Tips to get financial freedom
Published 02/24/2022 | Last updated on March 01, 2022
If you check out your finances right now, would you be able to say, with certainty, that you are enjoying the long-desired financial freedom? Achieving this state of financial health does not happen overnight. It takes hard work and discipline.
If your answer to our question is "No," then you are in the right place because we will give you basic tips that you should put into practice to reach your financial independence.
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Setting a goal
If you were in a race and someone told you: "Run until you win," you would always doubt "how far" you have to go to achieve it. When it comes to personal finance, the same happens. A savings plan without a concrete goal is much more fragile than one with a purpose. To retrace the path to financial freedom, it is essential to have a clear objective and define how you will achieve it. Only in this way will you know the proper use you should give to your capital.
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Save
It is the first step of many that you must follow to achieve financial freedom, and it must become a habit. There are several methods to save. Before starting your monthly expenses, you should set aside a fraction for savings.
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Be fully aware of how much you earn
Knowing how much you earn, or your income is vital to get financial freedom. This step can be complicated to calculate for someone who works as a freelancer or is self-employed because their income varies from month to month due to various factors, and it can be complicated to know how much you earn.
But those who work as salaried employees for a company. Those who receive a particular amount in their payroll account also often have trouble identifying how much they earn because their level of spending is such that they forget not to exceed the income limit they have.
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Spending more than you earn in a month is the basic principle of financial ruin
You will be accumulating more and more debt that will further compromise your income, and, therefore, there will come a time when you will not be able to cover even your basic expenses.
When you reach that point, you will be at a financial and emotional stress level that your quality of life will be at rock bottom.
So always be clear about how much you earn. And once you've established that limit, you should first understand that your total expenses should not exceed that limit. It's as simple as that. This decision will radically change your life.
Once you are clear about your monthly income, you must develop a plan to spend within that limit. This plan is called a budget, and it reflects your lifestyle needs and priorities.
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Diversify your income
Having more than one source of income is ideal for taking care of personal or family financial stability. Imagine that if you were to lose your job one day, you would have other means from which you receive enough income to meet your expenses. Here are some sources of income to consider.
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Keep your income active: we refer to the income you get in exchange for something. It can be providing a service under-invoicing or a work contract for 40 hours a week in exchange for a salary. This source of income ensures your survival, allowing you to pay your monthly bills. However, you need to increase your savings capacity to achieve financial freedom.
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Generate passive income: This income does not depend on the time you dedicate to it or your physical presence but requires initial work and then pays off on its own. A good example is rents or investments.
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Invest your money: remember that money loses its value due to inflation. So, investing is an excellent way to put your money to work so that what you have today does not dissolve tomorrow.
What am I willing to sacrifice?
Everything in life is a trade-off in the sense of sacrificing one thing to get another. It is possible to get more money, but you can get extra time. Seen from that perspective. Remember that time is the most valuable resource.
The essential question is how much of your time you are willing to sacrifice to earn money and how much energy you are ready to invest.
So, the key is knowing how much money an hour of your life is worth. The other part of the story has to do with savings. In this case, how much are you willing to reduce your expenses to save? It's essential to be clear that every time you have the opportunity to save, and you don't, you are sacrificing a future amount of your freedom.
But since it's a balance, you can also ask the question in the opposite direction: Are you willing to sacrifice present happiness for potential future wealth by depriving yourself of the things that bring you joy?
There is no correct answer. The dilemma between present freedom and future money is often tossed around among those who choose to sacrifice things for a payoff later.
If the goal is to save, it's not worth sacrificing small things like eliminating a coffee, a beer, or a monthly movie subscription. It's better to cut back on significant expenses like housing.
Develop your skills
Your skills are your future currency. The more skills you develop, the more opportunities you have to earn money. The skills you have are the best predictor of how much money you will make in the future.
Now, some skills are more in demand than others, and those are the ones to develop. Those are the ones that will allow you to make more money.
Developing new skills, it's not about going back to college to get more academic degrees. We live in an incredible time where you can learn many of the most profitable skills on the internet for free.
You can learn anything on YouTube. Specific basic skills can be helpful in different job areas, such as creating a website, running a Google ad campaign, developing a brand, or learning design.
Another way to improve skills is to get side jobs that complement your main job or start a business. When you have your own business, you get several new skills. Many of the world's wealthiest people have one thing in common: they are all entrepreneurs. Every time they have failed in business, they have learned from their mistakes.
Learn how to manage money.
It's about having a plan for the use of your money. Create a budget, allocate every dollar from the beginning of the month, and keep track of your cash outflows during that period. If it is common for you to spend more on some items, you will need to recalculate what you need in each area so that this does not happen. A budget is necessary to keep your finances on track, but just having one is not enough. You don't achieve financial freedom overnight. You need to follow your plan.
The top phase of financial freedom
The principles of financial freedom discussed so far apply to a salaried worker or a self-employed person who spends a good part of his daily hours working to generate his livelihood.
But a higher state or phase transcends this general financial freedom and is when you generate enough income while spending very few hours of your day or week to earn it. This means you have more free time to do the activities you love.
This goal is achieved when you have generated enough savings to acquire assets that generate passive income, those that come to you without the need to work many hours.
The classic examples of passive income are when you have a property and rent it, which gives you resources without the need to work. You put a significant amount of money in an investment fund, generating interest and becoming your monthly income.
We hope these tips will help you achieve the financial freedom you desire according to your possibilities and expectations.
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
