The Road to Financial Freedom – 6 Key Steps
The Road to Financial Freedom can sometimes seem difficult to find. An incredible amount of research has been done and the number of books written on the road to financial freedom is too numerous to count. Many people are still struggling to make ends meet and monetary independence is only a dream for many in our current economy.
What exactly is financial freedom and what are the steps required to reach it?
A simple definition for financial freedom could be “having an income cash flow that will cover your living expenses beyond your expected life span.” In other words, calculate your total expenses, including all of your fixed expenses including your taxes dues, and your daily living expenses, etc., compounded for inflation over your expected life span, and compare that to your projected cash income over the same period. You can say you’ve achieved financial freedom if your income exceeds your expenses. More simply, if your income outweighs your liabilities over your expected life span, you’ve achieved financial freedom.
Can this really be achieved or is it all a pipe dream? The road to financial freedom is not a myth but a concrete reality and can be achieved through careful planning and execution.
Difficult times create opportunities for fortunes to be made. Many of you may see our current times as being difficult. In today’s environment, the internet and internet marketing opportunities have opened the door to creating wealth like no other time in history. This is so because they have made it possible to instantly communicate across the globe, expanding potential customers and clients to levels never before possible.
The evidence lies in the numerous millionaires and billionaires whose fortunes have been quickly created in very recent history. These individuals are not superhumans but merely people who followed a plan that put them on the road to financial freedom. The steps they took are not secrets. They are calculated steps that many people fail to observe in the course of their daily lives.
Steps to Financial Freedom
What are these strategies that can put you on the road to financial freedom?
Here are 6 steps you can take:
First of all, start increasing your personal worth by feeding your mind. Educate yourself daily. Invest in your personal knowledge by reading books written by those who have created wealth and those who have interviewed the wealthy. A couple of recommendations would be “Think and Grow Rich” by Napoleon Hill, and “The Business of the 21st Century” by Robert Kyosaki.
Create a burning desire to be financially free. In order to get on the road to financial freedom, you must develop a burning desire to be there. I’m not talking about wishful thinking, but rather focused thought on a regular basis combined with emotionally charged visualization of what it feels like to be financially free. If you have a strong enough desire, your thoughts will lead you to ideas on how to reach your goal.
Many of the things we take for granted today would have been considered miracles not too long ago, and they all started with a single thought. If you strongly desire to be on the road to financial freedom then focus your thoughts in that direction and you can achieve it.
The next step is to create a plan. Once you have created a strong enough desire and are generating thoughts and ideas, you will need to organize those ideas into a concrete plan. I’m sure you’ve heard the saying, “Failing to plan is planning to fail.” Well, there is a lot of validity to that saying. You must have a plan or risk failure.
Make your plan SMART – Specific, Measurable, Accountable, Realistic, and have a Time deadline. Put it in writing. An unwritten plan is just a wish. Putting it in writing is the first step to making it a solid reality, you actually make it physically real. Once your plans are written out, each time you view them will act as a reminder to keep your thoughts focused on your goals.
Once your plan is in writing, enlist the help of others. Recruit and organize a group of like-minded individuals to help you optimize your plan. Nothing is more powerful than the strength of a mastermind group. Create a team that can provide you with expert advice. Don’t rely on ideas from friends, family, or neighbors who have no experience in doing what you aspire to accomplish. Seek out people who have experience in the areas in which you are inexperienced.
Next is the most important step of all – TAKE ACTION. Execute your plan. The best plan in the world is useless if you don’t do anything. Having a plan will only show you the road to financial freedom. Taking action is what will put you on that road. If you develop the discipline to stick to your plan and take daily action toward your goals, then you will be on the road to financial freedom.
Lastly, – Be Committed. You will face obstacles and bumps in the road. Expect them. Deal with them. Do not let yourself use those bumps as excuses to give up. View them as stepping stones to success, learning experiences that will build your goal-achieving strength. There will always be excuses for failure. Some people call them “reasons.” Ignore them. Push onward with no excuses.
There are many on-ramps to the Road to Financial Freedom out there. One of them is waiting for you. Which one will you choose to take?
Secrets to Financial Freedom
Ever since the colonial period, many individuals have always been after attaining complete freedom main a lot of sectors. However, if there is one sector whereby many have failed to achieve complete freedom it is in the financial sector. To start with, what is financial freedom?
This question has brought about a lot of fuss with different people having different definitions. According to Wikipedia, “financial freedom is a well-planned lifestyle whereby one is not required to work in order to earn all enough income to cater for the expenses”. This is one of the major definitions used by most of the elites in the sector.
Another very common definition is one that describes financial freedom to be a state whereby one’s passive and residual incomes are more than his or her expenses. This is the most reliable definition. It is more common among business affiliated authors such as Suze Orman who is the author of the book “9 Steps to financial freedom”.
Passive income is one that one gets from investments while residual income is one that one earns on a monthly basis from doing a particular job. All in all, both incomes attribute to the total amount of money one gets at the end of the month.
No matter the amount of money you end up earning at the end of it all, all that matters is the manner in which you budget for it. The secret behind financial freedom is that you earn as much profit as possible such that you can sustain yourself In a time of need. This is where budgeting comes in. It should be done in such a way that the expenses are way below what you earn in the long run.
On the other hand, do not budget for all the money to an extent that your pockets remain completely empty once you buy whatever it is you had planned for. Cut down the cost such that you will still remain with some reasonable amount that if saved properly can be invested.
However, this can only be done under two conditions. Number one; get rid of all the bad debts. These are debts that just add up your cost. Deal with them first before anything else. Condition number two: get as many sources of income as possible.
The best alternative source is by investing more and at the same time building a job on the side. A perfect example is home-based network marketing that has no time limits, and in addition to this, you are your own boss.
What Does Financial Freedom Look Like To You?
So often we are quick to put a value on what financial freedom means to us. Many people say “I want to be a millionaire – so I need one million dollars in the bank”. Or, “If I made $200,000 a year, I would be financially free.” So take a moment and think: what is my personal financial freedom figure?
Wikipedia defines Financial Independence as “a term generally used to describe the state of having sufficient personal wealth to live indefinitely without having to work actively for basic necessities.” (Note that Wiki doesn’t define Financial Freedom – it takes you to its Wealth definition.). Have you ever actually sat down and really figured out how much wealth you would need to reach financial freedom?
Does it mean a certain amount in the bank? Does it require a certain income per month? Well, the answer varies for everybody, and will certainly depend on your stage of life. Read on for some things to ponder when trying to come up with your Financial Freedom Figure.
Let’s look back at two parts of the definition: having sufficient personal wealth to live indefinitely without having to work actively.
By the time you are 65, you could possibly be earning enough government pensions to not actively work until your last days on earth. Even in your twenties, you could become disabled, and government assistance and disability insurance could cover your basic necessities for life. So, seniors and people on disability support technically are financially free. Their financial freedom number is based on a certain amount of money per month in government and disability pensions. But realistically, we know that anyone on a government pension or disability would hardly jump up and down and say “I’m free, I’m independently wealthy, and I’m rich!”
These people may have their monthly expenses paid for, but unless they have some cash reserves as well, they are limited to spending only what their pensions bring in. For a person in their 80’s, this may be just fine – their expenses are low, they aren’t providing for a family anymore, and may not even have a spouse to care for. But then again, they may have huge medical expenses and care-home expenses. So unless the senior has a good net worth, he may not be financially free.
The twenty-something who’s on disability will probably have a tougher time saying he’s financially free. He may be single now, but when a spouse and children come his way, so does the mortgage payments and credit card bills. And the thought of living the next 50 years on a set, minimal income is not all that appealing. Again, he will be forced to spend only what his disability pension brings in. But, technically, he has reached financial independence.
Is this what you thought financial freedom would look like? Well, for some people it might; as long as all your basic needs – food, water, shelter – are met, shouldn’t you be happy? Or are you on the other end of the spectrum, thinking of boats, cars, vacations, and fancy clothes when you dream of financial freedom?
For those who are leaning towards the “fancy” side of financial freedom, I ask you this: Can you not have those nice things while you work? Of course, you can. Do you feel rich when you accumulate those things? Probably, but it depends on if you used debt to acquire them, or you paid for your luxuries with cash. You may feel rich by paying cash, but if you still need to work the next year to save up enough to buy another luxury, are you really free? And if you used credit to purchase your items, then you may feel rich while using the item, but not so rich when you sit down to pay your credit card balances.
Being financially independent is more of a lifestyle quality than it is a quantity. You need to figure out what quality of life you wish to attain first, and then you can go about calculating a figure to support your chosen lifestyle. And your lifestyle quality will change throughout your life. You may consider yourself financially free during your child-raising years if you’ve managed to either save enough in cash or earn enough in passive income every year so that you do not have to go to a job every day during your children’s first five years of life. Or maybe your freedom comes from having the wealth accumulated so that in your 40s you can take 5 years off to return to school and get a university degree. Maybe financial freedom is as simple as renting out your residence for $2000 per month for a year, and moving to a foreign country to live on less than the $2000 per month your passive income rental generates.
Did you think of any of these scenarios when you first thought of financial freedom? Many people do not – they only think of retirement at age 65 or winning the lottery. Most people expect that they will always work until retirement, and few people think of generating passive income outside of their jobs.
Why can’t we do both? And why can’t we be financially free for only a year, five years, or even six months? We can, but we are programmed to think “forever” and “never work again”. I would sure be happy and feel wealthy and free if I were to say “Yes, I stayed at home with the kids while they grew up because I was financially free” or “I spent a year in Costa Rica learning Spanish because I was financially free for the year”. So I go back to work after those events in my life – big deal. At least I could say I reached financial independence before my meager government retirement pension kicks in, and my hips or heart gives out. And you can bet your savings account that after being “free” for any length of time, your appetite to generate more passive income will be ferocious: more passive income means more freedom.