financial freedom made simple (a full-proof guide)

Updated: Mar 20

“ Financial freedom is available to those who learn about it and work for it ” by Robert T. Kiyosaki


2 out of every 3 people I ask, want to achieve financial freedom.


But very few people are taking some serious actions in the same direction. It makes me wonder if people want financial independence so badly, why aren’t they taking any actions?


And I was not surprised when I got to know that the majority of people lack the necessary education needed for achieving financial freedom.


Because schools don’t teach us about personal financing, it is the main reason why a large number of people are in debt and are failing to meet their end needs.


Due to this reason, the rich are getting richer day by day and people who don’t have the necessary knowledge are stuck in the cycle of mediocrity.


Now the world's 1% aka the elites hold more than 44% of the entire world’s wealth.



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Do you also want to live the rest of your life living paycheck to paycheck?

If your answer is yes, then you should stop reading this article right now, as later on in this article I’m going to share some amazing tips and tricks to achieve financial freedom.

What is financial freedom?

Financial freedom means you are not depending on anyone or anything for your survival and you have enough money to cover up all your expenses for the rest of your life.


Being financially independent doesn’t mean that you should stop earning money, you should never shy away from an opportunity to earn a few bucks.


What financial freedom really is, is that you don’t work for the sole purpose of earning a certain amount at the end of the year.


When you’re at a stage in your life where you are all set to achieve financial freedom, you’ll work because you want to, not because you need to.


And being financially independent has its various benefits as well.

What are the benefits of financial freedom?

Imagine this: your car broke down and needs an urgent repair, the economy is just recovering from the effects of the pandemic, and here is another expense you have to pay off.


With the above scenario isn’t it would be great if you could pay for that expense easily without thinking much about it?


This is possible if you are financially independent. This is just the tip of the iceberg. There are many other benefits of achieving financial freedom.


Benefits of financial freedom:

1.) Early retirement: If you learn about financial freedom and start implementing the knowledge in your real life then you can achieve early retirement.


This is only possible when you are very serious about getting financial freedom and enjoying your life with your loved ones, traveling the world in your 30s.


2.) More time for the things that matter: Being financially independent means you are no longer chasing money.


As you have already accumulated enough money to support your future self, you can spend time doing things that matter to you.


Be it fishing with your friends or working on your side-business, or just simply spending more time with your family.


3.) Travel the world: Who doesn’t love to travel, rite. Well, imagine being able to take your dream vacation with your entire family without stressing over the budget.


Because you have saved or invested a lot of money in the initial days, you can always find the means and time to travel the world.


Achieving financial freedom is worth all the efforts. So start planning your way to it today.


4.) Being able to support your family better: If you are financially independent, you can provide better for your family.


We all are going to have a family at some point in our lives and with financial freedom, you’ll be able to provide all kinds of comforts to your family and loved ones.

Difference between Financial Freedom and Debt.




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Now you know all the benefits of financial freedom. Do you still want to be in the 9-5 rat race for the rest of your life?


Do you still want to live paycheck-paycheck and miss on all the fun life has to offer?


I hope your answer is no. If that is the case, I’ve laid down a process of 9 steps to financial freedom.

9 Steps to financial freedom

#1 Make up your mind:

Success in any field is 80% psychology and 20% engineering. To attain financial freedom you need to clear off your mind from all the distractions.


Don’t waste any more of your hard-earned money on stuff that you don’t need.


You don’t need to buy every new edition of the I-phone or you don’t need to buy a Gucci shirt to look good.


Stop spending money on things that don’t help you in achieving your goals. Remember “you have a family to feed, not a society to impress’.

#2 Know where you are:

To live a financially independent life you first need to know where you really are.


How much money you owe, how much money you are earning annually, how much money you can save each year.


Knowing from where to start makes it a lot easier to lay a good and solid groundwork for your independent future self.

#3 Stay away from debt:

“Every time you borrow money, you're robbing your future self.” ~ Nathan Morris


Debt is the ultimate killer of financial freedom. No one can ever be financially free with a bowl full of debt hanging around their shoulders.


Use your credit card less, buy a small or less expensive car on cash, don’t finance every single thing you buy and save the interest money and use it toward something productive.


Debt in its very nature is a liability and it is unproductive while trying to be financially free.


Accumulated debt is like a hole in the ship, slowly it’ll sink your ship deep into nowhere.


Keep a close eye on your debt/income ratio. You can do that with the help of a budget, which is our next point.

#4 Prepare a budget:

Budgeting is an effective way of keeping track of all your expenditures and incomes and even debts.


Allocate a certain % of your total income into various heads and spend accordingly or simply use a budgeting app like YNAB or Pocket Guard.


Prepare a budget according to your income and stick to it. Making a budget is easy but sticking to it is what is going to take a lot of hard work and practice.


Note each transaction you make and every penny you earn. This will give you a detailed review of your spending lifestyle and highlight the areas where improvement is needed.

#5 Start saving:

As we have discussed above budgeting, makes room for savings in your budget. Saving culture is vanishing away very quickly from our modern lifestyle.


This hard-hitting pandemic has taught us all, the importance of saving in our lives.


To become financially free, make saving money a regular habit.


Save at least enough money that can support your lifestyle for a bare minimum of 4-6 months. Create an emergency fund and monthly add a small fraction of your income to it.


Source


The above stat is astonishing, 45% of American households have $0 in savings. You can be one of them if you keep spending money on things that you don’t really need.

#6 Start investing your money:

After saving if you still have some cash in hand, invest your money for the long run and silently see the magic power of compound interest making you a richer person over years.


Calculation: $100/month for 50 years

50*12 months= 600 months

600*$100=$60,000

$60,000 invested over 50 years = $3,905,864


From the above calculation, you must have understood why investing your money is the key to financial freedom. Investing money is the way the 1% make their fortunes.


Next time you are about to spend $100 on a new pair of shoes, see the image above.

#7 Live below your means:

Living below your means does not mean becoming a cheapskate. Living below your means is buying less stuff than you need or not buying stuff for showing it off.


Only buy things that are important for your survival.


A $40 watch will tell you the same time as a $40,000 Rolex does. A $25,000 car will take you to the same place where a $250,000 car would.


Earn your money smartly and spend it even smarter. Don’t buy the stuff you don’t need to impress people you don’t even like.

#8 Create more income streams:

Depending upon a single income stream will not make you financially free.


An average millionaire has 7 income streams. They don’t put all their money into one single activity.


Instead, they diversify their investments in various businesses so that they can create a steady passive income stream.


This is how they earn money from various businesses. Every millionaire has at least seven steady streams of passive income that make them money without even doing anything.


Having another stream of income can surely help you achieve financial freedom much faster.


If you also want to make passive income make sure to check out my article on 11 legitimate passive income ideas to try in 2021.

#9 Buying more assets and fewer liabilities:

Spending your money on buying assets is money well spent. But, these days people are buying more liabilities than assets.


Buying a car worth $250,000 is equal to buying a liability worth $250,000 and on top of that, you have to spend a couple of $1000’s more on the maintenance.


Whereas buying a home worth $250,000 will pay you $2000/month in rent and also will increase in value over time.


The home which is valued at $250,000 will increase in value and could become $500,000 over the years.

#BONUS: FOLLOW 4% RULE:

Now, what is the 4% rule? How will it help you in becoming financially free? Is this rule really effective?


I had the same question in my mind when I first heard of it from a friend of mine.


So basically the 4% rule is a thumb rule which suggests that you should have enough money in your nest egg, from which you can withdraw 4% every year for annual expenses leaving the rest of the money invested.


According to this rule, you will be living on the interest you earn every year without touching the principal amount.


And in the meantime, your principal amount will continue to grow with the years to come.


Still, confused about how it works? Watch this amazing video with all the calculations done for you.





How can you gain financial knowledge?

#1 Youtube:

Youtube is the best place to learn anything for literally free. Youtube being the second most popular search engine has billions of hours of visual content.


Anyone can use youtube for free and learn anything they want to. Watch videos on financial freedom and gain knowledge and implement it in real life.


#2 Blogs:

There is a never-ending demand for written content and to match this demand there are millions of articles related to a single topic on google.


Simply go on google and type the word financial freedom or financial independence and you’ll have millions of search results in front of you.


And from there you can choose whatever article you want to read.


#3 Listen to podcasts:

Listening to the content is another way you can add precious information to your mind. Many podcast shows teach people about personal financing for free.


Some of the best podcast to learn financing from:


#1 Rich dad poor dad radio show


#2 The Ramsey show


#3 So Money with Farnoosh Torabi


#4 The smart passive income by Pat Flynn


These are my top recommendations on podcasts for financial freedom.


These people who are hosting these shows are experts in this field and they offer a great deal of advice on financing, making money work for you, making passive income, investing, saving, etc.


Make sure you check them out.

#4 Reading the right Books:

Reading is a habit that you need to develop and incorporate into your daily lifestyle. Reading is the best way to learn.


The more you learn the more you earn.


And it's a proven strategy. All the rich and wealthy people like Warren Buffett, Bill Gates, Elon Musk, Jeff Bezos are readers and give most of the credit for their success to reading.


As written content is in demand there are millions of books available to read. This makes it more difficult to choose the right kind of book to read.


But don't worry, I’ve made a list of books that you must read if your main goal is to be financially free or simply earn more money.

Books that will help you achieve financial freedom:

1. Rich dad poor dad by Rober T. Kiyosaki

2. The total money makeover by Dave Ramsey

3. Money master the game by Tony Robbins

4. Why didn’t they teach me this in school by Cary Siegel

5. The 4-hour workweek by Timothy Ferriss

6. Trade your way to financial freedom by Van K. Tharp

#5 implementing the knowledge you are gaining in real life:

Having financial knowledge is a good thing but if you are not implementing it in your life then it’s just not worth it.


Having knowledge and not implementing it is the same as wrapping a gift and not giving it.


Use your gift of knowledge and discover what strategy works best for you. Once you find your path to financial freedom, your life will be much easier than it is now.


Now that you have all the required knowledge about financial freedom you must be wondering how much you need to save to retire?

How much money do you need for financial freedom?

Well, this is a question that has millions of different answers.


The fact that you need XYZ amount of money for financial independence highly depends upon your lifestyle.


Financial freedom comes when you have enough money saved up that you can support your current lifestyle for at least 25 years.


And here is where the number varies for everyone. Some of you can live with $30,000 a year and some of you need $60,000 a year.


This all depends upon your lifestyle.


If a person is living on $30,000 a year, in order to be financially free he/she needs to save $30,000*25 years = $750,000.


And if a person is living on $60,000 a year, he or she needs $60,000*25 = $1,500,000.


So that solely depends upon you. So do your math and decide how much you want and according to that, you can lay out a deadline.

FAQ’s

Q1. How can I save money?

When you’re planning to save money, preparing a monthly budget can be a good option. Follow the 50/30/20 rule.


where 50% of your income goes for the needs, 30% of it goes in wants and 20% goes in for saving. This has worked for me and will eventually work for you as well.

Q2. How do you get financial freedom in 5 years?

Well, being financially free is not an overnight quick process. You need to save for a long time to become financially independent.


To achieve financial freedom in 5 years you need to make drastic changes in your lifestyle and you need to cut on various expenses.


Some of the ways you can somehow achieve it in 5 years are by:

1) Living below your means

2) Saving a large chunk of your money in the form of investments, assets, and liquid.

3) Creating other passive income streams.

4) By spending whatever is left after saving.

Q3. What is the 50/30/20 rule?

It is a simple rule where 50% of your income goes in for needs like rent, grocery, transit cost, mobile bill, etc things that you need for your survival.


And 30% of the income goes in for wants like NetFlix membership, eating out with friends, going to movies, etc the things you enjoy doing.


Whereas 20% revenue goes straight to your savings in the form of investments, assets, liquid, etc.

Q4. What is the definition of financial freedom?

Financial freedom means that there is enough money in your nest egg, that it can help you survive for at least 25 years without doing any work.


You must be able to afford your current lifestyle for 2 decades or more with the money you have saved over the period of time.


When you can do that, you can finally count yourself as financially free.

Q5. What is financial freedom planning?

Financial freedom planning means that you have it all figured out, how much you’re going to save/invest every month.


And how much you can spend each month to achieve it. Planning out a full course of action about spending, saving, investing is known as financial planning.

CONCLUSION:

Becoming financially free is a great thing and I think everyone should become financially free and spend their lives without worrying about money.


It is a great way of doing your future self a favor and leaving a legacy for your loved ones that is worth remembering.


Financial freedom is not hard to achieve if you have clear goals about the amount you want to save for your retirement and more importantly working on that plan every single day until you finally achieve it.