- Introduction
- Definition of terms
- Steps to achieve the goal of financial freedom
- Some benefits of being financially free
- Conclusion.
Introduction
Becoming financially free or having financial freedom could be seen as a state of having enough wealth or resources to take care of yourself and your family even after you have retired from your traditional 8am to 5pm job.
Financial freedom is personal and subjective, this implies that it depends entirely on your values, lifestyles, priorities and goals. It is not a fixed number or figure.
Everyone defines financial freedom differently. Example, some may see financial freedom equals to early retirement maybe at 40, for other folks it may simply means not living or relying on paychecks.
Financial freedom or becoming financially free simply means attaining a point in life where your passive income, side hustle, investments or assets generate enough money to cover your living expenses thereby not depending on paycheck. Interesting right, so keep reading to uncover the secrets of becoming financially free.
Steps to achieve the goal of financial freedom
To achieve financial freedom shouldn’t be complicated, the secret is to follow a simple and consistent steps over time.
Below are seven (7) simple steps that I think will work for you.
1. Audit Your Finances: The first step to becoming financially free is to carry out a personal finance audit in order to ascertain your worth or value currently, because you can’t improve what you have not measured.
Pro Tips
To know your numbers or worth, you have to do the following.
a. Write out all your sources of income. Example includes your salary passive income or side hustle etc.
b. Take a look at your expenses for at least 1 to 2 months. Note that in finance every penny or cent counts and every little thing also matters.
c. Calculate your financial freedom number. You can do this by implementing the 4% rule. Example, Monthly Expenses x 12 x 25. This will give you a picture or target for how much to invest in order to live off passive income.
2. Do Away With Bad Debt: The next step to take in becoming financially free is paying off every bad debt.
Pro Tips
a. You have to prioritize paying off high interest debts for example credit cards (Store credit cards), payday loan (Car title loans/cash advances, high-APR loans etc.).
You can use the methods below.
Avalanche method: This method requires you to start paying the highest interest first.
Snowball method: This refers to paying off the smallest balances first.
Refrain from taking or collecting new unnecessary debts. Why this is crucial is because debts drains your income, slows your growth and increase financial stress or pressure.
3. Establish an Emergency Saving: There is this popular saying that says when you fail to plan, you have already planned to fail. A safety net keeps your freedom plan on track. You have to target to save 3 to 6 months’ worth of living expenses.
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Pro Tips
a. Put it in a high-yield savings or fixed deposit account.
b. You can start small, then increase over the time.
The importance of having an emergency fund or savings is that, it protects you from unexpected expenses in order for you not to go back into debt.
4. Spend Below Your Income: Another practical and yet proven step to become financially free is spending below your income and not the other way round. Spending less than you earn is the backbone to amassing wealth.
Pro Tips
a. You have to stick to a budget that is inline with your goals, for instance the 50-30-20 rule.
b. You have to avoid lifestyle inflation. That is to say, you don’t have increase your spending or expenses every time your income increases rather you save more.
5. Consistent Investment: This is where your money works for you. Ensure you invest wisely and consistently to grow your money. Don’t just save your money for saving sake, make sure that your money is working for you.
Whenever your investment returns dividend, don’t squander it rather you reinvest. Through compounding over time your capital will eventually increase.
Pro Tips:
- Start on time to invest and it should be steady.
- Target low cost funds/ETFs.
- Avoid get-rich quick type of investments/Ponzi Scheme.
- Invest in real estate or other suitable assets.
- Ensure to automate your investment monthly and pay yourself first.
- You can approach your bank to open a retirement account such as the 401 (k), IRA etc.
Note: Investment is the easiest way to grow your wealth while asleep.
6. Increase Sources of Income: Having only one source of income is very dangerous and won’t allow you to be financially free. Ensure you have multiple sources or streams of income because that is the key.
Pro Tip:
To increase your sources of income, you can consider the following:
Learn a new skill adding to the one you already have. Example digital skills that can allow you work part time online
Work part time or freelancing online or offline. For freelancing online you can consider checking out Fiverr, Upwork, Guru.com, Freelancer, Flexjobs, Gigster etc
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You can consider rendering rental services
- You can consider writing and selling your own e-book online. You can check Amazon KDP, Google Play Books, Kobo Writing Life/ Barns & Noble etc.
- You can consider joining affiliate marketing programs where you can use your websites/Blogs or Social media platforms to promote other people’s digital products.
- Focus on scalable or passive streams over time.
Note: Having extra income aside from your salary speeds up debt payoff, increases savings and investment.
7. Adapt And Be Consistent: Finally on the steps of achieving financial goals is adaptability and consistency. You need to understand that achieving financial freedom doesn’t happen overnight. It is a journey which requires discipline and patience.
Pro Tips:
- Regularly review your progress, it could be on a monthly or quarterly bases
- Adjust your plans as income, expenses or goals change
- Read books on personal finance and investing. Example “The Richest Man In Babylon” by George S Clason, “Psychology of Money” by Morgan Housel etc.
Some Benefits of Being Financially Free
Below are the key benefits of being financially free:
1. It gives you peace of mind and less stress
- You don’t have to constantly worry about bills, debts or unexpected expenses.
2. Being financially free gives one a sense of security which allows you to focus on living and not surviving.
3. You have control over your time.
4. Financial freedom allows you to pursue of follow your passions without having to worry about money.
5. You will have the opportunities to travel and experience new things without worrying over the cost, travelling becomes a choice and not a luxury.
6. It gives the ability to build generational wealth.
7. It make one to have a meaningful and lasting legacy.
8. It boost confidence and dependence.
9. It gives room to be flexible in choices of life.
10. Finally, it gives you the ability to assist or help others.
Conclusion
Becoming financially free takes discipline, planning and patience to achieve but the rewards are life-changing. The earlier you start managing your money wisely, investing strategically and setting realistic goals. The sooner you will enjoy the freedom to live life on your own terms.
Remember financial freedom is not just about numbers, it’s about choice, control and having peace of mind. By taking intentional and practical steps today, you will pave a way for a future where your life decisions won’t be driven by financial pressure but by purpose and passion.
This guide covers all your questions on how to become financially free such as;
- how to become financially free step by step
- simple steps to achieve financial independence
- practical ways to build wealth over time
- best money management tips for beginners
- easy financial freedom plan for anyone
- how to manage money and save for the future
- proven steps to achieve financial goals
- financial freedom tips for young adults
- how to create a long-term wealth strategy
- beginner’s guide to achieving financial freedom.
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