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Last updated Jan. 3, 2023 by Peter Jakes
Do you know that you can actualize financial freedom by following simple steps? Most people see achieving financial freedom as too complex to accomplish. However, many successful people have revealed the basic steps anyone can deploy to become financially free.
The fact remains that nothing good comes easy. You really have to put in your best effort to become financially free.
How can you achieve financial freedom in record time? In this article, you will learn the 12 steps you must take to achieve financial freedom.
What is financial freedom?
Financial Freedom is a means of gaining enough income to sustain one’s immediate and future living expenses without depending on a job for survival.
This implies that generating a passive income is one of the surest ways to attain financial freedom.
Passive income is a type of income where you don’t have to perform work or do a job before earning income. Most people refer to passive income as a type of income one makes while sleeping. You can work your way to the top if you follow the due process.
Why is financial freedom important?
Most people have depended on working extra hard to meet their needs. However, they often end up spending the money without making a great plan for the future.
Financial freedom is important in everyone’s life as it is a means of survival when everything else fails in your life such as sickness, job loss or old age. Read up the following reasons to see why financial freedom is all important.
Guarantees financial Independence
If you constantly struggle to meet your needs, you will understand what it means to be financial independent.
The goal of most people is to become financially free no matter what the outcome may become. Hence, they usually go the extra mile to reach this great milestone. Financial freedom is essential for the growth of any individual or organization. It is when you are financially free that you can gain true independence
Guarantees a better future
No one can predict the future. But one of the best ways people prepare for the future is by attaining financial freedom. No matter what happens in the future, money will still be required to solve problems. Hence, channel all your effort to secure a better future for yourself and your family. Money is one of the best ways to guarantee your future.
Save you from Bankruptcy
Most people are afraid of bankruptcy. Since bankruptcy can devastate your financial life, you must work hard to avoid it by all means. One of the best ways to escape bankruptcy is by securing financial freedom.
When you gain control of your finance, you will discover that you don’t actually have any business with debt or filing for bankruptcy.
Gives you more time to do what you love
Most people are stuck in jobs that they do not like. As a result of this, millions of people often experience depression and increased stress-level while trying to meet their daily needs.
However, when you carefully plan your way toward gaining financial freedom, you will realize that you will have more time to go on a vacation, spend time with family and participate in other activities.
The 12 Steps You Must Take to Achieve Financial Freedom
Achieving financial freedom is an important goal that requires a lot from you. If you must secure your financial freedom, you must learn how to deal with every setback that may come your way.
You ought to deploy a realistic strategy to ensure that you attain success in the end. What are the 12 steps you must take to achieve financial freedom? While aiming at becoming financially free, you should consider deploying the following steps to actualize success.
Learn about your current financial situation
Before you consider making any move, you must first learn about your current financial situation. Many financial experts regard this as the first step towards attaining financial freedom.
Learning about your financial situation is essential to know your current source of income and how much you have saved in the bank. If you have an outstanding debt to clear, you must also include it in the estimation.
The essence of determining your current financial situation is to identify loopholes that may likely slow your progress of achieving financial freedom with time. As you do this estimation, endeavor to be honest with yourself.
There is no need to lie to yourself, as it will frustrate your effort along the way. Learning about your current financial situation will give you insight into your past financial mistakes.
If you cannot correct these past mistakes, you may be far from attaining financial freedom. Hence, you must ensure that your path is clear before moving towards the future.
Pay Yourself First before Clearing your Bills
The mistake that people often make is satisfying their other needs before paying themselves. Clearing your debts and paying bills are necessary.
But focus on paying yourself more than anything else. When you pay yourself for the work done, you are gradually setting a path to achieve financial success in the future. The amount which you should pay yourself has to depend on your income.
When you earn more money, you should probably pay yourself more. If you are confused about the exact amount to pay into your savings, you may consider deploying the 50-30-20 budget rule to guide your income.
According to the 50-30-20 budget rule, 50 percent of your income should focus on servicing your needs, 30 percent should service your wants while 20 percent should be kept aside for the future.
If you can adjust this system, you will realize that you have more money at the end of the year. You should also clear your bills after paying yourself. The essence of taking this action is to ensure that other financial needs never stop you from doing the basics.
Monitor your spending
If you cannot track your expenses, you may never attain your financial freedom. Your regular expenses will likely determine how fast you will move in reaching your financial goals. Sometimes, you may be making an effort to track your spending, but other activities may drive away your focus.
If you really want to track your spending, you must determine the exact amount budgeted to satisfy your want. When you live from paycheck to paycheck, you definitely have to review your daily expenses to see if you are even working to achieve financial freedom.
Spending your income satisfying your basic needs such as housing, clothing, foods and more is essential. But when you spend more on luxury items your chances of achieving financial freedom may be limited.
It is advised that if your basic expenses is on the high side, you should consider reviewing them and going for cheaper alternatives until things fall in right places for you financially speaking.
If it is possible, live in an apartment that you can afford, buy affordable clothes, shoes, and other essential household items. As you prepare your grocery list, endeavor to know about each item you add to the list. If any item will make you overspend your money, you may consider removing such an item from the list.
You can spend the next month tracking your daily expenses to see if this habit can create a change in your life. If you actualize success in the first month, you may consider repeating this same habit for the next months ahead.
Make a Debt Repayment Plan
No matter how hard you try, debt can stop you from achieving financial freedom. Hence, create a workable debt repayment plan to clear off your debts and focus on your future financial needs.
Whether you own a mortgage loan, school debt, or any other type of debt, you can become debt-free if you stick to a great plan.
So how can you make great debt repayment plans? Most financial experts will encourage you to increase your income sources. Since you actually need more money to repay debts, getting additional sources of income will give you more potential to get out of debt.
As you work toward repaying a certain debt, make an effort to avoid getting into another debt. Some people may find themselves securing another loan in addition to an already existing loan. That is a recipe for disaster.
No matter your debt level, ensure you are paying something off every month notwithstanding how little it may be. A consistent effort on the long run will make a huge impact.
You don’t have to wait until you have the complete money to repay your debt. The smallest amount within your reach can create an impact. Once you successfully clear your debt, you can easily focus more on gaining on financial freedom journey.
Get Additional Income Sources
When you work towards gaining your financial freedom, you should consider searching for extra sources of income. Since your goal relies mainly on making more money, extra sources of income will help you actualize this.
You may begin by analyzing the amount you bring home per week. See if your current income source can drive you closer to achieving financial freedom. But when you realize that you are far from reaching your goals, you may opt to render other services for extra money.
You can either secure a part-time job in your location or render services as a remote worker to other companies in far distances. Sometimes, you may find high-paying remote opportunities that you may even consider becoming a full-time freelancer.
However, you must find a side hustle that will not distract your focus from your main job. If you earn consistently from your side hustle, a time will come when you may put aside your main income for the future.
If you have acquired enough money from your job and side hustle, you may consider investing your money to earn passive income.
Create an Emergency Fund
Emergency Funds are essential when it comes to achieving financial freedom. Since no one can predict the future, you have to be prepared at all times to avoid risking your savings in the future.
What is an emergency fund?
An emergency fund is money kept aside to solve emergency occurrences such as natural disasters, accidents, health issues, and more. If you cannot create an emergency fund for sudden occurrences that may occur in the future, you may be forced to spend your savings or even borrow at high interest rate when the need arises.
Emergencies have sent many people into debt. But they could have avoided debt options if they had earlier made provision for an emergency fund. Creating an emergency fund may be challenging, especially when you live from paycheck to paycheck.
But no matter the amount you earn per day, you must work extra hard to build an emergency fund. You don’t necessarily have to start with a huge amount of money.
The amount at which you start this financial planning does not matter. You can possibly increase it in the future when more money comes your way.
Invest in your future
Since your goal relies on achieving financial freedom, you must devote your time and resources towards reaching this milestone in the future. The best way to gain financial freedom is to invest in the right opportunities that will guarantee your financial securities in the future.
As you search for the perfect opportunity to invest in the future, you have to be aware of scammers. This implies that you must do your findings before you conclude on pushing your money towards any given opportunity.
When it comes to investing in the future, most people prefer to buy stocks of companies across the globe. With the increasing profitable opportunities in cryptocurrencies, more investors are beginning to buy into the idea of pushing funds towards this emerging blockchain technology.
Others are considering Non-Fungible tokens as a means of securing financial freedom. If you want to invest in the future, you must carefully analyze any opportunity before putting out your money.
As someone hoping to invest in the future, you must be aware of risks. Hence, you must carefully manage any occurring risk factors to avoid any regret in the future.
Adjust your Budget
If you hope to achieve your financial freedom, you must focus more on cutting your budget. The budget that you created for your income will determine your ability to achieve your financial freedom.
If you prefer to add unnecessary expenses to your daily budget, you may have to change tactics by creating a more friendly budget. To cut your budget, you must review your current financial expenses and see how you can make a financial difference.
The extent of your expenses will likely determine the time it will take to actualize your financial freedom. If your current budget is limiting your ability to save more and prepare for the future, you may consider coming up with another plan.
For example, if you live in an expensive apartment that limits your ability to save more money, you may consider finding a cheaper apartment to cut your monthly expenses.
If you can trim your budget by making simple changes, your chances of gaining financial freedom much faster will likely increase.
Develop a strategic financial plan
Before you progress in life, you surely need a plan. Good plans serve as the pillar to the ability to make it big in the future. You don’t just create these plans without making good considerations.
Creating a good financial plan will set you on the easy path to success. In fact, your ability to attain financial success has to depend more on how well developed your plans are. You must carefully analyze every suggestion that you include in your plan.
This is to ensure that you are on the right track. How can you begin with creating strategic financial planning? Begin by outlining every idea that you think will be meaningful to your success.
When you think of some ideas, you may come across some crazy ideas that may make you think twice. No matter how crazy the idea may appear to become, endeavor to outline it. When you have created enough ideas, you can carefully choose the best to work with.
As you prepare your plans, keep in mind that they should serve as bedrock in which other steps must follow. Developing a good plan will surely guarantee your financial success in the future.
Automate your Saving
If you have big dreams and ambitions for the future, you should focus on automating your saving for the rainy day. In most working establishments, the employer often creates a workable means that will enable the employees to automate their savings.
Some employers may likely pay direct deposit paychecks into several accounts. This payment option can give you the opportunity of diverting your funds accordingly. You can channel some funds directly into your Emergency funds and savings account.
In most working establishments, employees are allowed to contribute directly to their 410(k), which is often made via a payroll deduction. If your company gives you the opportunity of contributing to 410(k), you should consider using the opportunity to save more money.
One of the best ways to automate your savings is to notify the bank about your plans. The financial institution will help in directing your income into the right account. You can save 10% of your earnings directly to your retirement and the remaining 10% into your regular savings account.
Commit to living within your earnings
You may be working extra hard, but want to have a text of luxury at the same time. Enjoying a luxury lifestyle is awesome. However, you have to keep your expenses within your earnings. Even if you earn more money, you should stay committed to saving and investing.
Most financial experts will advise you to avoid living a luxury lifestyle with your active income. Instead, you should enjoy a luxury lifestyle with your passive income after you have achieved financial freedom.
However, not everyone will be patient enough to attain financial freedom before living life to its fullest. If you want to enjoy a taste of luxury, endeavor to keep it within your earnings.
Almost everyone has friends who want to live above their means. If your friends are inspiring you to spend more than you earn, you may consider changing your class of friends and finding people better aligned to your dreams to keep around.
Learn about Risk Management
Risk management is essential when you are working towards achieving financial freedom. However, most people often become confused when it comes to managing risks.
As a result of this, they end up making the wrong financial decisions. As someone working towards gaining financial freedom, you must carefully analyze risks to ensure you are on the right track. A single risk factor can ruin your financial goals forever.
So you must be at an alert to detect every possible risk that may change your story. Aside from financial risks, you should also consider other risk factors that may negatively impact your plans of attaining great success. Some of these may include relationships, trips, your lifestyle etc.
In that light, it is important consider insuring activities, ventures or lifestyles that need insurance. Do not expose yourself to financial catastrophes which little insurance payments would have saved you from.
So which types of insurance should you consider? If you intend to manage risk factors, you should consider the following insurances.
- Auto Insurance
- Life Insurance
- Health Insurance
- Disability Insurance
- Homeowner’s or Renter’s Insurance
Your ability to climb the ladder of success and achieve financial freedom highly depends on the plans you create.
Hence, you must carefully plan every step you take to ensure that you achieve financial success faster. If you want to work towards a better future, you should consider deploying every step to see to your success.