Financial freedom–does it sound too far-fetched for your current lifestyle? Does it sound easy? does it sound hard but attainable?
Whatever might be your case, it is very much a reality for many.
I became financially independent long before I even graduated from college. I had no debt to my name and my income was quite impressive, running the very blog you’re reading.
And let me guarantee you, if an inexperienced, still-in-college student (like myself) can do it, you can too!
In this article, you will be learning the importance of living on your terms and tips to be financially free including those strategies that worked for me!
Table of Contents
What is Financial Freedom?
Attaining “Financial freedom” is all about taking ownership of your finances. The spendings, earnings, and everything in between.
To be able to be financially free is to be able to live on your own terms, have a steady income, have a substantial amount of cash for emergencies, aren’t burdened with soul-sucking debt, etc.
It is also about the money friendly habits you develop along the way of becoming financially free.
You may take a few steps out of sheer motivation but it’s the habit that’s going to keep you in check.
Without further ado, below are the 10 steps that will make sure you achieve the sweet taste of financial freedom that you profoundly deserve!
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10 Practical Ways to Achieve Financial Freedom
1. Know Where You Stand as of Now
You cannot think of improving your life unless you know where you stand and have the realization that you want to grow from that said point.
While this might seems like an insignificant/ demotivating way to start things off but it is better to know your reality than to dismiss it. This is a bitter yet valuable step to head in the right direction.
If you have quite an amount saved with no debt, that’s really good.
But if you don’t have anything to rely on and have a debt along with stacks of bills rolling in every month, don’t get all gloomy because from this point on you are going to move forward and not look back.
Ya feel me?
Perhaps something to look forward to!
Now, take out a pen and paper, list down all the debts, credit card loans, car loans, emergency cash, your income, that money that you owe from friends, everything!
Now add everything up: They money that you earn, the money that you have in your pocket or in your bank account will be considered positive, the money that you are going out (bills, debt, mortgage, etc) will be considered negative.
What did you get?
Did you get a tiny but positive number? Did you get a large negative number? Or a big fat positive amount? It could be anything!
Now that you know where you stand, let’s bring your A-game and get you started on your journey to financial freedom!
2. Set Your Goals
Now that you have your starting point, you need something that’ll set the path forward for you! Something that motivated you every single day to keep pushing!
What is that “something”? A goal!
Do you want to get rid of debt for good? Do you want to buy your dream house? Do you want to quit your 9 to 5 job? Do you have a dream vacation in your mind? Want to finally start that business? Or do you want to retire early?
When I achieved financial freedom, it was because I was tied to an emotional goal. As I was studying in college, I had developed an acute itch/desire for work-freedom.
“If I am going to be working on something for a long haul, it better be something that I like and too on my own terms,” I said to myself.
To be able to work on things that I like, to be able to travel wherever I want, to be able to take a day off whenever I wanted, to work on my own terms, to be able to work without feeling the pressure to do so were some of the required checkboxes in my career path profile.
It was because of this aggressive urge of work-freedom that made it all happen. And honestly, it was euphoric to watch it all happen!
3. Track Where Your Money Actually Goes
Have you ever sat down to actually think about all the places and things you spend all your money on? If you haven’t already, I suggest you do!
Bring out your bank statement from last month, and see for yourself. How much do you spend on food, clothes, entertainment, all of it?
Now you have a short summary of why you are/aren’t struggling with money!
It all starts with small expenses here and there, and *poof* in no time it becomes a spending problem!
You can use a tool like Mint, which will let you know how much money you’re spending on a daily/monthly basis, on which categories you’ve overspent, how much you exceeded from your set budget, how much money is in all of your accounts, and how much debt you have.
Everything in one place!
4. Spend Less on Useless Junk
In 1958, Warren Buffett bought a five-bedroom home for $31,500 and hasn’t moved out ever since.
His net worth? A whopping $90.3 billion.
Of course, he can afford a bigger and more expensive home. But his frugality might be the very reason why he’s one of the richest people on the planet.
Kanye West, on the other hand, isn’t afraid to show off his money. He lives in a $20 million mansion. And at one point in time, he was with $53 million of debt to his name.
And he decided to ask Mark Zuckerberg for $1 billion… on Twitter (source: Oberlo).
There are plenty of people on Instagram showing off their exotic vacation photos, new fancy cars but are actually struggling with money, on the other hand, people like Warren Buffet, Mark Zukerberg have no interest in showing off.
Zuck usually wears the same T-shirt and jeans most of the time- no Gucci, LV, or Versace in sight!
The ones who are actually rich, don’t let their income control their spending. Their frugality might be the very reason, they will not lose their “Billionaire status” anytime soon.
What is the point here?
By spending less on useless stuff, two things work in your favor.
One, you’ll have more control over the way you spend. Two, you’ll learn that you actually need a lot less stuff to survive, which helps you put aside more money.
5. Pay off Debt ASAP
Are you thrilled to have debt in your life? Absolutely not! But what can you do, other than to pay that monthly minimum amount! Right?
Wrong! There are many strategic ways to pay off the debt that allows you to pay less money in even lesser time. In my article “How to get out of debt fast“, I’ve explained how you can pay off your debt (single or multiple) more efficiently.
Whenever there are multiple debts involved, the snowball method is the way to go. Here, you knock off one debt at a time.
Once you get into the mindset of knocking down your debt, it will create a domino effect and you can literally witness your debt being repaid more easily
At times we are overwhelmed by the thought of paying off our debt, scary even. But taking the right financial steps will ensure the repayment of debt in the cheapest, fastest and easiest way possible.
6. Save Surplus Money (Savings Account/ Emergency Fund )
One of the major flaws in our education systems is they don’t teach you about the things that’ll ACTUALLY help us run our lives. Financial education is one of them.
Here’s some truth, Most people don’t have any idea what to do with their money!
Moreover, it is not a regular thing to have surplus money on the table. Just sitting there, looking right back at you!
Now! The obvious question in this scenario is, “What are you going to do with the extra money?“
•Are you planning to spend it on something you wanted for so long? The new iPad maybe?
•Are you going to finally plan that trip to Bali?
•Are you paying off your debt with it?
•Or you’re more focused on using it to make more money? And if so, then how?
Regardless of the intentions we usually set in the beginning, all inspired to make better choices and all, most of us end up spending up that amount in buying dumb things!
Saving your money! This is your first option, to save the entire stash and never speak of it again…Kidding! But it is still a good idea to save it rather than to spend on buying that newly released product!
This option is best for people who don’t want to get into any type of business whatsoever or are afraid to invest (because of the risks involved).
I get it!
But how the way to save your money also makes a great difference!
As discussed above, just keeping your money in a secret safe at your house will get you nowhere!
To make sure that your extra money is saved & goes to your long term benefit,
Open a new high yield savings account that provides 2.0% APY or more ( compared to 0.09% national average) which is both impulse expenditure and inflation-proof.
Banks like CIT Bank provides 2.20% APY. Just a savings builder account is all you need to save yourself from the mentioned risks.
7. Create Additional Sources of Income
I have always been a believer that to have more money, you actively or passively have to make more money.
If your current income does not align with your lifestyle or spending habits, it is a very clear indication that you need to find a way that will make you more money.
Starting a side hustle can be a life-changing decision because it has the potential to become your full-time income source so you can quit your 9 to 5 job as you wanted for so long.
1: Start a blog – I 100% of the time recommend people to start a blog when they are thinking of starting a new side hustle. Why? because you can choose any topic you desire, write about it and make a ton of money doing so.
Unlike some other business models, starting a blog is so much cheaper (less than $4 a month). If this is something you think you can give a try just like I did a couple of years ago, you can pull off a full-time income writing from home.
2:Develop a new skill – You are paid directly in the proportion of the value you give out. So if you can upscale your value you can surely make more money. Learn flea market flipping, learn to proofread, etc.
3: Run other people’s business – Do you know that Facebook is used by almost all online businesses because, with more than 2.42 Billion active users on Facebook, it is a goldmine for many businesses.
But the problem is, not all businesses know how to utilize that.
Similarly, there are quite a few things that a business lacks, learn how those work (like facebook ads, Virtual assistant, etc) and you can make money off those businesses by providing your services.
If you’re considering starting a new side hustle anytime soon, I suggest you check out the 49 Side Hustle ideas to start right now.
8. Avoid Lifestyle Inflation
What is lifestyle inflation? In simple terms,
The more you earn, the more you spend, often without thinking about it.
This is very common for those who don’t have a good relationship with money or those who recently got a big bump in their income.
What happens here is when someone earns $5k a month, immediately they spend that $5k in buying stuff and when their income increases, (say $50k a month) their spendings too increases (i.e $50k ), resulting in no savings irrespective of income.
Another example is the “influential spending” where the majority of people are influenced by others and try to live beyond their means. They buy overpriced branded stuff they don’t need, expensive cars they cannot afford, just to fit in with their peers.
These so-called traps are considered fatal because they can cripple you financially without even your realization.
So your goal here is to keep your spendings in check even you can afford to spend it all.
9. Invest in Your Future
Once I read on Instagram that said, “The best investment you can do is in yourself, your future self will thank you for it”.
That is a powerful line.
Don’t ever shy away from investing in something that will benefit you later in your life. Save up for an emergency fund, invest in retirement plans, acquire new skills or buy courses that will help you start a business.
Invest in anything that you think has the potential to help you later on.
Not to be morbid or anything but, life is uncertain. Anything can happen tomorrow, so it is wise to be prepared for it.
By setting aside money for uncertain times and for your retirement, you’ll be less likely to end up back to where you started: Wishing for financial freedom!
To know more about investing, head over to the article, How to Start Investing (even with little money): Total Beginner’s Guide
If you’re on the way to achieve something that will last for the longer term, you’re going to need more than just motivation. Because motivation is what gets you started. Habit is what keeps you going.
So clearly it is essential to develop money friendly habits. And the only way to do so is to keep repeating the above 9 steps whenever needed.
There will be times where it will be easier to just slack off and take a break, and when you do just remember why you started in the first place, how will your life change if you actually become financially free?
Perhaps that might make you reflect on how you’re about to make that change.
Here’s a hard pill to swallow: Achieving Financial Freedom isn’t easy! If it was easy, everyone would have attained it. But the benefits it gives overpowers every sacrifice and work you’ve done over the course of time (speaking from experience).
And you’ll thank yourself for taking the initiative!
By following the financial freedom tips in this post, you’ll be eons closer to achieving the financial freedom lifestyle you deserve.
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