Learning how to achieve financial freedom starts by taking ownership of your finances.
It’s about living free from debt now and forever.
It’s about working hard today so that you never have to worry about unexpected expenses ever again.
It’s about building the life you want in the future without feeling like you’re not living life in the present.
Reaching financial independence won’t be easy, but the best things in life are always worth fighting for.
Essentially it boils down to these seven steps:
The first step towards learning how to achieve financial freedom is getting your mind right for this monumental task.
Gaining financial independence will not be easy and it is not going to happen overnight. So, in order to survive the challenges on the road ahead, it’s all about mindset.
Money itself is not evil, but sometimes just the thought of juggling rent, the car payment, and putting food on the table can weigh us down.
Instead learn to look at money positively. Money is nothing but a tool that you can use to build the life you want and deserve once you understand how money works.
Yes, you deserve to achieve financial freedom and you will achieve your goal if you are willing to put in the work.
You do not have to wait until you are 65 to retire. Retire on your terms by calculating the number you will need to live off of your investments. As soon as the income from your investments is greater than your cost of living you are officially done!
Create your plan. Believe in yourself. And make it happen!
Now it’s time to take control of your finances by tracking your spending.
Believe it or not your budget is one of the most powerful tools at your disposal.
It’s the compass that will help you find your way out of the jungle.
Creating a budget and sticking to it may not sound like the most glamorous exercise, but it is essential if you’re serious about learning how to achieve financial freedom.
Instead of viewing your budget as a restrictive force on your life, think of it as a way to find money you didn’t even know you had! When you understand where every dollar is going each month, you are able to identify wasteful spending and direct your money towards the things that you really want.
I recommend using the free budgeting software at Mint.com to help you track your spending. You can also set and track goals within the program to keep you accountable with your monthly contributions.
>> Learn More: Create a Personal Finance Budget that Works
Plans in place?
Now it’s time to put your strategy on how to achieve financial freedom into action.
Obviously, you can’t spend more than you make every month and expect to reach your goals.
However, living within your means doesn’t always work either because if you spend every dollar you make, you’re essentially going no-where.
That’s why you should aim to live below your means while you learn how to achieve financial freedom (and well below your means if you want to speed up the process).
Living below your means will free up extra money each month to apply towards your goals and to reward yourself for sticking with your budget month after month.
Ask any millionaire for tips on how to achieve financial freedom and they will likely tell you to focus on paying off your debt. Especially the high-interest credit card debt that traps so many of us month after month.
High-interest debt can range from 18-28%. Usually only the savviest investors can consistently make these kind of returns year after year in the market.
While paying off debt is not the sexiest thing to do, it is often the smartest thing you can do with your money.
If your credit card is charging you 25% interest and you pay it off, you are basically guaranteeing yourself a 25% return on your money.
That’s money you would have otherwise just given away to the credit card companies and gotten nothing in return.
Not owing anybody anything is a taste of freedom in itself. Then focus on building investments that can pay for your future living expenses to really feel financially independent.
>> Learn More: How to Pay Off Debt Quickly
So, you’re paying off debt, living below your means, and hopefully saving for a rainy day.
You’re definitely on the right track, but reaching your goals will still take time. If you’re looking to speed up the process, you can do one of two things.
First, you could live further below your means and trim your budget even more. However, at some point all of this budget cutting might start to feel too restrictive and even counterproductive if it causes you to give up on your goals altogether.
The other option is to simply make more money.
Even an extra couple hundred dollars per month in your pocket would make a huge difference. You could get out of debt quicker and then focus on funneling more money into your investments, which ultimately are the vehicles that will allow you to live the lifestyle you want.
To reach your goals faster, the choice is yours: either trim expenses or make more money.
Trimming expenses is often the easier short-term option, but you can only trim so much. If you start earning more money, you might be surprised how quickly your financial goals start falling into place.
>> Learn More: How to Earn Extra Income
Nothing can derail your journey towards financial independence faster than a large unexpected expense.
If you get into a car accident, will you be able to pay for repairs?
If you get laid off, will you be able to pay rent until you find another job?
If you are hospitalized, will you be able to pay for treatment?
Medical expenses in this country are no joke. I recently spent 4 hours in an emergency room waiting for a physician to take 15 minutes to stitch a small cut and was hit with a $3,000 bill!
I thought to myself, “$3,000 for what?” So that I could sit on this bed and wait for hours since the hospital was understaffed? Frankly, I would’ve rather waited in the lobby to save a few grand.
Whether we like it or not, this is the reality of healthcare in America. They are legally robbing Americans every day. That being said, the best thing we could do is eat well, exercise and stay healthy to avoid potential trips to the hospital.
At the same time, send a portion of your paycheck every month towards building up your emergency fund to cover you for events that are out of your control.
The last thing you want to do during an emergency is be forced to pull money from your investments to cover your expenses. This will set you back a few steps from reaching your goals because you won’t be giving your money the time it needs to do its thing and multiply.
This is a critical step towards learning how to achieve financial freedom.
After taking care of the essentials like sticking to your budget, paying off debt, and bringing home a good income, you’re well on your way to learning how to achieve financial freedom and living your best life.
As you know, the road to financial independence is a long one, and it cannot be traveled by foot.
Unless you plan to live to 179, you cannot save your way to a million dollars; you need a vehicle to get you there.
But which wealth creation vehicle should I choose?
You should decide which one is best for you based on your interest and available time.
Some of the most common options include:
If you have the entrepreneurial spirit, aim to start a small business that you can eventually scale and hire someone else to manage.
This way you’ll be getting paid because of your ownership in the company, not through the number of hours you work.
Creating a successful small business is like building a puzzle, so there is definitely risk involved with so many parts that you have to figure out.
It will be a lot of work, but being your own boss and leading the company you founded to greatness can be one of the most gratifying experiences you could ever have.
More millionaires are created through real estate than any other investment and it’s not even close.
Up to 90% of the world’s millionaires over the last two centuries have used real estate to grow their fortune.
There is risk in real estate, but with real estate you can use leverage. This means that you can use other people’s time, money and experience to build your wealth.
Plus, your wealth will grow in multiple ways whether you decide to rent it, fix it up and sell it, or just sit on the property and let it appreciate.
Arguably the easiest way to start along your path to financial independence is by investing.
Anyone can create a brokerage account and invest as little or as much as they want nowadays with no transaction fees.
Of course, there is risk of losing money in investing, but if you do your homework and invest in quality companies that are consistently growing, you can mitigate your risk and maximize your upside.
While any one of these vehicles can help you achieve financial independence, often the best strategy is to diversify and use a combination to reach your goals.
Whichever you decide to pursue, the recipe is the same: Make money. Put it to work. Repeat.
So long as you consistently stick with your plan, you will reach your goals.
I hope you find the tips on this page helpful along your journey. This is not intended to be an exhaustive list, however.
I know there is much we can share with one another so that we can all learn how to achieve financial freedom even faster.
Are you just starting out and finding success with your strategy?
Have you achieved financial independence have some struggles you’d like to share?
We’d love to hear from you! Have your say about how to achieve financial freedom in the comment box below.