Avoid this if you want financial freedom
Published 03/02/2022 | Last updated on March 03, 2022
Our home culture influences many of the financial mistakes we make when we are young. We have been taught the wrong way to handle money and what we think about it for years and years. But this doesn't have to be enough of an excuse for our finances to be in chaos.
We must get out of the mental bubble that makes us remain victims and take action with our own money. Our mindset plays the most crucial role in achieving our financial freedom.
Making your money grow is a maxim that must be taken care of within your finances
Apart from saving and knowing how to tackle certain philosophies with your wealth, it is essential to be focused. Keeping up expenses, being careful with the debts you can close, or living with just enough are practices that can make you not enjoy proper financial health.
You can achieve financial freedom
Achieving financial freedom means having enough savings, investments, and control of money to have a peaceful life. That is, there is the possibility of covering the necessary expenses to live and those that are not essential but provide satisfaction and recreation, such as travelling, learning something new, or buying new things.
If you are reading this, congratulations because you recognize the value of financial freedom. The first step to achieving it is already done. The next step is to identify all those elements that prevent you from attaining them to eliminate or diminish them.
Many people think that achieving financial freedom is only possible if a person earns a lot of money. The reality is different; anyone can achieve financial freedom to have a carefree life.
These are the most common mistakes preventing you from having financial freedom
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We don't generate passive income sources
A passive income is money that can be earned without making a lot of daily effort. For example, there is income from real estate rentals, stock dividends, and interest.
In this order of ideas, passive income is one of the main tools for wealth creation without working 8 hours a day, 5 days a week to get it.
The more sources of passive income you create, the less you will depend on your regular job, and the faster you will get closer to financial freedom.
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Failure to perform a risk analysis
When talking about achieving financial freedom, it is about having several sources of income and making these sources last over time.
When investing, each person assumes a certain level of risk. The risk is directly proportional to profitability: the more risk there is in funding, the more profitability can be generated.
However, what should be sought after when trying to achieve financial freedom is to make the investments and the various sources of income last over time, so it is essential to analyze and manage risk at multiple points.
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Investing in liabilities, not assets
When building your wealth, you should focus on acquiring assets, not liabilities. Assets will give you the cash flow you need to buy the things you want and pay your future expenses.
To this end, you must learn to differentiate assets from liabilities. In the words of the author of Rich Dad, Poor Dad, Robert Kiyosaki, assets are all those assets or investments that generate money for our pocket, while liabilities are those that take money out.
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Not diversifying investments
Diversification is a technique that reduces risk by investing in various financial instruments, industries, and other categories. Its goal is to maximize returns by investing in different areas that react differently to the same circumstance.
While it does not guarantee any losses, most investors agree that diversification is essential for achieving long-term financial goals and minimizing risk.
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Failure to manage finances properly in the present
One of the essential points to achieve financial freedom in the future is to be able to manage money properly in the present in order not to squander, to save more, and to be able to use that money from savings to make investments and create other sources of income for the future.
To achieve this, it is vital to educate yourself on economic and financial issues and start tracking your finances through a budget.
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Spending more than you earn
According to some studies, young people between the ages of 15 and 29 spend more than they can afford. It has been revealed that despite the reduction in income, many people continue to spend a lot. Spending more than one earns is the primary inhibitor of financial freedom.
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Delaying retirement
If there is no savings plan to cover expenses during working life, when the time comes to retire, it is possible to have financial problems. Many people do not save voluntarily for retirement, which represents a big problem later on.
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Having debts
Debts are obstacles that prevent financial freedom because money is not well used. Debt is not always bad because, often, it allows us to access new or better opportunities. But if we do not know how to manage it, it can be an obstacle to our financial freedom.
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You are looking for comfort and not freedom
I want you to know that comfort is one of the main enemies of freedom. You may not realize it, but you may be engaging in some of the following behaviors with your money that keep you from financial freedom:
What do you do with surplus money when you have it? What do you do when you get a raise or when you get extra income? What do you do with that money? If what you do is spend it, increasing your standard of living, I want you to know that this is not the attitude of a person who achieves financial freedom.
A person who seeks financial freedom always lives below his means. That is, he does not use all his economic resources on consumer goods. He uses the money to build long-term freedom.
At El Paisa Multiservices we want to help you with your finances and give you the best advice. You can contact us if you have questions about our services.
By Ingenuity & Solutions
