Want to learn about financial independence and how to achieve financial freedom and financial stability? Before that tell me if this sounds familiar.
Living in a big house with lots of really cool, really expensive things and not a care in the world.
Your children go to the finest schools, your spouse will never work again and you only have to log on to the computer once or twice a day to check emails and give out instructions. Sounds pretty good, doesn’t it?
This seemingly universal dream of wealth isn’t so far-flung as most of us think (even if it’s highly unlikely you’d actually enjoy sitting around doing nothing all day).
But, well before you can become rich and wealthy, you have to get your current finances under control.
That’s the biggest issue I see in the interminably dreamy eyed entrepreneurs out there – they want to be the next international billionaire but don’t take the time to get their current situation in order.
The problem in question is that most people think they have two choices – either stay poor and scrambling for money week after week or become instantly rich.
If they cannot do the latter they will be stuck in the former for the rest of their life.
But that kind of all or nothing attitude is one of the primary reasons so many people fall flat on their butts when it comes time to actually fix their finances.
They think “if I can’t be rich, who cares if I owe a few dollars on my credit card?
At least I’ll have that awesome TV.” If only things were that simple.
Listen, I don’t want to tell you how to run your finances, but I can tell you one thing – if you’re not willing to make a few simple sacrifices and get your finances in order, actually becoming the next millionaire is going to be a more farfetched dream than you can imagine.
In this guide, let's learn 9 step formula on how to achieve financial freedom and financial stability as fast as possible.
#1. Do You Know Your Budget?
It’s such a simple thing – the budget.
A spreadsheet or piece of paper somewhere that tells you exactly how much money you have coming in each month and how much you can afford to spend on the little trinkets and nights out that are probably draining your checkbook without you knowing it.
And right now, it’s harder than ever to actually keep track of a budget.
More than 65% of adults use online banking to some degree to keep track of their finances.
Nearly half of those people only use online banking, opting not to use or own a checkbook unless absolutely necessary.
Have you ever tried to keep track of what you spend in your head? It’s a nightmare.
Most of the time, you login to your bank account at the end of the week to find “hey, I spent $300 more than I thought…crud”. When balancing a checkbook and keeping track of every dime you spend, this doesn’t happen.
It’s a lot easier to say “I can’t afford this latte” when you know exactly how much spending money you have left for the week.
Without a budget and regular record keeping, how can you possibly keep track of everything?
The number one easiest way to solve this problem is to get software that automatically updates your spending by downloading records from your bank.
Tools like Quicken allow you to enter your budget for common expenses like groceries and bills and then watch as you approach those budgets month after month.
There are even free online tools like Mint.com that offer simple budgeting. The best part about tools like these is that they allow you to connect ALL of your accounts to a single interface.
If you use a credit card to buy gas and meals at restaurants, you can quickly and easily see what you’ve spent and how much of your budget that spending has devoured.
Of course, setting up Quicken or Mint takes a bit of time. You have to set time aside to do it, be vigilant in the process and make sure that anyone else in your household with access to the accounts does the same thing.
Sounds tough, but trust me when I say that careful money management is no tougher than writing down that you need paper towels or carrots on a grocery list.
Once you know it needs to be done, everyone in the house will do their part.
#2. Who Runs the Checkbook?
Too many people think about their checkbook and bank account as this mutable thing that can be used and tweaked according to priority when needed.
But to really gain financial independence and financial stability, you need to drop the hammer on frivolous spending.
Here’s what I mean. First, setup a budget for everything you spend money on.
This includes your utility bills, mortgage, TV, your car, and anything else that isn’t going anywhere. These are probably the same every month so I call it the core budget. After the core budget, set up an expense budget.
Include in this everything you buy each month that changes. This includes clothes, food, gas, and other consumables that change frequently.
Most of the time, you can easily budget less than you currently spend. After all, if you’re not paying much attention right now, it shouldn’t be very tough to cut down on that spending.
Now, here comes the hard part. When you want to buy something, check your budget.
Are you on track to stay under the budget? If not, don’t buy what you want.
Simple as that. It sounds so simple, but the vast majority of people don’t even get this far. Of course, there are benefits to doing it this way.
For example, if you set a budget for $700 next month on your groceries and spend only $465, you just saved $235.
Now, that money can go straight into a savings account for future expenses, vacations or investment.
When I ask “who runs the checkbook” I want to know that it’s you and your spouse, not the uncontrollable cravings that tend to crop up whenever you go to the mall or don’t feel like cooking dinner.
I am not asking you to get too frugal to save money but if you can take control of your budget and minimize spending in simple ways, you’ll be well on your path to achieve financial freedom and increased wealth.
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#3. Pay Off Your Debt To Achieve Financial Independence.
Paying off a big debt supports financial freedom in more ways than one. After all, you have more future cash flow to work with. Your credit rating is strong. And most importantly, closing a loan lifts a massive weight off your shoulders.
There are two main methods of paying off debt. The first one is the snowball method where you pay off the smallest debt first.
So basically get one tick mark in your checklist and then move on to the bigger debts.
And the second method of paying off debt is the avalanche approach where you first pay off the debt with the highest interest rate and then move to the lower ones.
Both these methods work efficiently and if you have a pile of debt, you need to decide what works best for you. But there is no hiding the fact that getting rid of debt is one of the most crucial factors to achieving financial freedom.
#4. Rethink How Your Money Works for You When Trying To Achieve Financial Freedom.
Now, imagine what you can do with the money you just saved. You could put it in a coffee can and hope it doesn’t go missing, or you could put that money to real use. Want to know how?
Here are some quick tips:
#5. Think Long Term To Attain Financial Independence.
When you save $50-$100 a week, it’s tempting to dump it into immediately profitable endeavors.
After all, it’s only $50, right? But, imagine for a second what happens if you put $50 each week into a simple investment account earning 5% each year.
In 25 years you would have $130,295 set aside. Now double it. Or triple it. What could you do with that money – and it requires almost no effort whatsoever to make it happen.
Short term investments may be sexier, but they are riskier and the goal is security, so think long term.
#6. Spend Money to Save Money And Achieve Financial Stability.
A growing trend these days is to invest in your home in ways that will save you money in the long run.
Stocks and mutual funds are great for retirement, but what about your monthly bills?
Specifically, consider what you can do with green energy upgrades like solar powered hot water or heating, PV panels on your roof or a windmill.
Heck, even a geothermal heat pump in your backyard can severely cut down on your monthly energy bill. It might cost a few dollars today, but in 10 years, you won’t be paying a dime for heating. How much has your heating bill gone up in recent years?
Can you imagine what you might be paying in 10 years with that cruddy old gas furnace?
#7. Sell Your Creativity to Achieve Financial Freedom.
You don’t have to start a multinational corporation to make money from a good idea.
You may not make billions like Zuckerberg, but you can earn a few dollars on the side by investing some of your savings into hobbies and side projects that will make you money.
If you like to paint or quilt, get some materials and make stuff you can sell. If you enjoy building websites, invest in a hosting account and create some websites or blogs loaded with ads that will draw an income.
If you like to write, start selling articles or short stories online for a small profit.
These are all things you can do in your spare time and while there’s no guarantee you’ll strike it rich, every penny counts – plus you’ll have a blast!
#8. Sell Your Skills To Achieve Financial Independence.
Going one step further, you can upgrade your efforts and start selling you innate skills. Are you a fantastic planner?
Do you know a lot about Japanese cars? Are you pursuing a law degree?
Almost any skill can be outsourced if you have spare time in your day.
Whenever you have a few hours or minutes set aside with nothing to do, consider investing in a profitable activity to boost your income – you’ll be surprised what you can do with it.
Making money in your spare time is a big way to boost your income and if you carefully reinvest that money, you’ll be well on your way to the financial security you’ve always dreamed.
No more living paycheck to paycheck. No more worrying about big expenses like your roof or little Sally’s braces. Just steady, reliable income and few if any bills.
#9. Going Beyond the Coffee Can To Achieve Financial Freedom.
The days of stashing your money aside in a coffee can and hoping it doesn’t get lost are long gone.
The path to financial freedom may seem like a quick hop and a jump (with a multi-million dollar idea somewhere in the middle) away but it could take you months or even years to get there.
The key is to be patient and consistent. It’s incredibly easy to waste money when you grow impatient or bored.
But, think about it this way. If you keep a budget, then set aside whatever extra money you make, you can finally relax with some spare time on your hands (that would otherwise have been spent spending that money).
Now, you have two options here.
You can either pine for that new pair of shoes and try really hard not to spend your extra cash, OR you can spend more time with your family, work on some freelance projects, put your creativity to work and make even MORE money in the process.
Life sometimes seems like a hill with a really big boulder that keeps rolling back onto you.
But, there are two sides to that hill. Sure, on this side – the boring side you’ve been looking at for years – you keep rolling backwards, constantly saving until a big expense (or hot new toy) comes up and you are suddenly broke again.
But, on the other side of the hill you can catch up to your expenses. Once you catch up, you start to make even MORE money through your investments and side projects.
You start to see that there are opportunities out there to be profitable in everything you do, even your spare time.
Before you know it, every bit of money you bring in is a little extra and you really CAN relax. Imagine what that will feel like.
No expenses, no worries, no constant stress about where you’ll come up with the funds for Sally’s braces or new tires for your car. It’s all there because you planned and invested money and time into being ready for anything.
Money is a fickle beast but the moment you recognize that your time and intelligence is just as important as the intangible currency filling your accounts, you will be well on your way to conquering the relationship you’ve found yourself in and in turn to a financially secure future
