Steps to Financial Freedom
Which one are you now?
First of all, let's talk about the definition of Financial Freedom. Many people think that the plain concept of this is something like “being rich”, but this is a very vague definition and very far from reality. Speaking in financial terms, financial freedom is to have enough residual income to fully cover your living expenses. And this is where it becomes interesting because the amount of money you need to cover your expenses is not the same amount your neighbor needs, that's when this concept turns very personal and each individual must work on their own financial freedom steps in a very particular way. Now, let's move on to some simple basic steps you must consider to reach your own financial freedom.
Debt-free: one of the biggest block to financial freedom is debt, but not the “good” one, like investments or educational loans, which usually involves previous financial planning around it, we mean the “bad” debt like credit cards, like when you bought Christmas presents for all your family members and two years after, you are still paying. Like those unplanned vacations you took without working on your budget first, and you ended up spending three times more of what you estimated, and you are still paying for that. That kind of debt is what you need to get rid of immediately.
Make a Budget: This step sounds self-explanatory or easy, but to be honest, most people don't sit and think about their real income and adapt their expenses to it, and this causes overspending which leads you back to step 1, debt! So, every month or week or whenever you need to, make a budget, write it down and follow it step by step until it becomes a habit. Believe it or not, budgeting is the first step to building wealth!
Savings Account: You must always have a backup plan, no matter what other spendings or plans you have, an emergency account will prevent you from, again, debt! So having the habit of saving a % of your income will prevent you from any emergency expense, try this until you reach a 5 to 6 month worth of expenses, then saving money will be a breeze.
Investment: At some point in your path, you must take the time to learn about investment options, nowadays there is plenty of information around us, books, podcasts, financial advisors, among others. Whether you are interested in Real Estate Investments, Taxable Investments, or any other that calls your attention, investigate it and start when you feel ready and comfortable, there are many options in the market and this is without any doubt, the spine to financial freedom.
Tenacity: You must know that this step applies to almost everything we do in our lives to achieve something, it´s like going to the gym, you will never develop muscles unless you are constant. Setting your investments to autopilot is not a strategy, one must actively make decisions in our investments and if you don't feel ready enough, you must always look for advice from a professional investor and try different strategies to achieve your goals.
Well, now you know how to reach financial freedom, don't feel bad if you fall short on any step of the way, you can always go back and start over again, as we mentioned before, it takes time and tenacity. Never stop learning and keep your mindset on your goals, you will see that every day you will be closer to retirement before the average age!