Financial Freedom, How To Achieve It

In my previous article, I wrote about financial freedom and it’s importance. I defined it as the stage of financial stability where one is free from debt (both good and bad debt) and is able to sustain their lifestyle without living in a rat race, i.e living paycheck to paycheck

Financial freedom is a goal for many of us. It is, however, unfortunate that many fail to achieve it. The reason for this is, we are burdened and drowning in increasing debts, wasteful extravagant spending, and other factors that thwart us from achieving our goals. We may also encounter unexpected events that overturn our plans and reveal holes in the safety nets we thread for ourselves and our families.

Everyone has emergencies and this is exactly why financial freedom is important , you will always be prepared for anything you may encounter at any given moment. Let us remember the idiom that says, “prevention is better than cure.” It’s easier to stop something from happening in the first place than to repair the damage after it has happened. So, take precautions today to prevent finding yourself in a financial crisis tomorrow.

Steps To Achieving Financial Freedom

1. Understand Where You Are
   • It is important that you know where you are right now, you cannot achieve financial freedom without knowing your starting point. Understand your current situation, then, retrace your steps to also understand how exactly did you get here. I have discovered that it is futile to give an advice to someone who doesn’t even understand where they are and how they got there in the very first place. It’s like giving counsel to a married couple that wants to divorce, when they haven’t even taken steps to identify the underlying cause of their differences. They need to retrace by asking themselves “what exactly happened to us” that has suddenly caused them to want to separate. You see yourself languishing in debt and you don’t take time to honestly and realistically consider what has put you in that “unfortunate” situation. Truth be told, YOU are the CULPRIT.
   • So, understand your current situation then start looking at how much debt you have, how much savings you don’t have (or how much you have if you’ve been saving up) and how much money you need. I know this may be sort of depressing for some but it is a crucial step in the right direction.
   • Compile a list of all your debts: your mortgage loans, student loans, credit cards, the money you may have borrowed from friends and family, and all the other debts you may have accumulated. If it’s a small number then congratulations! If it’s a big number, there is absolutely no need for you to stress yourself. We will get through this together. I will be sharing ways for you to pay that down.
   • Next, take a look at how much you have saved up.
   • Compile a list of all your savings: your stocks, investments, savings account, company stock-matching programs, etc. Add the recurring monthly/weekly payments you receive (salaries and wages, side hustle money and so on).
   • Keep these numbers in mind as we work through the next few steps.
2. Look At Money Positively
   • Debt is discouraging, I know. But keep in mind that money is a useful tool can assist you achieve your dreams, fuel your energy, and live a stress free life you can enjoy.
   • If you keep viewing it negatively, you will subconsciously sabotage your chances of making it and keeping it. What are you going to do then?
3. Set Goals And Write Them Down
   • Setting financial goals is essential to financial success. Why do you need money? Do you need it to get rid of debt for good? Is there a place you have been dying to visit? Are you trying to escape the 9-5 grind? Do you want to save up for retirement? Be very clear with your intentions. Once you’ve set these goals, you may write them down and follow a roadmap to realize them. I find this very useful because it helps you stay focused and confident that you’re on the right path. Make sure you attach your goals to an emotional goal. “I attached my goals to my emotional goals and I don’t regret it. I was so depressed because of how much debt I had and I also had to save up for my apartment. Watching my debts gradually diminish and my savings rise was such a euphoric experience. Not only did I achieve my financial goal but also my mental goal.” said one of the people I interviewed.
   • You may not accomplish everything you want today or in a week or month, but a year is a long time to work on your goals. Tie your goals to a specific number you want to hit. Believe it or not, you will start working towards those goals without even realizing it.
   • Knowing exactly what you want to achieve makes achieving it a million times easier.
4. Track Your Spending
   • Tracking your spending is a very, very important step towards financial stability.
   • There is a very cool application that I use to track my spending, it’s called Mint. It allows me to keep track of how much money I am spending, which categories I’ve overspent in, how much is in all of my accounts and how much debt I have.
   • What’s cool about Mint is that it allows you to set goals within the dashboard and also keep track of them. It helps you stay focused on your goal and pushes you towards creating more passive income to hit your financial milestones.
5. Pay Yourself First
   • You probably have heard the expression “pay yourself first”. In case you haven’t heard it or don’t understand the meaning of it, to me it means putting a specific amount of money in your savings before paying anything else. This is important because, if you want to pay yourself, let’s say R1500 per pay period first, then whatever is left over needs to go towards your bills. If you don’t have enough to cover those bills, you’re then forced to pick up a side income to make up the costs.
   • If you do the opposite of this, you only get whatever is left over, which isn’t usually substantial enough to help you experience financial freedom.
6. Spend Less
   • As I said in the beginning, profligate spending is the reason why many don’t achieve financial freedom. By spending less, two things will work in your favor.
     1. You’ll have money to put aside for financial freedom.
     2. You’ll learn that you actually need a lot less stuff to survive, which also helps you put aside money.
   • In 1958, Warren Buffet, chairman and CEO of Berkshire Hathaway with a net worth of $76,1 billion, purchased a $31 500 home and hasn’t moved out since. We all know he can afford a bigger and more expensive home but his frugality might very well be the reason why he’s one of the world’s wealthiest people.
   • Kanye West, on the other hand, is not afraid to flaunt his money. At some point, it was announced that he was drowning in serious debt, and by serious I’m talking about $53 million of debt. Yet he lives in a $20 million mansion.
   • The difference between the two super successful gentlemen? Buffet didn’t spend more than he needed to, and Ye spends money he doesn’t have. I’m not judging and this is not me trying to tell people how to spend their money, but, what I’m trying to show you is that wasteful spending may lead you into serious debt.
7. Buy Experiences, Not Things
   • I always tell people, life is too short and is not about hoarding your money until you’re 60 years old. You’re allowed to enjoy life whilst you’re still alive.
   • The things that will help you live a more fulfilled life are not the products you own, but the experiences you have.
   • What is your happiest memory? When last did you travel? What’s the most exotic place you’ve been to?
   • Create memories just like that. These fancy things you’re buying right now probably won’t even make you happy in 5 years.
   • You’ve always dreamed of traveling to the Maldives and you have been saving up for it? Good. Go on that vacation feeling guilt free. You deserve it. You’ve earned it.
   • Life is made up of memories. The best ones come from quality time spent with family and friends. Some products can help bring you closer to your family (like video games) but most of them do not add much value. Don’t spend money you don’t have to pretend that you have money. Don’t do yourself like that.
8. Pay Off Debt
   • Paying someone else isn’t glamorous as having money in the bank, but it’s necessary and it brings you one step closer to financial freedom.
   • Now, there are two methods of paying off debt, snowball and avalanche.
     1. Snowball is when you pay off the smallest debt first.
     2. Avalanche is when you pay off the debt with the highest interest rate.
   • You need to decide on what works for you best. When I was working on becoming debt free, yes yes yes I also had debts once upon a time which is why I am writing this article, the snowball method worked for me. It helped keep me more motivated. Since I was able to get rid of my first debt, which was my credit card bill, in just a month, the feeling of accomplishment helped motivate me to tackle a debt higher than that.
   • Paying off a big debt unburdens your shoulders. After paying off your debt, it’s like you start seeing the money in your bank account rising. It really is an awesome feeling.
9. Create Additional Sources Of Income
   • if you’re serious about financial freedom you have got to sacrifice blood, sweat and tears. Your 9-5 might not cut it and if that’s the case, you need to step up and look for money outside your job.
   • Now, you can look at your sources of income in two ways, active income (trading time for money) or passive income (money that can keep coming in even whilst you’re asleep).
   • For me, passive income is way better. When you trade your time for money, you’re limited by the hours of the day.
10. Invest In Your Future
    • This is a very important step. Let’s say you follow every advice I’ve given you, pay off your debts and grow your savings. That might be enough to help you out right now, right? But what if the unexpected happens? Will you be prepared for it?
    • It’s important that you set aside money for rainy days and to be able to face the future with financial security. As you go through life, your circumstances will change.
    • You want to save enough money for an emergency fund. Some experts would say take out at least 35% of the money you get. To be honest, this is not a high number but if it is, then you can start small on the first month and increase your goal as time goes by.
    • Doing this makes you less likely to end up where you are right now, wishing for financial freedom.

Bottom Line

Financial freedom can help you take ownership of your finances and, more importantly, your life. It’s about living within your means, being a bit frugal, and making sure that money is spent on things you really need like food, shelter, and yup even vacations. So take a look at those finances, build additional streams of income, pay down that debt, and before you know it, you’ll be free.