Everyone wants to attain financial freedom, but what does it mean to you? For some it may simply be not living pay check to pay check. For others it may be owning mansions and going on lavish holidays. Whichever it is, we all inherently chase it.
Unfortunately money is a constant source of stress in our lives. In fact, according to CNBC, money is the highest cause of stress amongst Americans, even more so than work or relationships. As of 2018, 41 percent are stressed about financial planning and 46 percent worry about outliving their savings.
From an early age we are constantly reminding of the need for saving. The need for planning for retirement and setting up our financial future. But the reality is, most people don’t
But it doesn’t have to be this way. Taking control of your financial situation isn’t as simple as earning more. Can you recall a time when you earnt far less than you do now, and still survived? Why don’t you have more savings now? As we earn more money we become accustom to the lifestyle it brings, and the reduction in stress.
To really achieve financial freedom, you need to change your habits and consciously live in a why that builds your financial future. Fortunately, it is actually quite simple. Let’s take a look at the 4 steps to plan for financial freedom.
Regardless of what your idea is of financial freedom, money will undoubtedly play a big role. There are two main ways to move towards financial freedom. Make more money than you currently do, or spend less of the money you currently make.
No financial plan would be complete without budgeting. In fact they all should start with it. Budgeting is an incredible way to make the most of the money you are already earning. The majority of adults have no clue where all their money goes, and it is even worse for married couples and families. Not only do you need to account for your own spending, but also the spending of your spouse and all the money spend maintaining the family.
Budgeting will help you plan for your essentially spending, and create a regular savings scheme to build your financial assets and bring you closer to financial freedom. When preparing a budget there are a few key points to follow.
Identify Your Current Spending Habits
In order to plan for your expenses and savings you need to first establish a benchmark. Spend time tracking your current expenses and spending habits. You can do this easily by simply downloading your credit card or bank statement. Then break down your expenses into categories.
Once you have done this, you can start to identify where you can cut back, and establish savings goals. Often a good place to start is miscellaneous spending such as eating out, and entertainment purchases.
Categorise Your Spending
Your expenses can be categorised as a stating point into 3 main categories
- Essential Spending – all the essential expenses you need to maintain an acceptable level of living. This includes your rent, food expenses and hygiene products. Expenses in this category can then be reduced by for example switching to cheaper brands.
- Non Essential Spending – non essential spending is spending used to enhance your lifestyle, but is not essential to living. Common examples of non essential spending may be Cable TV or a nice leather couch. These are often things we want, but we don’t need.
- Junk Spending – junk spending is unfortunately the bulk of our expenses outside of the essential categories. Buying take out lunch instead of taking a packed lunch. Buying a new set of cloths, despite having new cloths at home and then rarely wearing them.
Within the 3 categories you can then break the expenses down futher into much more granular spending categories. For example and entertainment category may then be broken down into Take out Food, Movies, Alcohol etc. Below is a simple example of such categories – you can take it as far as you wish.
Write It Down & Work As A Team
Have you ever noticed in any business program, motivational plan or diet plan the first step is to write down your goals to hold you accountable? A budget is no different. Without recording your financial goals the requirements to achieve them become blurry and it is easy to excuse incorrect behaviour.
Write out your plan and ensure all members who contribute to your household budget and spending agree and are aware of the budget. A collaborative approach is needed to build a collective financial freedom, so buy in is needed from all parties. Discuss elements where you can save, and decide as a team how much you can forgo. Ensure all members are making sacrifices to create a unified working team.
Be Flexible & Maintain A “Rainy Day Fund”
Undoubtedly after you have developed your budget life will get in the way. In a perfect world you could predict your entire month and stick to your planned spending. But in the real world things pop up along the way. As you gain experience in your budgeting journey you will become better at adapting.
Be comfortable cutting back on certain monthly expenses to counteract any unexpected expenses. Furthermore it is a good idea to maintain a “rainy day fund” or an “emergency fund”. This is money you put aside for unexpected expenses in an emergency. For example medical expenses or a car breakdown. It should not be touched under any other circumstances.
2. Invest In Yourself
This is a hard concept for a lot to understand considering we just discussed budgeting and minimising expenses. Most people considering investing to be putting money into shares, stocks or other money making ventures.
But you can also invest in yourself. Whether it is a training course that will get you a promotion at work. Or perhaps a seminar that will give you the skills to start your own business. The old addage you need to spend money to make money is not always true, but when it comes to investing your in personal development it almost definitely is.
Identify opportunities to further your current financial situation, such as a promotion, earning more money, creating a secondary income stream or starting a business. Then identify the skills you lack to accomplish these, or any knowledge you feel you need to better succeed at these endeavours.
Do not be afraid to spend money on yourself, as long as it is well thought out and develops skills you can use to build a path to your financial freedom.
3. Give Back To Others
This step really depends on your mindset, and personal values. For a lot of people the path to financial freedom and independence is not just reliant on monetary factors. Often financial freedom can also encompass a personal sense of empathy, compassion and giving back to others.
If you are someone who has a strong desire to contribute and give back to those less fortunate to yourself there are many ways you can do it, and not all rely on money. Some people may sponsor a child for a few dollars a month. Others may simply volunteer. Whether its at the local food bank, sports centre or charity.
Giving to others is often rated as one of the top ways to feel a sense of fulfilment and help to develop purpose in your life. When we care for others, and feel fulfilled our desire for monetary and tangible things in our life often becomes less important. You being to appreciate the non tangible like spending time with your family, which helps you move towards financial freedom in two ways.
Firstly you spend less money. You begin to discover the best things in life are free – there is a saying for a reason. Secondly financial freedom becomes easier to attain. It may have started as a mansion, a fancy car and endless money. After time it may begin to develop into a stable job, and just enough time to spend with your family.
4. Start a Side Hustle
Once you have invested in yourself, you will more than likely identify a way to monetise your skills and potentially start a side hustle. With the advent of the internet, it became exceptionally easy to start a business with virtually no start up capital.
In fact, 70% of Americans have a desire to work from home. There are currently 38 million active home businesses in the United States with over 20% of them making between $100,000 – $500,000 a year. And the best part, nearly half of all these businesses cost less than $5,000 to start up.
Add the internet to the picture and the costs can drop dramatically. In fact my online business journey started for under $150. How long will it take you to make money online? My journey started with my first sale at 39 days. But how quickly you make money really depends on how much work you are willing to put in. If you wish to start for virtually no money, you will be relying on free traffic sources, which take time to naturally grow.
Online business is a great way to work towards financial freedom, and with a long term vision you can lay the groundwork to build a business than can eventually passively make you money.
Start Planning & Build Your Version Of Financial Freedom
There is one more way you can get closer to your financial freedom. It involves commitment and a willingness to invest in yourself. Many people create online businesses as a side hustle, only to end up doing it full time.
Making money online fortunately is not that hard. The main reason people fail is they are chasing get rich quick schemes and are not willing to do SOME work.
If you are reading this you have obviously already made the decision that you need to do something to change your financial future. And the great thing is that means you are one step closer. In order to be successful in online business you need to have a good program, commitment, dedication and most importantly the skills and knowledge to grow and build a passive income stream.
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