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Most people think that financial freedom is not possible and that it is only for millionaires. However, whether you are poor, middle, or high class, financial freedom is for everyone. Obtaining it takes time, effort, and discipline. Many people dream the day they escape the rate race and live their dream life, and only a few can make it due to the overwhelmingly impossible task.
Can you imagine what it would be like to do what you want and not be tied down by money? Achieving true financial freedom is a journey with all kinds of ups and downs, as well as other factors that come into play. Do you understand the true meaning of financial freedom and what action needs to be taken to achieve it?
What is Financial Freedom?
Financial freedom is the state of having enough money to pay for daily basic needs such as basic living expenses, entertainment, personal interests, etc. When you have financial freedom, your decision-making is not governed by money.
Financial freedom does not necessarily mean being rich, owning a trillion-dollar mansion, or driving a luxury car because you can live an amazing lifestyle by living frugally. In simple terms, financial freedom is “having enough” in terms of money and assets to live comfortably and long-term without being affected by concerns of paying the bills.
To achieve financial freedom, you need to have more income than expenses. You probably think that this is only a theory or a daydream. However, anyone can achieve financial freedom, even those who have been in debt or have money problems. Of course, there's a catch.
In order to have financial freedom, it is best to take small steps and do it consistently.
Understand your Financial Situation
You cannot be financially free if you do not take control of your personal finances. Whether you are in college, married, or retired, it is essential to have financial knowledge. The very first step is to always review all your income, debts, monthly expenses, and savings. If you don't have a grasp of your situation, you'll never be able to live your dream. No one can take control of your money except for you. That is why it is important to learn personal finance as soon as possible. There are so many people out there who are not financially stable, and it is very depressing to see them struggle every day.
Around 55% of adults in the United States, Canada, United Kingdom, Germany, France, Italy, and Japan are financially literate. That's not a lot when you think about the other countries struggling financially.
Write Down Goals
What is it that you are trying to achieve? If you want something, you need goals. By having a goal and a plan, you will be motivated to take action. The more specific the goal is the higher the chances are of achieving it.
Is your goal is to pay off your debt? Buy a house? Living your dream life? Or not worry about money?
Without goals, you have no clear direction. You wouldn't know what you have to do and lose all your focus.
Track your Expenses
Tracking your spending is an important step on your journey to financial freedom because you are in control of your money. By keeping track of your expenses, you recognize unnecessary expenditures and take measures to limit your spending. To track your spending, you should create a simple budget. You can use an app to help you or write it down physically. To be on top of things, you might want to record and review them at the end of each month to see if you went over or under.
Many people always have problems with how to shop and save, but if you keep track of your expenses every month, you'll know what to cut. It may not sound a lot, but this will help you to be more confident with your personal finance.
Pay Yourself First
You probably have heard of the common phrase “pay yourself first.” Whenever you get paid, you should transfer your money to your savings or investment account before spending on anything. Why you might ask? If you use all your money on paying your debt and bills, you will have nothing left for the near future. Think about it for a minute.
The advantage of paying yourself first is that you are building a nest to secure your future. For example, you might run into problems like your car breaking down or unexpected medical expenses. Where will you get the money? Are you going to borrow money or get a loan? Without an emergency fund, you will experience a lot of stress.
Live Below your Means
If you spend less, you can become rich and wealthy in the near future. Not many people have a great habit of spending less. You don't have to live frugally and miserably, but rather spend wisely and sensibly. There are things you can do that you don't need to spend money on like cooking, buying things at discounts, cutting subscriptions, and so forth.
This can be a challenge for some people, but if you change your mindset and adapt to a minimalist lifestyle, things will become a lot easier for you. You can start by making small adjustments by distinguishing between the things you need and don't need. If you practice this early, it'll be easy to reach financial freedom.
Paying off Debt
If you don't pay off your debt as soon as you can, it can suck your life forever. Most people think that they can never pay off their debt due to their lack of knowledge and poor mindsets. There are people out there who have paid off their students loans, mortgage loans, and other debts in a short amount of time.
Getting rid of debt is achievable when you have a plan. The most sense for people is to start paying off debt with the highest interest rate. However, finance experts say to pay off debt with the smallest balance first. If you are consistent and stay on track with your goals, you can become debt-free.
Start Investing Now
Many people are afraid of investing because it's too risky, but if you learn and believe in yourself, it won't be as risky. Some people don't know where to invest or even start because they lack the knowledge. The most promising step to achieve financial freedom is by making investments. Most wealthy people do not rely on one income, so if you want true freedom, you have to work your way to diversify your income.
The power of investing is time, so you should start as soon as you can. Whether you want to start a side hustle, business, or invest in real estate or stocks, you need to learn the ropes and put your knowledge into action. The beauty of starting early is that your money can grow once you get the hang of it and become more experienced. If you start young when you don't have a lot of responsibilities, you'll get to enjoy your life when you are in your 30s.
Having baby steps listed out for you can help you digest better. I hope these steps help you to have a clear and better understanding of your financial situation. If you have a will, there is a way. For every problem you have in life, there is always a solution. You just need to look for it. With patience, perseverance, and consistency, you can create a great foundation for your finance, and things can only get easier for you.
Thanks for reading, and I'll see you in the next post!