Money doesn't buy happiness but anyway, with a financial freedom formula in your hands you could free your mind from a recurring nightmare.
Financial freedom can seem like a chimera or a spring dream, overall after all the economic insecurities that this pandemic COVID-19 has created, with the fear or certainty of losing your job and a life to be reprogrammed.
So we are not speaking about something abstract, but it is a real status that everyone can get by following some simple rules.
But first, we need to understand what is financial freedom, from the definition it will be easier to create a financial freedom formula that can work for anybody.
What is financial freedom?
This term born from the general concept of freedom. So what is Freedom?
“What then is freedom? The power to live as one wishes.” — Marcus Tullius Cicero
At the same way, financial freedom doesn't mean just having money. Financial freedom is about taking ownership of your finances. It is the real freedom to be who you want to be and to do what you would like to do in life. You are no longer worried about having money to pay the bills and other sudden expenses at the end of the month or to accumulate debts.
Practically your choices are no longer influenced by your bank account and You can think about how to realize your passions.
It's also realizing that you need more money to pay your debts and maybe some idea to develop an extra income. It's also the chance to plan a long-term financially wealthy status to prevent the next crisis or for your retirement.
Naturally, if you didn't get this goal until now, it's time to change and find a working financial freedom formula for your happiness.
This presupposes a change of mentality and also an action plan to obtain the goal.
The financial freedom formula: 10 key steps for your happiness
1) Identify Your Starting Point
You can not set up a plan for financial freedom if you have not a clear idea of your current situation. This means knowing the exact numbers. How much debt do you have? How many savings do you have? How much money do you need?
Answer to those questions can be hard and depressing but you need this step to start your path toward happiness.
Put all the debts you have accumulated in a list, comprise not official ones as borrowing from family or friends.
Take strength and be aware that you are doing that to improve your situation. So make a sum of all your debts.
This seems too big, do not be worried about your will receive every suggestion to pay all, in the opposite if it is a small number, fantastic! You are a step ahead for your financial freedom.
Once you have a list of all your debts, you can make a list of all your savings: investments, retirement plans, saving accounts, etc...
Now you can add to the list your salary and each kind of recurring income you receive.
Write the numbers in a paper or keep these in mind. They will back useful in the next steps.
2) Money is not bad
We live in a world in which money seems to buy everything. This transmits an image like having money is bad.
Money can be responsible for many bad things for instance debts, addictions, and social differences. However, it's also the means to make many of our dreams come true. Thanks to the money you can buy your dream house or your favorite car, you can pay for university for your sons and many other positive things.
Therefore, we can say that money is a good thing. According to Jen Sincero "We use it every day to enhance our lives, yet we always see to focus on the negative about it".
So just need to change the idea you have about money, you need to look at money as a tool to help you to achieve your dreams and enjoy the life you want.
A bad idea about money about the tool to get your financial freedom, it will bring your subconscious to sabotage your intent.
3) Set up your Goals
You can not get something if you have not idea about what you want to get. Effectively, goal setting is one of the most important steps to achieve financial freedom. You need to set up both short-term and long-term goals.
The first ones are useful to pursue steadily your long term goals. Moreover, those are important to understand if you in the right way or if you need to change something. These can be daily, weekly, or monthly.
Long-term goals can be single-term or multi-terms. For instance, you can set up the first term goal after one year and other terms after two years of five or seven or also ten years.
These must be tied to a specific number which represents the amount of money you want to get. Also, if it seems an esoteric remedy, you will unconsciously start to work toward these goals.
4) Create Your Personal Business Plan
Once you set up your goal, then you need to create a kind of simple business plan. Practically you fix in a paper: where you are now, which are your goals, and how you are going to get there. It's easier than you think.
You need to insert into your plan:
- your current income (included extra income);
- expenses (divide in necessary and not necessary);
- what you need to get these goals;
- how you intend to realize your goals (saving more money, building an extra income, etc...);
- expectations (these can be the progress you expect while trying to make your plans come true).
In this way, you could put in front of your face all the data and understand which difference there is between what you have now from what you want, How much money you can save and how much you can do, how and why.
This plan will help you in realizing the next steps of this financial freedom formula.
5) Spend less and Avoid Harmful Debt
If you are following this guide, thanks to your business plan you have now a clear idea of your economic situation. You know how much you earn and how much you spend. Overall this last one will be useful to make the next step.
It will be really important to track your spending in the next months and years. Mobile technology gives you many tools to do it. For instance, you could use an app like Mint which will let you know much info about your expenditure such as: how much money you spend, for what you spend too much, how much money you collect in your account, and how much your debt is.
You can also set up your goal in the dashboard and know each month how much you are close or far to your goals. Mint can help you to cut your unnecessary expenditures and avoid harmful debt.
In the panorama, you can find plenty of billionaires who don't look really like reach people. Zuckerberg by dressing every day the same t-shit doesn't give the idea to be one of the richest men in the world. If you spend less you can understand know two truths: your financial freedom is just a few blocks from you and you don't need a lot of stuff to make a satisfying existence.
Debt is another thing that keeps you furthest from your goals. However, some debt is necessary such as the loan to buy a house, college, or medical care. Anyway, the problem arises for unnecessary debt. These are harmful to your plan and could be debt such as excessive shopping, too expensive car for your budget, luxury items, etc...
Debt is the opposite of wealth and unnecessary debt is limitations. If you spend all your income to pay the debt then you will never accumulate wealth. For example, if you earn $3000 each month but you spend $2000 just for the debt you can not put money back. Indeed, you will need of the other $1000 to necessary spent like food and bills.
A good practice can be to do not spend so much money to promote your business as well. You need to make it sustainable and long-standing by avoiding unnecessary risks.
6) Pay Off Your Current Debt
Your freedom depends more on the debt you paid than on the money you accumulate in the bank. If you have $30,000 in your bank account but you have to pay yet a $50,000 of debt you will never feel financially free. You are still missing $20,000.
Many people consider wiser to invest money in stocks instead of paying off debt. While this can be true for expert investors, it can be a big mistake for beginners. You could wind up with more debt.
By paying your debt you will keep yourself more motivated to get your goals. Once you are debt-free, all that it will come in your bank account will be a step more toward financial freedom.
Moreover, when you start to pay the small debt and you understand you can do it, you will be aware of your ability to save money and comply with payments. This means you will be able to pay even more demanding debt such as a student loan or a home equity loan.
7) Pay Yourself First
This a famous expression "pay yourself first", that matches well our financial freedom formula. What does it mean? Simply, This means to save an amount of money in your account before paying other things, each as bills.
For instance, if you decide that whatever happens, you will save $1000 every single month into your account, you will need all the rest to pay your bills, and if it's not sufficient you will need to find an extra income to pay your bills.
If you can make your financial freedom a prerogative on your mental scale you will get it in the time you were expected in the opposite case if you can't sacrifice something, like vices and luxuries, you will be forced to chase your goals for life.
You can also agree with your company or subscribe to a saving plan to directly withdraw the money every single month from your income for your retirement.
8) Keep your focus on the Goal, not the Circumstances
No matter what circumstances you find yourself in, keep your focus on your goals. You need to deal with your business slow times. Indeed, every business has ups and downs. Do not give up in front of the difficulties and you can be sure that the busy times are bound to be much better than ever. Your income will grow fast and your financial freedom is just behind the corner.
It will not grow out of anything but it will be the result of your commitment towards the goal and the strategy your make.
There are rules you need to respect to realize your dream, two of those are: focus and commitment.
This financial freedom formula is giving you all the rest you need to succeed.
9) Build an extra income
Maybe your business plan highlights a difficult situation in which your debt is more than your income. In this case, if you want to conquer your financial freedom you need to sacrifice yourself for this goal.
It's time to understand that your daily job is no longer enough. Maybe you should look further and think to make money outside your current job.
Once you are aware of it, it's time to choose how you want to get it. Two are the options (you could choose both)
- active income (another work where you sacrifice your time to get money)
- passive income (make money while your sleep)
On the other hand, you could be busy and have no time to devote to earning income. In this case, you can try to develop a passive income. For instance, you could start an e-commerce end to sell physical or digital products; invest in stocks. Those are all businesses that require some skills. Indeed, if you want to start a passive income business with no experience you can start an affiliate marketing business. By joining an affiliate marketing network you could acquire the skills and get the tools you need to start a profitable online business from scratch with no investment.
In any of this business, you can create different incomes by selling different products or working on more channels. These are valid tips to make working your financial freedom formula.
10) Invest for You Security
This is the last suggestion to do not fall into a bad surprise. This COVID-19 crisis is unhinging all our securities. Indeed, we were sure that none of this could ever touch us, and anyway, the divinization of both our advanced technology and medicine made use sure that never could an illness destroy our beliefs with such simplicity. Yet it happened.
We were unprepared, and we remained astonished from how this in a short time we threw ourselves into a precarious situation. Many of us lost their job and unfortunately, we are experiencing hard times.
What can all this teaches us? Have an emergency fund would surely help us to overcome these moments.
An emergency fund it's what will help you to remain focus on your goal even when you have to face periods of crisis. Some experts say $10,000 can be a good sum, but for someone can be not enough while for others it's too much. You need to make a plan and consider every essential expenditure you will need to cover with the emergency fund.
Anyway, when you make your plan, consider establishing a sufficient monthly fee to save into your account. For instance, you could start at $100 for your first month and grow regularly until $1,000 every single month.
The emergency fund can be the solution in any bad situation.
Financial freedom is not just about making money but it requires a change in your way of seeing life. For a while, you need to establish new prerogatives, become a bit frugal, and spend your money just for what you need. By following the suggestions in this financial freedom formula you could achieve it in a shorter time.
Author: Christian Battistoni
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