The road to financial freedom is not an easy one as some scammers and con artists try to convince you. It takes a lot of sacrifices, learning and even taking some risks along the way. If you are ready to pay the price and are stubborn enough to persevere then the reward will be well worth it.
A few years ago I asked myself: “How to achieve financial freedom and is it possible to do it in five years?”
Well, it’s only been a year and a half and I am still far from my goal but I have learned a lot already and believe I am well on my way to it.
Financial freedom is something that a lot of people strive for but very few actually achieve. The thing is that we all have a choice and a chance to be financially free. It’s only a matter of believing in yourself and being ready to pay the price. A few years of hard work are nothing compared to a lifetime of freedom.
What does it mean to be financially free?
It is very important to understand well the concept of financial freedom and the ways to create it for yourself. In essence being financially free means that you own assets that produce enough passive income for you to cover all your expenses without you having to do any real work.
Those income producing assets can be real estate that you get paid a rent for, a business that you have invested in or created yourself, any kind of paper assets that are making money (stocks, bonds, mutual funds, hedge funds, etc.), a high-traffic website, creative work that pays you royalties, and many more.
But how do you create these assets and what does it take to achieve financial freedom?
1. Create a goal to be financially free in 5 years
The first step towards any achievement in life is to know exactly what you want and seta a goal for it. It seems logical but a lot of people miss this step completely. Put your goal in writing, set a realistic deadline and commit to it by taking action. Knowing what action to take is the hard part and you need to figure the exact steps out based on your personal strengths, knowledge and experience.
2. Create a budget
The biggest mistake that a lot of people make is spending more than they are earning. This is a sure recipe for disaster, getting in debt and being a slave to the banks for the rest of your life. Whatever you do and no matter how much money you make you need to live below your means if you want to have a chance of being financially free.
Creating a budget will make it a lot easier to track your finances, especially if math is not one of your strengths. When you subtract you expenses from your income the balance has to be positive and what you do with that ballance is one or both of the following:
- Pay out your credit cards and whatever other high-interest debt you may have;
- Save, invest in yourself and create assets.
3. Learn about money
Probably the most important factor in achieving financial freedom is financial literacy. You need to learn how money works if you want to leverage its power. If you want financial freedom you should not be working for money. Instead money should be working for you.
I encourage you to get as much training and books on finance as you can. Being financially literate is something that you can’t learn in school but is very important for just about anyone. This is the main reason why so many people with good education are working for others that are not that well-educated. In the end it is financial education that really matters.
4. Change your thinking
If you want to become rich you have to think like the rich. Thinking only of scarcity, struggle and being afraid of change and taking risks will get you nowhere. You have to realize that your thinking and your mental attitude is what determines a great portion of your results.
A lot of people say things like: “It takes money to make money.”, while the truth that the rich hold is “Money is just an idea and you can create it.” There are way too many examples of people starting with nothing and creating a huge wealth. There are currently 8 million millionaires in the US, most of whom are self made.
Poor people say: “Building a business is risky” or “Investing is risky”, and they are right, since they don’t know how to do it. Through proper education this can change and the risk can be drawn to a minimum. What I really think is risky is working for someone else and putting your fate in the hands of your boss.
The truth is that we are only limited by our beliefs and fears. Unless we are willing to change them they will be holding us back forever. Facing your fears, challenging your beliefs and escaping your comfort zone are crucial to achieving financial freedom.
5. Follow your passion
Life is that much easier when you are doing what you love. Find the thing that you are most passionate about and figure out a way to turn it into your full-time job. Don’t try to reinvent the wheel. Figure out what other people are doing and how they are making money.
Our age, technology and the internet are providing us with unlimited opportunities. It should be your main focus to leverage everything you have available to make things work. I am passionate about online business and I urge everyone to give it a try. The main reason is that it can work for any kind of passion even ones that you may not be able to monetize in any other way.
6. Create a plan
Once you figure out what you really want and what you are going to do then it is time to create a plan. It is always a good idea to start with the end in mind. So the big goal is to be financially free in five years. Break it down into yearly goals and decide how you plan to reach them.
Plan for at least a year ahead and have certain milestones that will help you stay on track and measure your progress. Make your plans as detailed as possible and try to predict the way things are going to work out. Tie your plan to your budget an make sure your spending fits into it.
Try to predict positive as well as negative outcomes and always have a back-up plan if things don’t go exactly as you plan. Make it a habbit to review regularly the tasks that you planned for and the ones you accomplished. Every Sunday night plan for the week ahead and prioritize your tasks accordingly.
Don’t be afraid to review and make changes to your short or long term plans whenever you see it fit. Just make sure you are focused on the final goal at all times.
7. Network with like-minded people
A lot of successful people say that “It’s not abour what you know but who you know”. Knowing the right people can make a huge difference in your life. Whether it’s poeple you can team up with, get advice or mentoring from or simply someone to encourage and inspire you it will make your journey a lot easier.
There are too many out there that think they know it all and are quick to tell you how and why “It’s not gonna work”. Instead you should surround yourself with people that are open to the question: “How can we make it work?”
It’s always a good idea to have a mentor. Someone who was once in your shoes and made it to where you want to be in a few years. That is the kind of person that can help you the most if he or she is willing to.
If you can’t find a mentor join a club or a community of people with common ideas. Find local or online communities that may be a good fit for you.
Research and try a network marketing (MLM) company. Just make sure you join one that has been around for more than 5 years, has an actual product that is not overpriced and offers a good training program. Even if you don’t make money from it the training and contacts you create can prove valuable.
8. Resist the temptetion to give up
The only way to truly fail is to give up. There will be set-backs and there will be temporary defet but they are only opportunities to learn and grow. Take the time to learn from your mistakes and move on.
This is another reason to make friends with people like you. They will lend a hand when you are down and not let you give up when you feel like it.
Not giving up is the difference between winning and loosing. Whenever you think you should quit ask yourself: “How bad do I want to be financially free?”
To sum up I can say that the key to achieving financial freedom is the ability to convert earned income into passive income. It is not an easy thing to master but the reward is deffinitely worth it.
Do you have any other tips that you want to share? I will be glad to read them in the comments below.