We are now living in a money-conscious time where people are eager to gain financial freedom. While most people desire it, very few people do attain it. People are likely unable to do so because they lack information on how to get there. In this article, even as we discuss the steps to financial freedom, it’s essential to keep in mind that this list here is not exhaustive. Consider this as a brief orientation of all the knowledge that you stand to acquire once you’re on the road to financial freedom.
From there, your mind will be opened enough to begin your unique journey to the goals you hope to achieve. Let’s now get into the top ten steps to take toward financial freedom.
What are the steps to financial freedom?
Understanding your net worth
You’ve seen it on Forbes, where celebrities and tycoons get listed based on how much their net worth is. You, too, have to look at yourself in the same way. To know your net worth, you have to subtract liabilities from your assets. Your liabilities here could be debt and expenses, and assets could be your cash and investments. Sit down and make a balance sheet of how much you spend in a month and how much debt you have, and place on the other side, your income, savings, and investments.
What you will have left is your net worth. Looking at it, is it something that generates concern or happiness? If you’re reading this, the feelings you have are likely the former. As you move around the rest of the steps on how to attain financial freedom, always keep in mind your net worth. It gives you big-picture thinking and how the smallest of financial decisions make all the difference.
Track your money
The next step is understanding where your money is going. Is it going toward your assets or your liabilities? How is that affecting your net worth? There are many handy financial management apps that you can turn to when it comes to tracking your money. If you’re overwhelmed by having to key in everything your money gets spent on, remember that it is something you need to do if your path to financial freedom is to be successful. This part is not glamorous, but it is crucial.
Tracking your money is something that you may have to get used to for the rest of your life. It is a good habit to keep and allows you to know where you stand at any moment. The other aspect that makes these apps that track money ideal is that within the application, there are additional useful functions. They include being able to budget for the month, set goals, track your investments, and lending, among other things.
Don’t go alone
One area that people neglect when it comes to financial matters is in getting a mentor or mentors. If your mind immediately jumped to people in the limelight, you could be missing out on something more grassroots and even relatable. Sure, you can read their books, attend a seminar and watch their interviews, but at the end of the day, you need someone close to you.
Look around your life; who can you say has attained financial freedom, no matter the degree of it? The answer could indeed be closer than you think. It could be friends, family, and even a person known locally for their financial management skills. Reach out to them, showing interest in being their mentee. You’ll be surprised how many people are willing to help you on your journey when you purpose to become better. That said, do be mindful of who you reach out to. You need someone of noble character that will set you on the right path.
Pay yourself first
This piece of advice is not about paying yourself a salary with your income. No, what it refers to is saving money; the first thing you get our paycheck. Sure, you do have bills to pay, but you ought to make savings a priority. If you feel that you won’t have enough, then it is a perfect time to think of how you can make extra income to supplement the shortage. That said, it is likely that if you focus on paying yourself first and making paying bills the second priority, you will indeed have enough to get you through the month sans luxuries.
As you start, begin with saving 10 percent of your income. After doing your budget of what you need, see how much is left over. Instead of using it, choose to increase your savings. The size of your savings should grow with your income. Therefore, if you get side hustles, you should equally begin to save that too. Done right, you can even save 40 percent of your income annually.
Invest, not consume
Investing is about building wealth, and that is indeed one of the steps to financial freedom. The issue that most people have is that when they get money, they are focused on spending it on things that they want or missed out on. Instead of getting caught up in that, instead, focus on delayed gratification. Unless your net worth is what you picture it to be, then you’ll have to make some sacrifices and invest instead of consuming.
Before you purchasing anything, ask how it is going to contribute to your financial freedom if it doesn’t save and invest that money. When it comes to investments, there are various options, and there’s always something for everyone. You can research what you want and talk to a financial adviser to set you on the right path.
Pro tip: Keep a jar at home where you place the money that you could have otherwise spent. Visually seeing what you’ve saved by giving up things that won’t add to your net worth can keep you motivated to stay indeed on track.
Invest in yourself
Acquiring marketable skills is another step that you can take toward financial freedom. It won’t increase your income exponentially overnight, but you will have access to more opportunities because you’re qualified. The world that we’re currently living in is primarily about communication and everything that falls under it. That could be digital marketing, advertising, social media, and even coding. Aim to attain certification in these areas to further boost your employability. That is not only limited to those in the communications field. Whatever career you’re in, there is more you can do to advance yourself.
The other reality is that with additional skills, you can get a side hustle much easier. A lot of online jobs do require such skills, and there are employers and even startups that are willing to give you a shot. Should your job fall through, you’ll have a few projects running on the side that can sustain you. The idea is not to rely on one paycheck but to have multiple sources of income. With the networks you build over time, you’ll be able to demand more. Done right, you could just become an employer too.
Get multiple sources of income
Picking up for the idea above, you mustn’t only rely on one source of income. It is a sure way to remain financial bound and putting financial freedom out of the question. We also live in versatile times, where you’re not guaranteed that you’ll always have a job. That is the reality for many the world over. Therefore, with the new skills you’ve acquired as you advance your career, you’ll have other ways in which you can make money.
Depending on the career you’re in, you can become a consultant, freelance writer, sell things, become a drop shipper, or anything in between and beyond. If you’re feeling overwhelmed, you can start by looking at what marketable skills you have. After, look at where your passions or interests lie. If there are overlapping ideas, then you can run with it. If not, see what other opportunities are there to get you started on a side hustle.
Don’t stop learning
New ways of doing things are always getting discovered. Keep informed with the latest trends to give insight into the direction the world is going. It is even better if you spend more time understanding the beginnings of financial matters and how they have transformed over the years. When you do, you have a higher appreciation of things. For example, if you’re investing in real estate, knowing the beginning of it and trends over the decades helps you become a better analyst.
The same applies to your career and side hustle. Keep learning new and improved ways of doing things. Look at what the pros in that field have to say and emulate them. In this information age, there is virtually no excuse to remain in the dark about anything. If you have to, take a course if it is going to enhance your career prospective further. As you keep at it, you’ll notice that your financial IQ is improving, making it a step in the right direction to financial freedom.
Getting frustrated can be quite easy if you think that there are magic or get-rich-quick steps to financial freedom. What you plant now does require time to grow. For a while, as your digging in the roots, you won’t see the results of your sacrifices. If you’re still paying off your debt, then your closet might go a few months without getting a new outfit. The road to financial freedom is gradual, and the speed in which you attain it is dependent on the amount of work you put in.
Going back to school will take time. So will taking online certifications or reading everything you can about finances. You will not be a guru overnight; you’ll stumble and make some mistakes. At some point, you might even go back into old habits that no longer serve you. When you strictly follow the lives of those you admire, you will note that there will be bumps on the road. The key to getting to your goal is not stopping, but rather getting over the hurdle. Overall, don’t give up. Make decisions that your future self will more than thank you for.
Become a mentor
At this point, you have likely acquired a lot of knowledge and become successful in your own right. One way to keep yourself on toes and to keep learning is through becoming a mentor yourself. It is difficult to become a mentor if you don’t practice what you preach. Your mentees will be looking up to you, meaning that you have to remain on top of your game.
There is also space for you in the world to become a teacher when you’re successful. You can share with those around you your story across different mediums. That could mean starting a blog, becoming a motivational speaker at the local college, or writing your own book. The good thing about the journey to financial freedom is unique, even though there are cross-cutting themes. Your story does need to be heard, so take the courageous step and become a mentor.
If you’re getting started, the steps you need to take may seem daunting. It can be for you especially if you don’t have sufficient knowledge of money and finances in general. However, consider looking at it differently. On your first day to a new class, you were nervous and weren’t sure you would pull through. Now look at yourself currently; you’re knowledgeable, and things you learned come to you quickly. Sure, there might be a steep learning curve, but financial literacy is possible.
Remember to keep positive throughout the process. What do you tell yourself about money? Give up any negative connotations you have about money and develop a more practical way of looking at it. Money is primarily a tool that gets us what we need and want. Without it, we wouldn’t be able to survive or even achieve our dreams. Therefore, keep at it.