Financial Freedom
Financial Freedom

The Formula of SUCCESS for Financial Freedom in 10 Steps

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Financial freedom. That sounds like a nice theory. But the truth is, financial freedom is something that really all of us can achieve. I mean everyone – even someone who, like me, once owed quite a pile of debts. No matter what financial difficulties you have today, there is always a way to get back into the green. In this article, we’re going to explore the importance of financial freedom and outline some avenues to financial freedom – including some that have worked well for me personally.

What does financial freedom mean?

Financial freedom is about taking responsibility for your finances. It’s about finding a reliable source of income (or, better still, several) that enables us to live according to our ideas. When you are financially independent or financially free, you don’t worry about how you will pay your bills or unforeseen expenses. Plus, you won’t have to contend with a crushing mountain of debt.

It’s also about realising that you need a side job to pay off your debts and ultimately increase your income. We’ll take a closer look at this aspect in a moment. And last but not least, it is also about planning your long-term financial situation by actively saving for bad times or for retirement. With a few tips, the path to financial freedom will be within your grasp – so let’s jump right in.

10 crucial tips for your financial freedom

1. Become aware of your current situation

How do I achieve financial freedom? Many of us have probably already asked ourselves this question. Financial freedom cannot be achieved without knowing where you started. If you think about how much debt you have, how much savings you do NOT have, and how much money you need, it can be pretty depressing at first. However, this is an extremely valuable step in the right direction and to become financially independent.

So first, make a list of all of your debts: mortgage, student loan, car loan, credit cards, and any other debt that you may have accumulated. Also, don’t forget about the money you may have borrowed from friends or family members over the years.

Now take a deep breath. And again. Then you add up all the numbers.

So how much are your debts?

If it’s a large number, don’t panic right away. In the course of the article, I’ll give you some workable solutions to get you back to the black. If it’s a small number, or maybe you have no debt at all, congratulations. You are welcome to share your tips for financial freedom in the comments with our readers.

Next, take a look at the money you’ve saved so far.

Make a list of all of your savings: savings accounts, stocks, employer savings, personal retirement plans, and so on. After that, we’ll add the recurring monthly payments you receive. This includes, for example, your salary, income from secondary employment, stock dividends, etc.

You should keep these numbers in mind as we look at the next few tips for your financial freedom.

2. See money as something positive

Debt can definitely be daunting, no question about it.

Remember, money is a good thing, even if it is quite a burden on you right now.

Work on your mindset and realise that financial freedom is something you deserve.

According to the American bestseller “ You Are a Badass at Making Money by Jen Sincero”, people who don’t make a lot of money often feel ashamed when it comes to making money. And so is the biggest obstacle that many people with regard to the theme make money experience that they have the feeling of having money is bad. Many feel guilty because they have money and even more guilty because they want it. Sincero says of money: “We use it every day to improve our lives. Still, we always seem to focus on the negative. “

Money is just a necessity like food or water. It helps you buy the things you need and live the life you want.

To experience financial freedom, you need to view money as a tool – a tool that will help you achieve your dreams, recharge your batteries, and enjoy a stress-free life.

If you view money negatively, you will subconsciously sabotage your chances of making more of it and keeping it for the long term.

3. Write down your goals

How much money or capital do you need for financial freedom and what do you actually need money for?

Do you want to get rid of your debt forever? Are you trying to escape the hamster wheel? Is there a place you’ve always wanted to travel to? Do you need to save for a wedding, kids, or retirement?

When I gained financial independence, it was because I linked it to an emotional goal. My goal was to pay off my student loan and save for my first home of my own. It was an almost euphoric experience to watch how the debt gradually disappeared and my savings grew.

When I saw the numbers change, I worked even harder to make more money. I had tasted blood and wanted to make an even bigger change in my personal finances. Would I have achieved my goal of financial freedom if I hadn’t tied that goal to something emotional? Probably not. I really wanted to get out of debt and move out of my parents’ house. This goal kept me motivated throughout my journey.

Then another important thing happened. In February 2016, I wrote down some of my goals on a piece of paper:

  • Earn $ 100,000 selling products online
  • Save $ 20,000 on a loan down payment
  • Pay off your student loan of $ 24,000

Somehow I misplaced this piece of paper and completely forgot about it. And then one day, a little over a year later, when I was already living in my new home, I found it in my notebook. I had actually achieved all three things. The funny thing was that I didn’t even consciously think about these goals.

You may not achieve everything in a month. But a year is a long time to make progress on your goals. Make sure that your goal is tied to a specific number that you want to achieve. Believe it or not, you will automatically start working towards these goals without even realising it.

Knowing exactly what you want to achieve and when you want to achieve it (maybe even financially free at 30?) Makes it a lot easier to find your way to financial freedom and to know when financial freedom is a realistic option .

4. Track your expenses

How do I become financially independent? An important step on this journey is keeping track of your expenses.

For this you can z. For example, use a tool like Wallet that lets you know how much money you are spending, what categories you have excessively spent in, how much money is in all of your accounts, and how much debt you have.

Another great thing about Wallet is that you can set personal goals in the dashboard. You can keep an eye on your goals and know exactly which month to reach your goal based on your deposits. In this way, the app holds you accountable and reminds you regularly to keep saving money to achieve your goals.

5. Pay yourself first

You have probably heard the phrase “pay yourself first” before. If not, this approach is about putting a certain amount of money into your account before paying anything else (such as bills). Paying yourself first has helped countless people successfully progress their path to financial freedom.

Why?

If you pay yourself 500 euros per salary first, then the remaining money has to be used to pay your bills. And if you don’t have enough money to pay those bills, then you will be forced to build an extra income to cover those costs.

With this strategy, you make sure that you always put money aside to invest in yourself. If you do the opposite, you will only get what is left. And that’s usually not enough to help you pave the way for financial freedom.

You can also pay yourself in other ways. For example, if your employer has a retirement program, you could apply for a percentage of your gross salary to go into that program. That way, you are investing in yourself and your future first. The money will be deducted directly from your salary. So you can use whatever is left for your bills, expenses and medium-term savings projects.

6. Financial freedom through less spending

In 1958, Warren Buffett bought a five-bedroom home for $ 31,500 and has not moved out since. His capital? An amazing $ 90.3 billion. So he can easily afford a bigger and more expensive house. But his frugality could very well be one of the reasons he is one of the richest people in the world.

Kanye West, on the other hand, isn’t afraid to show his money. He lives in a $ 20 million mansion . At one point, with $ 53 million in debt, he decided to ask Mark Zuckerberg for $ 1 billion  … on Twitter.

The difference between the two super successful men? Buffet never spent more than he needed, and Kanye West spends money he doesn’t have.

The truth is that many rich people don’t look like rich people. Zuckerberg literally wears the same boring t-shirt and jeans every day.

Buying less can actually help you become richer and, most importantly, financially independent.

By spending less money, two things work in your favor: First, you will have more money to put aside on your path to financial freedom. Second, you will learn that you actually need far fewer material things to survive, which will also help you put more money aside.

And that leads to our next point …

7. Buy experiences instead of things

Life is short. It’s not about hoarding all of your money until you’re 65. You can enjoy life during your time on this earth.

Ultimately, the things that contribute to a fulfilling life will be your experiences – not the things you own.

Do the things you buy make you happier in the long run? Is the debt you accumulated from purchasing material things making your life easier?

Now let’s look at the other side.

What is your happiest memory What have you done? Who was with you?

Let’s just create more memories like that.

Maybe you have a girlfriend who you enjoy exercising with. Invite them over to you to do a home workout together to a YouTube playlist.

Maybe you are planning a date right now and want to make it unforgettable. Find a cool activity you’ve never done before on Groupon for a fraction of the price.

Have you always wanted to discover Hawaii? You saved money for a year to finally make your dream vacation a reality. Take this vacation and enjoy it without feeling guilty. You didn’t go into debt for it and so you deserve it. Or you could become a digital nomad and travel the world while working abroad.

Life is made up of moments. The best have their origins in the time spent with friends and family. While some material things can help bring you and your family closer together (such as a weekly family video game night), most of them don’t add much value.

Don’t spend money that you don’t have to pretend you have money!

8. Pay off your debts

Some people will tell you that it is wiser to invest your money in stocks rather than paying back your debt. If you are a seasoned stock trader, this may be true. This way, if you’ve never invested in stocks, you could end up in even more debt.

Many people feel the same after making their last loan payment: relief.

Even if you have 10,000 euros in your account, you will not really be able to call yourself financially free with 20,000 euros in debt. You are still in the red with 10,000 euros.

Even if paying someone else doesn’t seem as glamorous as having cash in your account or in a stock portfolio, it will bring you closer to your financial freedom.

There are two main ways to pay off your debt: snowball and avalanche. With the snowball method, you pay off your smallest debts first. The avalanche method is when you first pay off your debts with the highest interest rate.

You have to decide what works best for you. As I worked toward my debt-free life, I followed the snowball effect. It helped me stay more motivated. Within just one month, I was able to completely settle my first debt – a credit card bill for a total of 1,100 euros. The sense of accomplishment helped me motivate myself to finally tackle my much larger student loan.

And since credit cards were no longer a problem, I was able to pay off about three times more on average than the merger minimum payment of 200 euros. In the end, it took about three years to repay my student loan instead of the nine years originally advised.

Paying off larger debts will take a huge burden off your shoulders. After you have paid off your debt, your savings will increase noticeably. It’s a great feeling to watch your account balance go up (even if it had to go down in the beginning).

9. Develop additional sources of income

At this point you may think to yourself, “My debts are much higher than my salary. How can I pay them off promptly if I don’t earn enough? “

If you are serious about your path to financial freedom, you have to sacrifice some blood, sweat, and tears.

Your regular job may not be enough to get you closer to your goal. If that’s the case, you’ll need to shift up a gear and look for sources of income outside of your current job.

Some experts even recommend having seven different sources of income. If you have a 9 to 5 job, congratulations – you have one, six more are missing.

You can look at your sources of income in two ways: active income (i.e. the exchange of time for money) or passive income (money that keeps coming in, even while you sleep). It should already be said that passive streams of income often contribute much more effectively to financial freedom than active ones.

If you only exchange your time for money, you are limited by the number of hours in a day. Here are a few part-time jobs you can do to earn extra active income:

  • Become a freelance copywriter and find jobs on Textbroker
  • Support entrepreneurs as a virtual assistant with job advertisements on Upwork
  • Earn with apps such as B. Streetspotr money on the side
  • Find sideline jobs on sites like Kimeta or Seitenjob Zentrale
  • Fill out surveys and get paid for them, e.g. B. at CINT
  • And much more!

If you don’t have a lot of time, you could focus on increasing your income using passive sources:

  • Start a dropshipping online shop on Oberlo
  • Start your own custom fashion business on Shopify.
  • Sell ​​profitable content ( blog, e-books, courses, webinars, audio books, podcasts, apps)
  • Become an affiliate marketer
  • Buy real estate and rent it out
  • Invest in stocks

Fortunately, your seven streams of income can all come from the same source. If you z. B. If you are an e-commerce expert, your seven streams of income can come from building seven different online stores. Remember: you don’t have to start with seven sources of income, you can build them up gradually.

10. Invest in your future

The last tip for your financial independence is particularly important. Let’s say that you follow the advice and recommendations in this article, move on from your debt, and build your savings. Perhaps you are already satisfied with it by now. But what if something unexpected happens? Will you be prepared for this That is also what the issue of financial freedom is all about.

It’s important to set aside money for worse times, your retirement, and (sorry if I mention it here) your death too so that your family isn’t burdened with the costs involved. But now we want to return to the positive aspects.

So if you work regularly as an employee, you should talk to your employer about existing options for retirement provision. Perhaps you are already making corresponding contributions without knowing about it. The corresponding amount is usually deducted before it goes into your paycheck. This way you don’t feel like you’re missing out on money. Plus, it’s pretty cool to check your balance every now and then and see how your savings grow.

Next, you should save some money for an emergency buffer. Some experts recommend 10,000 euros here, while others prefer six months’ salary. Granted, these numbers can seem pretty high if you’re not making a lot of money. Instead, start with a goal that you can afford – such as: B. with 100 euros in the first month.

Then, as soon as you start earning more active or passive income, you can start increasing your goal to $ 500 per month or $ 500 every two weeks. And if you ever have to settle a bigger bill, you shouldn’t use your emergency budget for it. Rather, focus on finding more active income opportunities for yourself.

The emergency buffer is only intended for unplanned emergencies – e.g. B. in the event of a car damage caused by a storm or medical treatment that you have to pay for out of pocket.

By putting money aside for bad times and your retirement, you will achieve financial freedom much faster.

Financial freedom: bottom line

Financial freedom can help you take responsibility for your finances and, more importantly, your life. It’s about living within your means, being a little frugal, and making sure that money is being spent on things you really need – such as food, shelter, and even vacations (relaxation is also important).

By following the tips in this article, you can make your dream of financial freedom a reality. How much money do you need to be financially free? There is no general answer to this, as it depends heavily on your personal situation and your requirements. So take a close look at your finances, build additional streams of income, pay off your debts – and before you know it, you’ll be financially free and independent.

How far have you come to financial freedom? Do you have any other tips that can help you become financially independent faster? Let us know in the comments below.