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According to the article in that site, financial freedom will most likely involve a lot of changes in your life. It is a process that you have to go through. It will be difficult at times - implementing the changes that you have to make. That is because if your current lifestyle works, you should already be free from the burden of your finances. You should be enjoying the fruits of your labors without hesitation. If you are not, then obviously something has to change.
The rewards of being financially free is numerous. On top of the list is a happier and more successful individual. You will have growth, improvement and satisfaction that you have never known before. It is beyond how much you earn but more of how that particular income allows you to feel good about your life.
5 step plan to be free from financial problems
We have mentioned that the road to financial freedom is a process. There is actually 5 simple steps to help you achieve this financial state.
- Boost your extra money. By extra money, we mean you have to increase the money that is left over after you have paid off your usual expenses and payments. Most people will interpret this as earning more money. That is true, but is it not the whole picture. We have said that being financially free is more than just increasing your income. But that does not mean it is not part of the process. It is one half of what you can do. But boosting your extra money also means decreasing your usual expenses to free more money in your budget. It is your choice. This might be a bit difficult considering your current situation in life. Your life’s situation will help you determine if you need to increase you income or decrease your expenses.
- Create additional sources of income that are passive. You want to earn more but you want to do it in such a way that will not compromise your other obligations in life. Some people sacrifice their time with family and personal relaxation just for the sake of earning some extra money. A survey done by the University of Massachusetts mentioned how the earning capabilities of people change when they have children. The results of the survey published in BusinessInsider.com said that men increased their earning by 6% while women experience a decrease by 4%. This is probably because men are expected to boost their income to help finance the extra needs of their kids. Women, on the other hand, are obviously unable to earn more because they are usually the designated caretakers of the children. While these are understandable, you need to find out how you can earn passive income without compromising your time with your kids. It can actually work. Men do not have to sacrifice their time with family and women do not have to deal with a lower income to take care of their kids. All it takes is a stable passive income sources - take note that you need more than one to achieve financial freedom.
- Pay cash for your expenses. If you have to use credit cards for the rewards, you need to make sure you have the cash on hand to pay it back in full. This way, you do not waste money paying any interest. When you pay for things in cash, you get to limit just how much you will spend. If you do not have cash, you will stop spending. It is as easy as that. Controlling your expenses will be more effective this way.
- Contribute more towards your future. Anything extra that you have right now should be invested in your future. This could mean your retirement money. Invest your extra finances so it can grow separately and secure your future. That should help you feel more secure about what lies ahead. Not only will you be secure, you will be prepared for any financial need in the future because you have saved up for it. Just make sure you know where to put your money so it is somewhere it can grow best.
- Give yourself funds to enjoy your life. Your present happiness is still important. Never lose sight of that while you are pursuing financial freedom. Do not work yourself to death and then lose the chance of enjoy today. You simply have to budget how much you will spend on the things that will make you happy today.
If you notice, the steps towards financial freedom involves financial management: budgeting, saving and smart spending. These are the key to keep your finances from flying apart.
Things you might have to give up to be financially free
Part of having financial freedom is actually changing a lot about your lifestyle. In most cases, you will have to cut spending on a lot of things. It is not so much about restricting your lifestyle but more of concentrating only on what is essential. You will not deprive yourself. You will just identify what is excessive and cut them off.
According an article published on TheAtlantic.com, Americans have a love affair with houses and cars - big ones! In fact, the article mentioned that one third of the household budget usually goes to the house alone. The percentage is higher as the household income gets lower. Not only that, transportation takes up 17% to 18% of the household budget too. This is too excessive considering there are many alternate options to travel that are much cheaper.
That has got to stop. If you want financial freedom, you need to lower your lifestyle to suit your financial goals. Here are a couple of things that you may have to give up.
- That big house. We all want that white picket fence surrounding a big home but if your finances cannot afford it, do not force it. We are not saying you should live in the slums. What we want you to do is to choose a modest home that fits your family perfectly and comfortably without the excess rooms that you do not really need. These extra rooms merely give you space to accumulate junk.
- That new car. Granted that you need a car because you have kids. But that does not mean you need a new one. Pick a sturdy, reliable and good condition second hand car. It will serve its purpose without costing you too much.
- That expensive annual vacation. You do not need a trip abroad to relax. There are so many places to visit in the country that will help you relax. If you’ve never heard of staycation, it is the option to go on a vacation close to home so it will not cost you a lot of money. The important thing is to spend them with the ones you love.
- Those trendy clothes, accessories and gadgets. These trends, as attractive as they are, can really ruin your budget if you are not careful. You may want to think twice before replacing your phone or your clothes. Unless it is really necessary, keep yourself from spending unnecessarily on what would eventually become junk.
- Those expensive entertainment activities. We encourage you to spend on your entertainment to keep you happy and motivated. But you should keep yourself from spending too much on it. Check how you can enjoy your hobbies without costing you a lot of money.
On a last note, it is important for you to realize that financial freedom is not a one time achievement. Once you have reached this stage, you should work hard to maintain it. Otherwise, you could lose what you sacrificed for so long to reach.