Money can’t buy you happiness, but forgetting about it does the trick. This is why financial freedom has become the American Dream: it’s less about having a lot of money, and more about escaping financial constraints and having time to do things that fulfill you.
To represent this, picture yourself earning $500k /year. But you’re exhausted. You’ve been working hard for the last 20 years, you barely spend any time with your family, and your lifestyle costs $650k/year. Full of debts, no savings for emergencies or retirement, and all the money you’re earning isn’t going to fix any of that: you’re still stressed over your financial status.
Now picture yourself earning $70k /year. You made some sacrifices in your twenties, you worked hard and cut your family expenses to $40k /year, so by your early thirties you started investing. Your passive income grew steadily, to the point you didn’t need to rely on your paycheck. So you quit your job and started to dedicate your time to your family and things you always wanted to do. You won’t be able to buy a private airplane anytime soon but you’re debtless and, more importantly, financially free.
People might think money solves all problems, so being rich is the key to the perfect life, right? But you’ve probably heard stories about lottery winners getting ruined (E.g. Jack Whittaker) or millionaires in massive debts (E.g. Michael Jackson). Money won’t do anything for you until you get control over it, and that’s where financial freedom comes in. It’s being free from financial problems, having the independence to be yourself, to do the
things you really like, to work on something you’re passionate about despite the income. All of this without having to rely on a paycheck, and covering your expenses through investments and passive income.
Building Financial Freedom For You
Financial freedom is a destination, and the road is paved with effort, discipline and consistency. Your success depends on you and as we go on you’ll see what I mean.
You –and your mate, couple or whoever you may live with- need to understand the way money flows at home. Perspective is key.
You may write down your income and your expenses, so you get a monthly, weekly or even daily balance. Here, as the expenses get a name and a value, you’ll identify what really matters in your daily life. Maybe you like to treat yourself some more expensive version of an everyday product like a fancy cosmetic or a latte macchiato from Starbucks: those extra pair of dollars may seem harmless, but as you visualize the expenses stacking up it’ll get easier to ditch them out of your daily life.
Now you know where your money goes so you should set a monthly budget, give every dollar a name and stick to it. There are many budget apps for free out there, however, you can still get the full experience of writing it down on paper.
Be prepared for anything
Accidents, illness, job loss, car or home repairs, and environmental disaster. You need to be ready for anything and open an emergency fund. You may start with at least $500-$1000. As you save more and more money, you should increase your emergency fund as well and reach enough money to cover three months of expenses.
Wipe out your debt
Easier said than done. It depends on the amount of debt you’re holding, but with time and effort, you’ll make it.
Sometimes it might be the case where you want to first get yourself in debt to have investment capital. As long as you are sure you can make revenue from this, you should check what do you need for a personal loan.
Because you can actually start investing (next step) before eliminating your debt, but that goes on you. Whatever you do, stop increasing your debts. Tackle one debt at a time, meanwhile pay the minimum on your other accounts.
Dave Ramsey explains the Snowball Method easily. Once you’re debt-free, you’re ready to go!
Your goal now is to increase your future income. You won’t see the fruits tomorrow, but as soon as the tree grows your future self will thank you endlessly. If you really want financial freedom, you need to build up passive income. To do this, there are plenty of options and some are readily available for you right now, online and IRL.
Like Betterment, Blooom, and Acorns make investing as simple as it can, since an algorithm does the job. There are also many online businesses options out there:
You can always start a blog, write an e-book, or create an online course. Investing in
A SIMPLE WAY
Yet not an easy or short one. Anyone can take it and complete it, however, people have trouble going for distant rewards in times like this, dominated by instant gratification.
As said above, your success depends on you: we reach it after overcoming our financial constraints, most of the time created by ourselves without us even noticing.
With discipline, following a budget, and investing as early as possible, you’ll see how those constraints loosen up as you get closer and closer to financial freedom. The first months and years will be the hardest, but it’ll be worth the effort for the rest of your life.