The 4 Stages of Financial Freedom

Many of us have thought about financial freedom at some point.

What is it?

It’s a concept that seems almost too good to be true for some people-

but the fact is, anyone can achieve it with some determination and the right help.

Financial freedom has one universal meaning, regardless of the situation: the ability to never again worry about money.

When you achieve financial freedom, you no longer have to work to earn your living expenses, your money will generate your living expenses, without you worrying a bit!

Not having enough money is something we’ve all experienced, and it’s stressful, depressing, and downright aggravating.

When you can’t meet your bills, let alone plan for the future, you can start to feel seriously stuck in a financial mire.

Here is financial freedom explained in four easy steps.

1. Identify, Analyze, and Plan

You can’t get where you want to be without first looking at where you are currently.

Are you up to your neck in debt? Are you working at a dead-end job?

Barely making ends meet?

Maybe you’re paying your bills okay, but you have trouble with keeping your spending under control?

Whatever the case may be, this is no time for sugar-coating.

Take a hard, honest look at your financial situation and tell yourself the truth about your spending/saving habits.

Ask yourself these questions:

How much do I bring in every month/how much goes out towards bills?

What expenses can I eliminate or reduce significantly?

What leisure items do I spend extra money on?

How much personal debt do I hold, and how much am I paying toward it? How long before it’s paid off?

What does my credit history/score look like, and how can I improve it?

Is my job bringing in enough money, and is it satisfying to me personally?

You’d be amazed at how many people aren’t satisfied with their jobs.

While this might not factor into your financial future, it does mean something to your future.

If your job doesn’t satisfy you, you’ll be less enthused about everything else, including financial planning.

It’s never too late to choose a different career.

2. Implement Your Plan

You’ve identified everything that’s wrong with your financial situation and created a plan to reduce your debt and improve your debt to income ratio.

Now comes the hard part; doing it.

Make no mistake, keeping your discipline during this stage of the financial struggle is crucial to the next two steps toward financial freedom.

If you falter here, you might as well go back to the beginning and start over.

Set yourself a monthly budget. Be sure to include money to put towards debts, and any excess should be invested in an emergency fund.

An emergency fund is an essential component of financial security, which you must have before you can achieve financial freedom.

Knowing your expenses can be met even if you’re out of work or experience health issues will bring peace of mind as well.

3. Create Passive Income

You can’t obtain financial freedom unless you start generating income while you’re idle.

Passive income is income that is created while you’re not working.

Rental properties and investments are two popular ways of generating passive income, but there are many more.

Passive income can help you solidify your financial security, and provide you with the excess income necessary to achieve financial freedom and even retire early.

Every financial guru out there will tell you that financial freedom is only attainable once you’ve got steady passive income.

From there, you can keep building those revenue streams until you have enough to flourish, not just survive.

If you’re only making enough to survive, you’re not going to have anything left over to invest.

This is a common pitfall that many people fall into, and they often believe there’s no way out once you’re down in it.

4. Invest in Your Future

Have you ever thought about retiring early?

You’ll need a fully funded retirement plan.

You should maximize every opportunity you have to save for your retirement, early or late.

You need to have $01(k) or its equivalent, a traditional IRA And/or Roth IRA.

To take good care of your medical and healthcare needs, you can go on maximizing your HSA plan as well.

Thinking of buying a home in a good location, as an investment?

You’ll need a few hundred thousand dollars at least, depending on the area.

Investing your excess cashflow into your future is the final step in attaining financial freedom, and it’s one of the most important.

You can have plenty of money, financial security, and a good plan:

But if you’re not investing anything in your future, you might end up losing it all!

It’s never too early to start planning for retirement, especially when experts suggest you save at least one million dollars saved up to retire comfortably.

That might seem like a lot of money, but if you’re getting started early, and making smart decisions, you can reach that goal easily.

The Bottom Line

You can’t have financial freedom without security first.

Focus on paying down your debts, improving your credit, and saving up an emergency fund.

Once you’ve paid down your debts and secured your monthly expenses against an emergency, you can focus on building wealth through passive income or other means.

Remember that discipline is key here; don’t spend money on luxury items when you’re struggling!