People define financial freedom as the state in which you are able to live the life you want without having to worry about money. This is basically the dream of every human being. Anyone with a good enough income can set their sights on this lifestyle and, with proper planning, expect to reach it.
Be very specific about your goals. Do you want a lifestyle where you earn US$2,000 per month, US$5,000 per month, or more? Where do you see your permanent home to be? How much money will be required for your children’s education? Answering such questions will allow you to calculate the money you need to achieve financial independence and plan accordingly. “The more specific your goals, the higher the likelihood of achieving them. Then, count backward to your current age and establish financial mileposts at regular intervals. Write it all down neatly, and put the goal sheet at the very beginning of your financial binder,” according to Investopedia.
You now need to create a monthly budget. Cut down unnecessary expenses so that you can invest as much as possible. For instance, you might have the habit of ordering food online once every one or two days. This can add up to a substantial amount per month. Instead, you will be better off financially by relying on home-cooked food. Plus, it will be a healthier option as well. Once the budget is set, make sure that you stick to it religiously. Don’t be tempted to spend a few hundred dollars thinking that you will recover the extra expense by somehow earning it back in the next few months. If you want something, save your money and only then, buy it.
Decide on the type of investing you plan to do. Basically, there are two options — “No. 1, you can save over a million dollars, and then live off the interest of your investment forever… Or, No. 2, you can invest in income-producing assets, things like real estate, that pay a consistent amount of money,” Grant Sabatier, a self-made millionaire, said to CNBC.
Option 1 will take a long time to materialize — you might basically be waiting until you reach retirement age. The second option is ideal. If you can make some wise choices, you could end up with two or three rental properties at bargain prices where the rental amount remaining after all expenses may be good enough to earn you a decent lifestyle.
Pay off debts
Take a look at all your debts and try to pay them off as early as possible. The longer you keep the debt, the more interest you pay. “It’s easier if you start by focusing all your extra money on one debt while making minimum payments on the rest… [Pay] the debt with the smallest balance first to build momentum and motivation. When you pay off that debt, don’t let the money you had been paying toward it get absorbed by your budget. Instead, take that payment amount and apply it to the next debt on your payoff plan,” according to US News.
Can you work extra hours and earn good money? If so, commit to doing it. You can put the extra funds into your investments. If your spouse is not the breadwinner in the family but has talents that can be put to use, encourage them to work part-time even if it’s freelance. Put this extra money into investments. The more you invest, the faster you will attain your goal of financial freedom.