10 Steps to Financial Freedom. Financial freedom can sound like a nice theory but it’s actually possible for anyone to achieve it. And I mean anyone, even someone who had lakhs of rupees in an education loan like yours truly.
No matter what financial troubles you’re having today. There’s always a way to get back to black, trust me. In this post, we are going to discuss a 10-step formula that you can follow in 2020 to achieve financial freedom.
We are here to help you learn, hustle and grow so let’s just get straight to the list.
Financial freedom means having a dependable cash flow that lets you live whatever life you want to. You aren’t worrying about bills every month and sudden expenses.
You aren’t burdened by a pile of debt that follows you everywhere. It’s about recognizing that you need to find ways to make enough money to pay down your debts, save and invest.
It’s also about planning for your long-term financial situation and making sure that you’re saving for a rainy day or an emergency.
Understand Where You’re at
Let’s start with tip number one. Understand where you’re at. You can’t achieve financial freedom without knowing where you’re. Actually start by looking at how much debt you have, how many things you owe and what credit cards you haven’t paid off yet.
It can be anxiety inducing but if you want to fight it, you need to acknowledge it. First compile a list of all your debt, mortgage, student loans, credit cards and put it on one big list. Now take a deep breath and look at the final number. How much money do you owe?
If it’s a big number don’t freak out. I promise there’s a lot of people out there who have had way worse debt, have been in worse situations. And have been able to pay it off.
The key is to go step by step. First you’ve got to acknowledge it, so pat yourself on the back if you did that. Next compile a list of all your savings, this includes your investments. Make sure to note down how much money you’re bringing in from your workplace or any other business.
Keeping these numbers in mind is important because it’s going to take financial freedom dreams and turn them into an actual reality for you.
Look at Money Positively
Tip number two. Debt can definitely be super discouraging to look at. But you need to remember that although debt is discouraging, money has the power to take away your debt. And help you achieve a lot of your dreams and goals. Remember you deserve to achieve financial freedom.
One of the biggest obstacles that people experience when it comes to making more money is that they feel shame and guilt when it comes to finding strategies. Many people feel guilty for having it and even guiltier for making it.
Money is extremely important because it can help you achieve your dreams and ambitions. And yet for a lot of us it’s very taboo. Something that we feel guilty for even thinking or wanting to experience financial freedom.
It’s imperative that you look at money as a tool to help you achieve your goals and dreams. And also to live a stress-free life.
Write Down Your Goals
Step number three is to write down your goals. Why do you need money? Is it because you want to be able to retire comfortably? Is it maybe because you want to escape your nine to five corporate grind? or maybe it’s because you want to prepare a college fund for your kids.
If you just ask somebody, do you want to make more money. Of course the answer would be yes. But if you actually know why you want to make more money and how much more money it is. It will be a lot easier for you to have a tangible goal to work towards. And as you work towards that goal it will be a lot easier for you to get excited.
You’ll feel euphoric as you pay off your debt and start going in the direction that you want to.
When you write down your goals you need to remember that this isn’t going to be an overnight thing. Things might not happen in a month. However a year is definitely a long enough time for you to make a huge impact on your financial goals.
Make sure that when you write down your goals, you write down a specific number. It will be a lot easier to work towards something that’s specific than ambiguous. Like for example becoming a millionaire. If that is your goal that’s awesome but start by writing down one million. Once you get to that point, it’ll be a lot easier to get to the second.
Track Your Spending
Step four is to track your spending. An important step towards financial freedom is to track your spending. There are a lot of different ways that you can track your spending. Some people like to do it with an excel spreadsheet.
Others like myself find that way too difficult to keep up with so I would suggest using an app like mint. mint is an app that allows you to punch in all your expenses. As well as how much money you’re bringing in. Your financial goals and savings that you’d like to make. It will track everything that you spend money on. And it will also let you know if you’ve overspent in any of your categories.
mint is amazing because it helps keep you accountable. And when you’re held accountable, you’re more likely to succeed and put money where it’s important rather than impulsively spend it.
Pay Yourself First
Tip number five, pay yourself first. You’ve probably heard this expression before, pay yourself first. But do you know what it really means when someone says pay yourself first. What they’re saying is that you should be putting money into your savings before you spend it on anything else.
The act of paying yourself first has helped countless people achieve financial freedom. But how has it actually helped so many people achieve financial freedom. That’s because if you’re dedicated to putting a thousand rupees into your savings each month. Then whatever you have left over goes to bills.
However if you don’t have enough money to pay those bills then you need to either work on getting a pay increase or starting a side hustle by paying yourself first. You always guarantee that you’re setting money aside to invest in yourself. By doing the opposite, all you’re getting is what’s left over and that is no way to achieve financial freedom.
Now you don’t need to pay yourself first only with cash. If for example your workplace has a retirement savings account and you can dedicate part of your pay to go to that first. That works too, just remember if you want to achieve financial freedom you need to put yourself first.
Tip number six is to spend less. In 1958, Warren Buffett purchased a five-bedroom home for thirty one thousand dollars and hasn’t moved out of it since. Isn’t that crazy, I wish I could buy a five bedroom home for thirty one thousand dollars.
That’s nuts, that’d be a good investment. I wouldn’t move out of it either. Warren Buffet’s net worth is an astounding 72 billion dollars. If there’s anyone that could afford a bigger and more expensive house it would be Warren Buffett. But as you can see he’s very frugal and this is definitely one of the reasons that he’s become one of the wealthiest and most successful people in the world.
Kanye West on the other hand isn’t afraid to flaunt his wealth. He lives in a 20 million dollar home and at one point with 53 million dollars worth of debt he asked Mark Zuckerberg for a one billion dollar loan on twitter.
The difference between these two successful gentlemen is Warren Buffett never spends more than he needs to. Whereas Kanye West is always spending more.
The truth is plenty of rich people don’t actually look like rich people. Look at the classic Mark Zuckerberg example. He is always wearing the same t-shirt and jeans. Buying less stuff can definitely help you become richer.
By spending less, two things work in your favor. First you’ll have more money to invest in your financial goals. Second you’ll be able to see how little you actually need to survive.
Our next tip, tip number seven is to buy experiences and not things. Life’s short. You definitely deserve to live a little. Ultimately the things that will help you live a more fulfilled life will be all the experiences you have. Rather than the things that you own.
Think about the things that you buy or that you’ve treated yourself to at the Mall. Have they actually made you happier. Now let’s flip the switch, think about one of your happiest memories. Was it something that you purchased or was it actually an experience that you shared with someone.
It’s important to focus on creating more memories just like that. Life is made up of moments. The best ones are created with friends and family. So the next time you think about purchasing something that you might not actually need, think about what kind of memories it will create.
Pay Off Your Debt
This one’s pretty obvious. But a lot harder to do than to say. Some people will tell you that it is actually wiser to invest your money in stocks. So it can grow faster and then you can pay off your debt. However, if you’ve never invested in stocks before then don’t do it.
First read up as much as you can about the various risks involved.
There is a sense of relief when you actually get all your debts down to zero. If you have fifty thousand rupees worth of debt and you have thirty thousand rupees worth of cash in your bank account. Obviously, you are not financially free because you still have that twenty thousand rupees that will be looming over you wherever you go.
Paying off that debt is not as glamorous as having all those zeros in your bank account. But it is the right way if you actually want to achieve financial freedom.
There are two main methods for paying off debt; first is snowball and second is avalanche.
Snowball is where you pay off the smallest debt first whereas avalanche is paying off the debt with the highest interest rates.
You need to decide what works better for you. Through all my research, reading and personal experiences, I would say that the snowball effect is the easiest strategy to follow. That’s because with the snowball strategy you focus on small debts first.
This kind of helps you get into the mindset of paying off your debts. And it gives you the motivation as you pay off small ones. You start focusing on bigger goals. Paying off debt lifts a huge weight off your shoulders.
You feel completely free and the feeling of getting paid and knowing that all that money is going to you instead of the debts that you owe is huge.
Create Additional Sources of Income
At this point you’re probably wondering my salary isn’t enough for me to actually pay off my debt. So what should I do? If you’re serious about becoming financially free you’re gonna need to sacrifice some blood, sweat and tears.
Your nine to five might not cut it and that’s just a fact. If that’s the case then you need to look outside of that for other ways to bring in income.
You can look at your income in two ways. The first is active income that’s like your 9 to 5 job where you’re actually trading money for time. The next is passive income and this is a stream of income that can make money without you actively working on it.
If your only income stream is your nine to five job then you can only make so much money in a day. It’s important to realize that if you want to make more money than that, you need to find a passive income stream.
If you’re looking for ideas for additional income streams, make sure you check out the below links.
Invest in Your Future
The last tip, tip 10 for achieving financial freedom is to invest in your future. This last step for financial freedom is an important one. Say you follow all the advice in this article. You save some money, you become financially free and pay off your debts.
But what about the future, what if something happens. Will you be prepared? It’s important to set money aside for rainy days, for retirement expenses. And out of sheer concern that if anything happens to you, your family is financially secure.
If you’ve got a nine to five job then I would suggest reaching out to your company HR and setting aside a percentage of your salary’s Basic component as “Voluntary Provident Fund (VPF)”. Because of government regulations, your employer already deducts 10% of your Basic as contribution towards “Employee Provident Fund”.
You have an additional option of contributing towards your retirement in the form of VPF. You won’t really notice it when it comes out of your paycheck but it will make a huge difference over the years.
Next you also want to save enough money for an emergency fund. Now, most experts would suggest saving up at least six months of salary. But if you don’t have any savings, I know that can seem like a very intimidating number.
You can certainly start with a small goal. Start by saving a thousand or two thousand rupees.
Any amount helps, anything more than zero actually helps.
If you ever unfortunately find yourself in a bad situation, you’ll thank yourself for setting money aside for rainy days or retirement. you’ll ensure that you don’t ever fall back into a place where you’re stuck and trying to become financially free again.
Those are our 10 steps to financial freedom. Remember financial freedom can help you take ownership of your finances and more importantly your life. Did you find the tips helpful, please let me know in the comments below. Which point was your favorite or which tip drastically changed your life if you’ve tried it before.
Thank you so much for reading.