For many of us, financial independence sounds like a beautiful but utopic idea. Yet the fact is that we can all achieve financial independence. I mean everyone-even someone like me who once had a fairly big debt mountain. Whatever financial problems you may face today, there’s always a way to get back into the green. We’ll look at the value of financial freedom in this article and demonstrate some examples of financial freedom-including those that worked well for me personally.
What is financial freedom?
Achieving financial freedom is about taking responsibility for your finances. It’s about finding multiple secure sources of income that helps us to live according to our ideas and purpose. Never worry about how you will pay your bills or unforeseen expenses. Besides, you ‘re not going to have to deal with an overwhelming debt mountain.
It’s also about understanding that what needs to be done is to pay off its debts and eventually raise its income. We ‘re going to look at that aspect more closely in a moment. And last but not least, by actively saving for worse times or retirement, it is also about planning your long-term financial situation. The path to financial freedom will also be within your reach with a few tips-so let ‘s get started straight away.
10 tips to achieve your financial freedom
1. Understand what your current situation is
How do I attain financial freedom? The issue has undoubtedly already been modeled by all of us. It is difficult to achieve financial independence without understanding its starting point. If you think about how much debt you have, how much savings you don’t have, and how much money you need, at first it can be very depressing. This is, however, an incredibly worthwhile step in the right direction towards being financially stable.
So first put a list of all your debts together: mortgage, student loan, car loan, credit card, and any other debt that you may have accrued. Also, don’t forget about the money that you might have borrowed from friends or relatives over the years.
Now take a breath in. And then again. You then add all of the numbers.
And how much debt do you have?
Even if it’s a big number you shouldn’t panic instantly. I’ll be showing you some realistic ideas in the course of the article that will get you back to the black zero. If it’s a small number or you do not have any debt, then congratulations. You are welcome to share your financial independence tips with our readers in the comment section.
Next, take a look at the money you’ve already saved.
Compile a list of all your investments: savings accounts, bonds, property of your employer, private pensions, and so on. We’ll add the regular monthly fees that you collect afterward. For example, this includes your wages, income from a part-time job, dividend sharing, etc.
Once we look at the next tips for your financial independence, you can keep those numbers in mind.
2. Change your mindset about money. Money is something positive
Debt will certainly be disheartening, no doubt. Keep in mind there is good and bad debt.
But bear in mind that money is a positive thing for you right now, even though it is a little bit of a burden.
Focus on your attitude, and know that you deserve financial independence. We all do.
Those who don’t make a lot of money sometimes feel guilty when it comes to making money, according to the American bestseller “You Are a Badass at Making Money” by Jen Sincero.
“People who do not make a lot of money often feel ashamed when it comes to making money. And so is the biggest obstacle that many people with regard to the theme make money experience that they have the feeling of having money is bad. Many feel guilty because they have money and much more guilty because they want it. Sincero says about money: “We use it every day to improve our lives. Still, we always seem to focus on the negative thing about it. ”
Money, like food or water, is just a requirement. It allows you to buy the things you like, and to live your life.
You need to see money as a weapon to achieve financial independence. A weapon that will help you realize your goals, recharge your batteries, and live a stress-free life.
If you look negatively at money, you will subconsciously sabotage your chances of earning more and maintaining it for the long term.
3. Put your goals in writing
How much money or resources do you need for financial independence, and for what money do you need in fact?
Will you like to free your debts forever? Do you seek to step off the rat race? Is there any area you’ve ever wanted to fly to? Want to save for a wedding, children, or retirement?
It was because I connected it to an emotional target when I became financially independent. My dream was to get my student loan paid off and save for my first home. Watching the debt slowly vanish, and my savings expand, was an almost euphoric experience.
I worked even harder to make more money when I saw the numbers shift. Could I have accomplished my goal of financial independence if I had not tied the goal to something emotional? Likely not. I decided to get out of debt and get away from my parents ‘ home. This goal kept me focused all along my journey.
Then, something else important happened. I wrote down some of my goals on a piece of paper in February 2016:
Earn 10.000€ from online sales of goods
Generate 5000€ net per month from stocks and real estate return
Pay of my debts 100%
I lost this piece of paper in some way. And then one day, a little over a year later, I found this in my notebook when I was already living in my new house. Yes, I had achieved all three things. The funny thing was, I didn’t really think about these targets consciously.
You may not be able to get it all done in a month. Yet it’s a long year to make progress on your goals. Always sure that your target is tied to a particular amount you want to attain. Believe it or not, you’ll start working on those goals immediately without even knowing them.
Understanding exactly what you want to do and when you want to achieve it (maybe even financially free at 30?) makes it much easier to figure out when financial independence is a reasonable choice.
4. Track and understand your expenses
Why can I make myself financially independent? Tracking your expenses is an important step along that path.
You can do this e.g. Using a tool like financial Wallet, that lets you know how much money you spend, in what categories you spent excessively, how much money you spend on all of your accounts, and how much debt you have.
Another nice thing about Wallet is that on the Dashboard you can set personal goals. You can keep track of your targets and know exactly what month, based on your deposits, you can hit your target. The app holds you accountable and encourages you to keep on saving money to achieve your goals.
I’ve managed to save a little more money on my wedding budget after using the service for a month. This helped me concentrate on my target and encouraged me to create more residual income to be financially stable in the long run.
5. Make sure you pay yourself first
You’ve always heard the term ‘pay yourself first’ If not, this strategy is about a certain amount of money being added to your account before you pay anything else (such as bills). Paying yourself first has helped countless people walk their journey to financial independence successfully.
Why? For what?
If you first shell out 500 euros per paycheck, then you have to use the remaining money to pay your bills. So if you don’t have enough funds to pay these bills, you’ll have to create an extra income to cover those expenses.
Using this approach, you ensure you ‘re still setting money away to invest in yourself. When you do the same, what you get is what’s left. And this is not necessarily enough to help you set the path for financial liberty.
There are other payable forms. For instance, if your employer has a retirement scheme, you could ask for a certain percentage of your gross salary to go into that scheme. In this way you are investing in yourself and your future first. The money is automatically deducted from the income. This ensures you can use whatever is left over for your taxes, investments and projects for medium-term savings.
6. The less you spend, the easier you reach financial freedom
Warren Buffett purchased a five-bedroom house for $31,500 in 1958 and hasn’t ever relocated. His net worth? Incredible $90.3 billion. And he can afford a bigger and more luxurious home, easily. Yet his frugality may well be one of the reasons he’s among the world’s richest men.
Nonetheless, Kanye West is not afraid to show his wealth. He resides in a mansion of $20 million. At some point, with $53 million in debt, he agreed to seek a billion dollars from Mark Zuckerberg on Twitter!
The difference between the two men who have been super successful? Buffet has never invested more than he earns and Kanye West is wasting money that he has not.
The reality is that a lot of wealthy people don’t look like the wealthy. Every day, Zuckerberg wears the same bland t-shirt and jeans.
Buying less will potentially help you to become wealthier, and financially secure above all.
Two things work in your favor by spending less money: First, you’ll have more money to set away on the road to financial independence. Second, you’ll discover that to live you simply need even fewer expensive stuff, which will also help you set more money away.
So this takes us to our next level …
7. Buy experiences instead of things
Life is short. It is not about hoarding all the money until you’re 65 years old. During your time on this Earth you will enjoy life peacefully.
In the end, your experiences will be the ones that lead to a satisfying existence-not the ones you own.
Would the things you buy make you happy in the long run? Do the debts you’ve created from buying material things make life easier? It’s scientifically proven that things we buy only make us happy for 3 months. People who win the lottery are in general less happy than before a couple of months after their winnings.
Let’s look now to the other leg.
What have you done? What is your favorite memory? Who happens to be with you?
Let’s just make more of those memories.
You will have a friend with whom you want to play sports. Invite you to join a YouTube playlist and do a home workout together.
You may be planning a date and would like to make it memorable. Discover a cool activity you have never done before on Groupon-for a fraction of the size.
Need to explore Hawaii forever? You spent a year saving money to finally make your dream holiday a reality. Take this holiday and make the most of it without feeling guilty. With that you didn’t go into debt and so you won that. You could also become a digital nomad while working abroad, and travel the world.
Life is about moments. The best have their roots in spending time with family and friends. Although some material things that help bring you closer together with your family (such as a weekly family video game night), most of them don’t add much value.
Don’t spend money pretending you don’t have money!
8. Pay off your debts first
Some people will tell you that it is wiser to invest your money in stocks than to pay your debt back. Perhaps that is true if you are an experienced equity trader. But if you have never before invested in stocks, that way, you could end up with even more debt.
After making their last loan payment many people feel the same: relief.
Even if you have 10,000 euros in your account, with 20,000 euros in debt, you are not going to be able to call yourself financially free. You ‘re still 10,000 euros into the red.
Even if payment by someone else doesn’t seem as glamorous as having cash in your account or in a stock account, it will bring you closer to your financial freedom.
There are two main ways to get your debt paid off: snowball and avalanche. You pay off your smallest debts first, using the snowball method. The avalanche method is when you first pay off the highest interest rate on your debt.
It’s up to you to decide what works best. I followed the snowball effect when I was working towards being debt-free. It contributed to keeping me motivated. I was able to pay my first debts in full within a month-a credit card bill totalling 1.100 euros. The sense of achievement helped me motivate myself to finally take on my student loan, which is much larger.
And since credit cards were no longer a problem, on average I was able to pay out about three times as much as the meager minimum payment of 200 euros. In the end, repaying my student loan instead of the originally announced nine years took around three years.
It will take a huge load off your shoulders to pay off bigger debts. Your savings will increase noticeably once you have paid off your debts. Watching your account balance raise (even if it had to decrease initially) is a great feeling.
9. Invest to create new sources of income
You may be thinking at this point, “My debts are much higher than my pay. How can I promptly pay them out if I don’t earn enough? If you’re serious about financial freedom, you have some blood, sweat , and tears to sacrifice.
Your regular job may not be enough to get you closer to your goal. If so, you need to move a gear up and look outside of your current job for sources of income.
Some experts even recommend that you have seven different sources of income. If you have a 9-to-5 job then congratulations-you ‘re missing one or six more.
You can look at your revenue sources in two ways: active income (i.e., time-for-money exchange) or passive income (money that keeps coming in even while you’re asleep). It can already be said that passive income flows often pay more effectively into the freedom of finance than those active.
There are limits to the number of hours in a day if you exchange your time for money only. Here are a couple of part-time jobs to help you earn extra active income:
Become a freelance copywriter on Textbroker and find jobs
Support entrepreneurs as virtual assistants by advertising jobs on the Upwork
Earn from such apps as B. By the way, money at Streetspotr
Find side jobs at sites such as Kimeta or part-time employment centres
Complete surveys, and get them paid, e.g. B. By CINT
And lots more!
If you don’t have much time, you might focus on passive sources to increase your income:
Fortunately, all of your 7 income streams can come from the same source. If you’re, e.g. For example, if you’re an e-commerce expert, you can build seven different online shops in your seven income streams. Remember: You don’t have to start with seven income sources, you can build them up gradually.
10. Invest in yourself and your future
The last tip is particularly important for your financial independence. Let’s say that, in this article, you follow the advice and recommendations, leave your debt behind and increase your savings. At this point maybe you are already satisfied with this. But what if anything unforeseen happens? Will you be prepared for it That’s what financial freedom is about as well.
It’s important to set aside money for worse times, your retirement, and (sorry if I mention it here) your death so that the associated costs don’t burden your family. Let’s go back to the positive aspects now.
So if you are working as an employee on a regular basis, you should discuss existing pension options with your employer. You might already make contributions without knowing it. Usually, the corresponding amount is deducted before it reaches your pay account. So you don’t feel you ‘re missing out on money. It is also pretty cool to check your account balance now and then and see how your savings are increasing.
You should then save some money on a buffer for emergencies. Some experts recommend ten thousand euros here, while others prefer six monthly wages. Granted, when you don’t make a lot of money, those numbers can seem pretty high. You should start with a goal you can afford, instead- As with B. The first month, with 100 euros.
Then, as soon as you earn more active or passive income, you can start raising your target to €500 a month or €500 a week. And if you have to pay another bigger bill, you shouldn’t be using your emergency budget. Focus instead on tapping into more active revenue opportunities.
The emergency buffer is intended only for unforeseen emergencies-e.g. B. In-car damage caused by a storm or medical treatment you must pay out your own pocket.
You will achieve financial freedom much faster by putting money aside for the bad times and your retirement.
Final thoughts on financial freedom
The freedom of finance can help you take responsibility for your finances and, more importantly, your life. It’s about living within your means, being a bit frugal, and making sure money is spent on things you really need-like food, accommodation, and even holidays (relaxation is also important).
You can make your dream of financial liberty come true by following the tips in this article. How much money does it take you to be financially free? There is no one-size-fits-all answer to this, because it is heavily dependent on your personal situation and your needs. So look closely at your finances, build up extra revenue streams, pay off your debts
And you’ll be financially free and independent, before you know it.
How far have you come from achieving financial freedom? Do you have any other tips that might help you become financially independent more quickly? In the comments below please let us know.