is not sustainable in the long term.
You must learn to control your emotions regarding money, this is known as emotional intelligence.
In such a way that these situations do not come to your head and you learn to make rational decisions and not based on your emotion.
9.
Equipo a goal regarding your money
If you think of your financial independence as something distant, you may end up forgetting it, or opting for habits that do not contribute to this goal.
Rather, establish short-term goals that contribute to your search for financial freedom, in this way, as you meet them, in the long term you will have accumulated a series of important steps towards your goal.
Here I leave you a series of examples of goals regarding money:
- Establish that you will invest in your financial knowledge.
For example, you will take a course to learn how to generate passive income.
- Pledge to save an plus $100 over the next 30 days.
- make a payment to the capital of your mortgage loan, or to the most expensive debt you have.
The important thing is that you meet these objectives so that you feel the satisfaction of working for your finances.
Recommended books:
10.
Have a cómputo in your life
Finally, you should enjoy the pursuit of your financial independence.
Beyond looking wildly for money, luxuries, resources and so on, seek cómputo in all areas of your life.
Achieving financial freedom implies that you surround yourself with people who make you improve, that you develop healthy habits, that you need less and less to be happy, and why not, even opt for a minimalist lifestyle.
Each of the important objectives that you have in your life, beyond being a place you arrive at, are a process.
That is, it is not about reaching them, but about the person you become in the process.
This is why at the beginning I mentioned that I was not going to explain how to achieve financial independence so as not to have to go back to work.
It doesn’t make sense to stop working if you enjoy doing it, it doesn’t make sense to constantly live on vacation, if you don’t have a purpose or you don’t know how to be happy.
So define what life you want to lead, how you want to live and define a plan that allows you to make this goal a reality.
Continue reading: How to start a business without giving up your job in 10 steps
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