How People Achieve Financial Freedom?

Financial freedom is a goal many people strive for. what is financial freedom? It refers to a state where you are free from worries about your financial conditions and can live the life you want without being constrained by money. In today’s globalized and technologically advanced world, it can be easy to fall into the trap of spending money on things you don’t need due to the constant bombardment of ads on our mobile devices. However, technology has also brought new avenues for earning a stable income.

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Ever wondered how people achieve financial freedom? Here is a two-step solution.

Save Your Hard Earned Money – 1st Step of How People Achieve Financial Freedom?

Most people around the world are earning enough to live a financially stable life, but some basic mistakes that most people are making make it hard to achieve financial freedom. Everybody exactly knows how much he is earning but very few exactly know how much they are spending. This unaccounted imbalance in earnings and spending is forcing them to live hand to mouth. The core of attaining financial freedom is more credit and less debit. To attain financial freedom, the first step will always be saving from whatever your income is, but how? 

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1. Make a Monthly Balance Sheet

The foremost requirement for financial health is to keep and track the record of income and expenditure. The majority of us ignore putting into writing the expenditure incurred during the month. So, start making a balance sheet of your every economic activity, this way you will easily identify where your money is used most and you will easily identify where you can easily save money.

2. Avoid Unnecessary Spending

Following the above step, you are going to realize where your money is going which can be avoided without affecting your normal life. We often buy things that we do not require. According to a study conducted by Schwab, 64% of people feel regret after spending money on dining out, buying clothes, etc. It is imperative to figure out which expenses are necessary and which are avoidable.

3. Impulsive Spending: A Major Hurdle 

Impulsive spending is the most important hurdle in gaining financial freedom. However, it is the easiest one to overcome. It is only a matter of realization. Ask yourself, when was the last time you made an unplanned spending? What was the motive behind the transaction? If you get the answer, and the rationale behind the transaction does not fall in the category of necessary spending that means you made an impulsive spending. Next time you go somewhere and crave to spend some money unplanned, first ask yourself, is it necessary? Is it avoidable? You will get your answer.

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4. Start Saving – A Healthy Habit

Saving your hard money should not be your option rather it should be your habit. It is easy for anyone to assess how much he can save but to remain consistent to that amount throughout is a tough job. First assess how much you can consistently save every month, generally 10% of your income for saving won’t hurt you but anything above 10% is highly encouraging keeping in mind unforeseen expenses. Ideally one can easily follow the 50/30/20 rule (50 for essentials, 30 for luxuries and unforeseen expenses, and 20 for savings). It is best to automate the deduction of savings amount directly to your savings account.

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Increase Sources of Income – 2nd Step of How People Achieve Financial Freedom?

Well-known investor Warren Buffett said: “If your salary is your only source of income, you’re one step away from poverty”.  Above mentioned quote should be an inspiration and eye-opener for aspirants of financial freedom. We have discussed step one, where we discussed about saving your money. In step two, we will be discussing adding new sources of income with your base source of income. These two steps complement each other, which means one has to follow both steps to achieve his/her goal.

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The modern world has opened many new/ unconventional ways to earn money, especially via the Internet, which can be utilized remotely in your leisure time and most importantly capitalizing your field of interest for adding a source of income.

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1. Entrepreneurship (E-Commerce)

It is easy for entrepreneurs to access markets in the current globalized world. One can easily find something of his/her interest that can be sold whether on online markets or offline markets. Modern entrepreneurship has changed a lot with the advancements in technology and e-commerce platforms like Amazon, eBay, Etsy, and many more. Many young people are involved in doing business (drop shipping, private labeling, white labeling, etc.) through these platforms. It is a good option for an additional source of income.

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2. Investments in Stocks, Real Estate and Digital Assets

To secure your capital from time value depreciation and to earn more capital from your capital right investment is necessary. Investments generally span over years and decades, so it is important to have patience to get maximum benefit from your investment. Investments in real estate and God’s money are considered to most secure and profitable. However, there are many other avenues (Stocks, bonds, stable currencies, etc.) where you can invest with the right skill set and knowledge to earn profit.

3. Trading Stocks, Forex and Cryptocurrencies

Many people confuse trading and investment, as discussed earlier investment spans over years and decades whereas trading is a short-term economic activity. In trading one buys and good at a certain point in time and sells it after some time booking his/her hoped profit usually in hours or days. Traditionally, trading in stocks or forex was quite complicated and many people did not have access to such platforms, but today there are hundreds of platforms where you can trade (forex, stocks, and cryptocurrencies) easily by staying at your home.

Everybody is aware of the revolution brought by cryptocurrencies, according to the Crypto Wealth Report published by Henley and Partners, there are 88,200 crypto millionaires worldwide in such a short period. Before plunging into trading, one must know about current trends and prospects.

Bottom Line

The concept of financial freedom is gaining popularity because of the easy availability of multiple income sources. How people achieve financial freedom is a two-step method.  The first step is to stop leakages from your income pool by adopting a habit of reducing your expenses and developing a habit of saving, and the second step is to enhance your sources of income.

Best of Luck!