It is hardly possible to find a person who would not dream of financial freedom. In this article we will talk about ten steps that will help you achieve it. Their strength to do to everyone. No need to have powerful friends, special talent or big capital. Only desire and action are needed. Of course, the path to financial freedom will not be easy. But you must not stop. Remember the tips below and keep going overcoming obstacles.
Many will ask: “Why exactly the ten steps?” In fact, there can be many more. We just decided to highlight the most important ones. But, before considering them, let's find out what financial freedom is.
Definition
Most people believe that having received a large sum of money (for example, winning the lottery), you can solve all your problems. Just say that it is almost unrealistic. Of course, you will temporarily avoid some inconvenience in life. But as soon as the money runs out, all the problems will return.
Remember, financial freedom is when your income exceeds your expenses. But in order to truly find it, you need to have a passive cash flow, while not spending a lot of time and effort to maintain it (for example, renting an apartment). For a person with an average salary, this is an impossible task. After all, he needs to provide for his family, repay loans, pay bills, go on vacation, etc. All the money goes, and it’s impossible to postpone a rainy day. And if he gets fired, he will be left with nothing at all. So, let's list 10 steps to financial freedom.
1. Consult with family
The vast majority of spouses usually do not talk to each other about their own monetary goals. But it is necessary to do this. So discuss your lifestyle with your partner. It will be easier if each of you writes your financial goals separately. Then you can compare and discuss the results.
2. Describe the current position
Before setting financial goals, you need to understand what stage you are currently at. At this point, write a short statement of equity. Do not be fooled and write the real level of your wealth. List all your assets (received monthly amount) and liabilities (debts and expenses). Then subtract the second from the first, and you will receive the size of your capital.
This report is an important tool to help analyze future changes in your wealth. For example, if there is a downward trend in capital, then you lower your income and move away from financial goals. And conversely, if it rises, then you are on the path to achieving them.
3. Track expenses
Financial freedom from scratch is only possible if your plan clearly spells out the numbers of expenses and savings. Specialists call this cash flow tracking. This is a kind of control tool that will help the easy implementation of both small and large financial changes in your life.
Most often, people are either afraid or too lazy to analyze their expenses. Do not put off this important matter for later. Cash flow analysis will keep your own finances under control. It is very convenient to record in an Excel spreadsheet. It perfectly reflects the current state of affairs and allows you to respond in a timely manner if expenses are exceeded. In addition, the table solves another important problem. Based on the data entered into it, you can summarize the financial month or quarter.There you will immediately see how you ended the reporting period: with a shortage of money or with excess of it. The deficit indicates that your expenses are more than income, and with an excess, you live within your means. To achieve the previously identified financial goals, it is necessary to increase revenue and reduce costs.
What usually happens when people track their own spending? They fall into a state of shock. Why does this happen? Everything is simple. After all, even a family of two with debit and credit cards, it is very difficult to get an idea of their costs, if you do not enter them into a spreadsheet. Remember: the correct system of accounting for finances will allow you to manage your household much more efficiently. So make this accounting your habit.
4. Adjust costs
People who do not think about how to get financial freedom spend more than they earn. That is, they live beyond their means. Do not be like them. Just reduce the consumable to an acceptable rate. It’s not necessary to limit yourself in something. But if you decide to eat only buckwheat and water in order to buy an apartment in 10 years, then this is your choice. The main thing is not to deceive yourself and really save the money saved on the apartment.
Although there are more pleasant ways to save your own money. For example, some people save tens of thousands of rubles on annual vacations by simply spending it on road trips. If, after adjusting for expenses, you are a plus, then this is wonderful. Now you can distribute funds to achieve your goals.
5. Define life goals
All people who know how to gain financial freedom have ambitious goals. Without them, life becomes a meaningless pastime. Think about where you want to be after 5, 10, 20 years of your life? What will you do in retirement?
One of the most common ways goal setting - visualization. That is, you just need to imagine what life will be like after a certain period of time, if everything goes according to your plan. Some see themselves in a chic mansion for several million dollars. Well, the expectations of others are more realistic - they are limited only by stable passive income in retirement. For example, from renting real estate.
Think about how to organize your life today to achieve your desired goals in the future. Your main task is to structure finances.
6. Develop a strategy
Once you have decided on where to go, you need to make a plan on how to get there. The standard way is to spend less than your income and invest the rest of the money. But before you achieve your foreseeable financial goals, get rid of debt. Even if they are taken at reasonable interest, it’s worth paying them off.
7. Cut taxes
To reduce the tax burden on your investment portfolio, you need to understand how taxation threatens your types of income. For example, when you profit from stock trading, you will pay 13%. With bank deposits, the situation is different. If the interest rate on the deposit does not exceed the refinancing rate (plus 5 percentage points), then no tax will be charged.
8. Think investment policy
In any financial plan, there should be an acceptable investment portfolio. It is developed depending on personal goals and the desire to take risks. Other than that, personal investment policy should contain a series of rules that will turn you into a more disciplined contributor. In case of violation of these rules, financial freedom will be unattainable. This is especially true in volatile markets, where profitability is determined by dozens, and sometimes hundreds of percent.
9. Write a will
Every adult with a family, children, and assets should have a will. An up-to-date and clear testament will guarantee that all your assets will be distributed as you want.If there is no will, all of these issues will be “resolved” by law.
10. Make a financial plan
The standard financial plan consists of five parts. The first includes a description of your current situation. The second lists financial goals. The third part is a statement of your capital. The fourth includes a list of steps necessary to achieve the goals. The fifth contains ways to invest your funds.
But for financial freedom to become a reality, it is not enough to draw up a plan itself. It is necessary to clearly follow it. By the way, during the reduction plan you will notice how your preferences regarding investments and expenses have changed. Be sure to update the financial plan depending on the current life situation. For example, it would be advisable to do this in anticipation of a job search, wedding, economic crisis, etc.
Conclusion
Now you know how to achieve financial freedom. It remains only to begin to act. Many never move on to this step because they fear failure. Believe me, all successful people (Steve Jobs, Bill Gates, Donald Trump, etc.) had failures. But they did not give up and continued to move on. Do the same for you. We wish you success!
