Never become a prisoner of your finances. Financial obligation sometimes forces us to make hopeless choices. For some, this is like getting trapped in a golden cage, imprisoned by living a lifestyle they cannot actually afford and investments that are designed to eat away their wealth.
To get out of that hopeless cage, you need to formulate a strategy that you can use to avoid getting tricked into things that can lead you to financial imprisonment. Instead, find a way to live a life that you’ve always imagined— a life with true financial freedom.
Although we often hear the word “financial freedom,” the truth is we are still unmindful of what it actually implies.
Financial Freedom
Imagine sipping your favorite tea on Friday night while sitting at your desk, having a good time for a job well done for the entire week. You thought of doing the things you love the most in this free time you have, for example— writing.
You were having fun but not until your phone rang and you saw that it was a call from your boss. He was calling to ask you to do work that would probably bring value to the company. Suddenly, you have to lay your hands off on anything you are doing to assist him with his needs. After all, he is your boss, and you’re getting your means to live from him.
Over and over again, people tend to give their time to other people. According to Robert Kiyosaki, the author of the powerful short book entitled Rich Dad Poor Dad, many people belong to the rat race. They tend to put all of their hopes in their paycheck and abides by it. By devoting their lives to work, they become stuck in a never-ending loop they can’t get away from.
Financial freedom is about having control and dominion over your finances. This means you have a dependable and stable cash flow that permits you to live life as you desire, you aren’t panicking thinking about how you will be able to pay sudden expenses and utility bills, and of course, you aren’t loaded with debts. Having financial freedom means being the boss of your own life.
How to Achieve Financial Freedom
Too many individuals fail to gain financial freedom. Instead, they are burdened with packs of increasing debt, impulse spending, emergencies, and other issues that push them on edge. Financial trouble happens to almost everyone. However, it is not too late to take some measures to avoid putting yourself on the path that others walked by.
These are the 5 things you can do to finally achieve F.I.R.E (Financial Independence Retire Early) that everybody longs for:
Live A Frugal Life
For some people, frugal living sounds like shopping at thrift stores, clipping coupons, and staying in instead of dining out. However, living frugally is way bigger than that.
Living a frugal life means being aware of how you spend, focusing on more essential financial priorities. Individuals who prefer to live frugally reflect on their primary goals and how altering their spending can greatly help them arrive successfully at their desired destination. In addition, by cutting off the amount of money they spend, frugal people have bigger saved money which they use to invest solid index funds and other reliable and low-risk investments.
In preparation to embark on frugal living, you first need to identify where your finances are going clearly. Just then can you wisely decide where it should be allocated. Begin by picking up a budgeting method that will work for you, perhaps an app, spreadsheet, or bullet journal. Then, divide your transactions into categories after tracking the amount you regularly expend.
Cut Down Expenses
Perhaps, more than 35% of your total expenses go to the grocery store, and you need to cut that down. Of course, that doesn’t mean that you need to eat once a day and starve. This only implies that instead of setting aside 35% of all of your income for foods, why don’t you try lowering it down to 20%? Rather than buying premium steaks and unhealthy foods, buy inexpensive foods that are healthy and good for your system. In order to use this strategy, you need to follow a precise budget.
Choose a Cheaper House
In this society where being in debt is a norm, the average type of person consumes $70,000 a year. Perhaps this enormous cost accumulated by buying a car and unnecessary things to show off. Selling your car to buy a cheaper one might be ideal for cutting off expenses. Getting back, the same goes in the house you choose.
If you choose to live in a much cheaper house, you will save yourself some money to put on investments that will grow eventually.
Financial dilemmas often begin with basic living expenses. If the payment you make for the house you live in is high, other utility expenses would probably follow suit. There will be a more expensive cost of utility cost, maintenance, and repairs. And if you eventually fall into this trap, there’s a massive chance that you will be forced to leave your precious home.
Upgrading later after you have much to spare is better than having to downsize in the years ahead.
Save Money
We mentioned earlier that a person usually outlays $70,000 every year. However, you need to give it a second thought— do you really need that much every year?
Imagine cutting your $70,000 expenses down to $30,000. It will save you $40,000. If you start doing that in your 20’s and continue doing so until your requirement, you will be having more than $1 million, which you can use to live your life to the fullest after you retire.
Do you think living by $30,000 is impossible? Definitely not!
The former president in the country of Uruguay was said to have less than $1000 monthly fund for living, and if we multiply that to a year, it would only be around $11,000 or even less.
When José Mujica was still the president, he has refused to live in a presidential palace to live by the countryside with his wife. By his extremely humble life, he was named the “Poorest President in the World.”
Now, does $30,000 sounds impossible for you?
Invest
Another key to financial freedom is investing. You cannot save money and just make it sit comfortably in banks. Your money can also do wondrous things for you if you would allow it. Passively invest your money on the stock market and ensure passive earning by interest.
You can try choosing companies that will make you dividends. When a company decides that they no longer need a particular amount of money to be allotted in growth, they just share the profit with investors. They do that to attract investors, and what comes next after investors? More money!
People in the stock market have created an enormous sum of wealth. The S&P, which makes up 500 of the biggest U.S publicly traded company has given 8%-12% returns per year. If you would come to think of it, $10,000 invested in stocks 50 years ago was now around $380,000 in value today.
Investing is crucial in achieving that financial freedom that you badly want, but it is also important to keep in mind the risk it could probably bring. So do intensive research about the stock market before you impulsively jump into investing.
