How To Achieve Financial Freedom
With the cost of living constantly rising and people’s personal debt on the increase, the question of financial freedom is in most people’s minds. How to achieve it and live a life that is debt-free, or at the least, where the ability to pay everyday expenses and provide for the family without needing to go into debt is the goal for most people.
Achieving financial freedom need not be difficult. People with a poor credit rating can turn their lives around and achieve a better rating simply by making financial goals for their life. Financial planning is not just for the rich and famous. Anyone who wants to achieve financial freedom must and should engage in financial planning.
Financial planning is about taking control of your financial situation instead of allowing it to control you. It is about creating goals and then committing to them. Your goals will help you identify what kind of lifestyle you can have with net income and savings. You can also set smaller goals such as reducing debt by a certain percentage or increasing your annual salary. A good savings plan will always include a money management system that will allow you to build up your nest egg while saving for the future. In addition, you will need to come up with a reasonable budget that will allow you to reach your goals over time, while also having money to spend on the things you enjoy most in life.
The reward for this action is the financial freedom you are craving. Achieving financial freedom involves three major steps that you should plan on.
Creating A Budget
Creating a budget means ensuring income does not exceed expenditure and the goal of the budget is to create a lifestyle plan that covers all expenses and provides extra for saving and personal spending. It involves not only listing the current income sources, but potential other sources to increase income if required. The interest paid on debts is a constant drain on finances. While it may seem logical to payout small debts and then focus on the large ones, in fact paying off the larger debts first will save money in the long term. The sooner you make the changes, the better off you are going to be.
Living By That Budget
You need to understand what separates the people who achieve financial freedom from those who don’t. It all boils down to lifestyle. If your lifestyle is full of wanton spending and frivolous spending, then you will most likely end up living paycheck to paycheck. On the other hand, if your lifestyle consists of saving, protecting your income, and building wealth slowly, then you will most likely make a comfortable lifestyle for yourself. The only real difference between the two types of people is that those who enjoy living luxuriously spend their whole life in debt while those who enjoy living modestly save their money until they have a comfortable lifestyle. Of course, you can’t compare the two types of individuals because each of them has a different path to reach their financial independence.
A budget is only as successful if there is a commitment to live within the budget and resist impulse buying and anything that may cause voluntary over expenditure. The exception to this rule is the true emergency, which although not budgeted is covered by the savings plan you have put in place. If you have plans to buy household furniture or other expensive items, give it a second thought, is it a ‘Want’ or ‘Need’? This way, you will be certain that you are moving toward financial freedom rather than living a lifestyle that is more of a burden than anything else.
You must generate income in order to live the dream lifestyle cost-free and then use that income to build wealth over time. Now take another look at your finances. Make sure you have a monthly income that can sustain you for a long period of time. Allocate a weekly fixed amount of money as savings. Do not compromise on this amount for any reason. It is your key to future financial freedom.
When you have a surplus and are ready to try out a new venture, there is nothing much better than to grow your wealth through investing, whether it is a 401(k) or an IRA, the most important thing is to do your research and get it started. Yes, Start doing it!
The bottom line: you have to go out and make money in order to achieve financial freedom. Living the dream lifestyle is not going to do it for you. You have to take an inside-out approach and look at what you have going for you in the present and in the future. Look at your income potential and what you can do with it. Also, make sure that whatever you decide to do is something that you are capable of doing from the inside out and not just trying to turn a good job into something better. When you understand these basics, you will begin to see how quickly your current situation can change to a more financially secure place.
Your likelihood of achieving financial freedom increase dramatically if you can save money, control your credit and minimize your debt. You will be better able to provide for your family and yourself, not to mention the awesome feeling of being debt-free.