Financial security is a topic on the forefront of most people's thoughts. In fact, think about how much of your daily stress relates to money. Pretty scary, huh? What if there was a way to cut your stress and build meaningful wealth to protect the future of your family? Got your attention now, right? Read on to learn the most important steps to financial freedom.
7 Steps to Financial Freedom
1) Save for emergencies - set aside a small cash cushion to fall back on in hard times
2) Debt Free - Take back your income with no more credit cards, car payments, department store bills, etc.
3) Build a Larger Emergency Fund - you're going to need it and I will explain why
4) Investing - Turning that new-found income into a money-making machine.
5) Creative Passive Income - find ways to make money without increasing your workload.
6) Actively Wait - Continue investing but be patient, this is a critical point
7) FREEDOM - this is the point you have worked to achieve
Keep reading to find out more details about each step!
1. Save for Emergencies
The storm will come...
$@!# happens, plain and simple. Not being pessimistic here, just a realist. Prepare for it... I suggest saving $2000-3000 for and emergency and DON'T TOUCH IT for anything other than a real emergency. Please remember that seeing something on sale it not an emergency! This step will allow you to advance through the others with less stress knowing you have some cash on hand to handle some bad situations.
2. Debt Free
Regain your ability to build wealth
Unless your inherent a fortune or win the lottery (not likely), you will need a plan to get to the rich life. Your biggest barrier is the fact that your income is being sucked away from you in the form of debt. The old saying "you have to have money to make money" is not always true, but it really helps! If you can regain control of your income, you will be able to start making money from your money. This step is the hardest for most people as it sometimes requires a complete shift in your thinking, which is quite painful. Buckle down and get started knocking out those debts like your life depends on it, as it literally does! I have to stop and thank Dave Ramsey for introducing these concepts through his programs. Dave, you literally have changed my family's life for the better. Check out his book below, as he does a better job explaining this topic than I do! I have read through this 3 times in the past couple of years, ha!
3. Build a Larger Emergency Fund
Seriously do it...
The initial emergency fund gave a small cushion between you and devastation. Now you are saving to handle pretty much anything that comes your way. Most experts I have read recommend somewhere between 3-6 months of expenses as an emergency fund. This will basically give you that amount of time to figure something out if you were to completely lose your income (just ask anyone during the 2008 to 2010 period).
Now is the time to start some serious wealth building. My purpose here is not to give you exactly how to invest your money. There are people out there who are experts in this area. Just know there are many vehicles in which you can use to build wealth.
Examples: matched savings plans (401k, 403b, TSP), real estate, mutual funds, Roth IRAs
Just get to researching and find which are right for you.
5. Creative Passive Income
Making money while you sleep
This step is really fun, and honestly where I am personally to date. When you do not have the stress of debt looming overhead, I have found that I have more energy to devote to researching ways to increase my "passive income." These are vehicles that work for you with minimal effort on your part. Please note that hard work is most likely required in any legitimate (ie legal) way to do this.
Examples: building a business run by a manager, developing an automated online business, writing an ebook
Honestly, I had no idea that these were even in existence 2 years ago! I give credit to Robert Kiyosaki for introducing to a couple of these examples. His book was what got some rusty cogs turning in my head that lead to some ideas I am working on now. You can check out his first and most popular book below.
Amazon Price: $7.99 $3.28 Buy Now
(price as of Aug 19, 2015)
6. Actively Wait
Watch it grow...But keep going
This step is truly amazing. Here is where the power of compound interest put into action. You simply watch your investments grow exponentially. Think of the mythological hydra, where every time the hero would cut off a head two more would grow back. Ok, not the best example but I think you get the point. I mentioned earlier the was a critical point in the process. There will be vast sums of money in your accounts you just dreamed about 10--15 years ago. But don't give into temptation to blow it at this point. Sure you can buy some nice things, go on trips and enjoy life. Who wants to be the richest person in the retirement home after all! Just simply live life in moderation and let your richest grow.
When do you truly become financially free?
When you get to a point that your income from your wealth exceeds you expenses, you have officially reached financial freedom. This is a beautiful time where you will be able to enjoy your hard work and free time. Enjoy life, take trips, give money like crazy to those in need. You will an authority on wealth building to help others out to reach their goals just as you have reached yours.
Hold on to this image and let it fuel your passion. You are going to have to work hard in the beginning stages, but eventually work becomes less and income skyrockets. Good luck with your endeavors and I hope to see you on the other side!