For many people, money is barely enough. They struggle to live check to check, overburdened by the weight of increasing debt. Any thoughts of financial emergencies or unexpected events overwhelm them with anxiety that such occurrences might poke holes in the small safety net they have.
You dream of a day when you will be financially free, when you can miss work and not worry about not having a paycheck.
When an unexpected car repair does not throw you off. When you can meet all your financial needs comfortably and have enough in an emergency fund. When you can do work that you are passionate about without worrying about how much it pays. However, you wonder whether this is an achievable goal.
Yes, financial freedom is attainable. It takes an empowered financial mindset, a well-thought-through strategy, and deliberate, consistent steps. It is not a get-rich-quick scheme. It takes patience and massive action over a period of time.
This article presents some specific strategies and steps that you can take towards achieving true financial freedom.
1. Get Your Money Mindset Right
We’ve all heard statements such as “money does not grow on trees,” “money is evil,” or “rich people are evil.” Maybe you’ve been told that people in your family or social circles only get so far financially and that you’re too ambitious regarding your financial life and goals.
Such beliefs significantly handicap your potential for financial growth as you can only get as far as your mind deems impossible.
The reality is money is essential to living a happy life, and the more you achieve financially, the more satisfied you’re likely to feel about life. Therefore, it is essential to upgrade your financial mindset and increase your cash flow continuously.
Affirm your ability to come up with a simple strategy to make and manage money. Read autobiographies about people who built their wealth from the ground up and let them prove to you that it is possible, especially if you make the right investment moves.
Some of my favourite examples are,
- RICHARD BRANSON – Losing My Virginity: How I Survived, Had Fun, and Made a Fortune Doing Business My Way
- ELON MUSK – Tesla, SpaceX, and the Quest for a Fantastic Future
- WARREN BUFFET – The Snowball: Warren Buffett and the Business of Life
- ROBERT T. KIYOSAKI – Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
- TONY ROBBINS – MONEY Master the Game: 7 Simple Steps to Financial Freedom
2. Look At Your Finances
On your journey to true financial freedom, you start where you are. Start by taking a close look at your current finances. Write down all your sources of income, debts, and expenditures. Get a sense of your net worth. Where do you stand with monthly expenses? Do you have a safety net of any kind in place? What about stock market strategies?
From here, create a budget and a plan to pay your debts. Adhere to your budget and track your daily expenditure. For easy tracking, you can download one of the freely available budgets and expenditure spreadsheets online.
Review your financial program and budget daily and every week and month; take some time to analyze it. Identify what you spend most of your money on and see whether there are areas you can cut down on.
Creating a budget and tracking expenditure can be an anxiety-provoking activity. It requires commitment, determination, mental strength, and a clear plan.
If you can overcome the anxiety, you will come face-to-face with your spending habits, and this awareness can give you tremendous control over your money. Budgeting does not mean that you do not spend money at all; it means that you make deliberate purchases.
3. Pay Off Your Debts
Paying off your debts not only improves your credit score, but it gives you peace of mind, which you can leverage on for a more empowering money mindset and make sound financial decisions.
Give yourself a realistic timeline that you can work with to pay your debts. Start with high-interest debts such as credit card debts. Lower interest loans such as mortgages and student loans are not an emergency.
Therefore, you can have a more long-term plan for them. Keep in mind that the sooner you pay them, the lower the interest and overall amount you end up paying.
Find here 10 Easy Ways to Pay Off Debt.
4. Have Clear Financial Goals
Create a clear vision both in the short-term and long-term. Determine the ultimate number that would mean financial freedom for you.
Consider the type of lifestyle you would ultimately be living and break down what it would mean in terms of your everyday living expenditure, how much you would have in your emergency fund, income, and savings.
This number may seem scary, but it gives your mind a specific target to work with.
Identify actions you can take immediately towards this ultimate goal. For instance, you could decide to cut down $2 from your daily expenditure and channel it towards paying your debt. Or you could give yourself a six-month goal to save up for your emergency kit.
Alternatively, you could work towards increasing your income and channeling that money towards a high-yield bond or stock. Generating investment income is another clear financial goal you can consider, and you search for financial independence.
5. Commit to Saving More
The number one rule of saving is to pay yourself first. This means that before you pay your bills and commit your money to other expenditures, determine a percentage of every paycheck that you’ll be putting aside in savings.
Avoid any and all money pits when you are supposed to be saving money.
If you start on your savings plan and your budget is tight, start with as low as 5% or even 1%. As your income increases, increase the percentage of the amount you put aside.
The idea is to remain consistent. Eventually, you will have saved a good amount that you can either put aside as an emergency fund or use as investment income.
6. Find Ways to Grow Your Income
You can grow your regular income through several ways, including building new skills, improving your career value, starting side hustles, and investing your money in opportunities that have higher returns, among others.
You may not make a lot of money overnight with a new skill or an upgrade to an existing skill. Still, over time you’ll be able to leverage it to negotiate for better pay and to find better-paying work opportunities for a steadier income.
Regarding side hustles, the opportunities are unlimited. You can either find ways to monetize a hobby or a talent you have or even start an online business. For instance, if you love writing, you could go into content creation and work directly for website owners or freelance platforms such as UpWork and Fiverr.
7. Adopt an Investor Mindset
Most people in the world have a consumer mindset rather than an investor mindset. A Person with an investor is focused on building wealth, while one with a consumer mindset is driven by spending.
For instance, when a person with a consumer mindset gets a pay raise, their first inkling is to buy fancy things and spend the extra money to upgrade their lifestyle.
On the other hand, when investors get a pay rise, they are keen to find investment opportunities to put the extra money.
While consuming is not necessarily bad, you have to find a balance between consumption and investments. Start to invest now with the much you have, and grow your investment portfolio as you go.
8. Financial Literacy
To make sound financial decisions, you need to be well-informed about the various financial and economic principles.
Please educate yourself about inflation, interest rates, and compound interest and what they mean for your financial future. Also, educate yourself about the various investment opportunities, their returns and risks involved, and how you can optimize them for sustainable wealth creation.
9. Adopt a Net Worth Mindset
While having clarity around your income, debt, income to debt ratio, saving, investments, and investment returns is crucial for your financial growth and development, you also need to know your net worth.
Your net worth is a measure of your assets versus your liabilities. No matter how much money you make in income, investments, and savings, if your debts and monthly expenses outweigh your assets, it will be impossible to become financially free.
Therefore, always work towards increasing your net worth to gain financial independence.
10. Be Patient
When you first embark on your financial freedom plan and start taking consistent action, it may feel like you’re not doing enough or that the process is taking too long. Stick with it anyway.
Of course, take time to review your strategy and steps to see whether there are some improvements that you can make. Plan periodic reviews, e.g., quarterly, every six months, or annually, and you’ll know that you will be a few steps ahead.
That $5 or even $1 you saved daily may not seem like much initially, but its compounded effect gets you significant accomplishments over time. Therefore, do not be discouraged by the slow progress. When you look back in a year or two or three, you’ll be amazed by how far you’ve come.
Why Do We Think We Are NOT GOOD ENOUGH?
Achieving true financial freedom is possible. It takes being deliberate, well-informed, and patient. It requires developing healthy financial habits and sticking with them over time.
Budget your money, track your expenditure, save consistently, pay your debt, find ways to increase your regular income, invest, educate yourself about money, and upgrade your money mindset. You will get there eventually.