5-Step Formula to Achieve Financial Freedom

5-Step Formula to Achieve Financial Freedom
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Do you want to achieve the kind of life, where you have the financial freedom to do things what you love?

Most people mistakenly assume financial freedom as having a boatload of cash and living an extravagant lifestyle. This ultimately leads to spending whole life just to earn money.

But in fact, it’s all about having enough cash flow to cover your expenses and utilize the extra time saved, for activities that normal life doesn’t allow you.

Here are 5 game-changing strategies to achieve financial freedom. Remember do not complicate things, it is simple and easy.


“Financial freedom is available to those who learn about it and work for it.” – Robert Kiyosaki

#1 Boost your income to achieve financial freedom

Take a moment to review your current financial status. Step out and look for extra income opportunities outside your current job.

Some time 9 to 5 active job may not fulfil your goal so you need to create room for passive income.

Many experts talk about having seven streams of income. But it all depends upon your plan and commitment to make it happen.

(a) Start with active income and build passive income

If you are in a job plan to save enough so that this can be utilized to build passive income. If you are a digital nomad or a freelancer start earning residual income. Once you have enough savings divert the fund to create passive income to achieve financial freedom.

On a broad level here are some categories of passive income.

  • Capital gains
  • Dividends
  • Rental income
  • Royalty
  • Interest
  • Online Business Income

But all incomes are not 100% passive. Like for example, the online business requires a good amount of time to build and grow online assets, which over time creates regular income opportunities even when you sleep.

Are you looking for passive income opportunity online? Check out these methods to get started.

  • Create a blog in your niche, and monetize the traffic with ads, sponsored posts, and affiliate marketing.
  • Create useful digital products like a guidebook, software, landing pages, graphics, themes etc. and enjoy 100% profit.
  • Start a dropshipping online store, earn great profit margins.
  • Create useful apps, publish on Android or iOS app store, and monetize through ads, purchases, and subscription.
  • Generate leads for local businesses and earn a percentage of the sale or per lead basis.
  • Trade-in stocks online to earn a good cut off the margin.
  • Build and grow online assets, and flip it for a whopping profit.

You don’t need to rush, in order to create seven sources of income. Start with one source and build other overtime. For online income earners, seven sources can be seven different online assets that add up to a good amount every month and will bring you closer to financial freedom.

(b) Work extra hours to earn extra active income

As you may already know that the human brain is trained to keep you in a comfort zone. When we hear about working extra hours we tend to get stuck.

 If you are working on per hour basis then you will be able to add some extra dollars and curb the laziness feeling coming from inside. You feel charged to take work as fun, not burden.

Keep in mind to take extra work only if you have spare time and your health allows you to work for long hours. If not, focus on passive income where you put in extra efforts for one time and enjoy substantial income for long time.

(c) Spend wisely to save every month

We are talking about freedom lifestyle so there is no question of limiting yourself when it comes to spending. Financial freedom gives you the ability to spend whenever you want, and however you want.

All you need is to be aware of what you are spending, and how you can save some money if you spend wisely.

Extra saving means ultimately boosting your income. Think like this. You spend on an average $500 every month dining and shopping. If you spend wisely by utilizing the promotional offers, and selecting locations where there is a scope of saving, will ultimately add up to your income every month.

 (d) Trade in stocks

In this context, I am not talking about a stock investment which is a part of passive income. I am talking about day trading which is an active income source because you have to keep a close eye on the stock chart.

Day trading can also be a good source to boost your income every month. But beware day trading can be highly risky. Try it only if you have the relevant skills and surplus cash available with you.

You cannot anticipate booking profit with every trade call. But you can reduce losses if you trade for small profit margins and always put stop loss while trading.

Consider this on a monthly basis – difference of sum of profits and sum of losses.  There is pretty good chance of adding extra money to your bank account as you become master of this trade.

(e) Invest in yourself

Investment is a great way to secure your future. Investment can even be in terms of self-learning – where you enhance a skill that creates a new way to earn extra income and reach your goal of financial freedom.

I have seen that most people resist to self-learning. This can be time-consuming, and you might get overwhelmed because of info overload when you start searching from several sources to learn a skill.

The best way is to find one good source and put in 100% effort into learning and putting it into action as soon as possible. With experience, your skill will shine and open the door for new income opportunity.

#2 Track your spending every month

All the earnings can get away very soon if you don’t put in a habit to record and track your expenses. If you serious about creating a life of financial freedom then you must learn to track the cash flow.

Tracking expenses doesn’t involve only expenses. It’s about keeping track of all your income accounts, debts, and expenses done for the month.

Once you have the data in your front, you can review where to control or spend. It also provides you with data to set goals and go for more income opportunity.  

Many people complicate this process. You don’t need any fancy tools or expertise to start recording your expenses. Here are some easy ways to get it done.

(a) Pencil and Paper

This is one of the old school methods, still effective. You have full control to choose the way to record. There is no standard format to follow. It’s handy also; you can check it whenever you wish.

Another good side of this method is that it connects your writing directly to your active brain since money is involved here. People don’t worry if they get anything for free but pay great attention if bought on for a price.

Keep in mind to record not only cash but also debit/credit card transactions. Set a monthly budget every month and update the cash flow every day. At the ends of the month review data to take financial decisions.

(b) Excel Spreadsheet

This is one the most convenient way to track earning, and expenses. If you use a computer everyday then this method can be really useful.

 You can design the format, the way you want to track. You might need to keep separate sheets for each financial heads.

Google sheet is a great online tool to record expenses on the go. You can also use mobile spreadsheet for this purpose.

(c) Budgeting Apps

Use technology to make work easier. If you are looking for expert help then budgeting apps are great options to get started. These apps can record data of expenses in different categories.

Not only this, they can record whole cycle of cash flow. All your investments, debts, income sources, and expenses can be tracked at one place.

Mint, Everydollar, Wally, My EasyFi are some of the popular apps to track budget and spending. However, if you are a freelancer or a small business owner, AndCo is an ultimate suite to manage everything in one place. 

You can start it for FREE and get a PRO version (Just $18/month) to save time and manage your business professionally.

freelancer-tool-andco

This tool lets you manage your online business at one place. Here is what you can manage with this software.

  • Proposals
  • Invoicing
  • Payments
  • Contracts
  • Time Tracking
  • Expenses
  • Tasks List
  • Reports

#3 Create emergency funds and keep away

Recent pandemic has taught us a great lesson that we must have emergency funds to handle crisis situation. In current scenario future financial situation can’t be predicated so having a backup plan is a good sign.

Though emergency funds are part of any financial plan but people tend to forget about this. There are some obvious reasons like people don’t get time to think about this.

In past experiences, they didn’t face a situation where the necessity of having an emergency fund was felt. Although, some people create emergency funds but they spend it based on urgent situations. You need to take care that emergency funds can be only be used when there is SOS like situation.

Here are some basic steps to create emergency funds.

(a) Know your numbers

The first and foremost step is to figure out how much you spend every month. This is easy if you record your spending though some kind of personal finance software. 

You need to keep a cash reserve for 3-6 months worth of household expenses. The fund that needs to be raised should be cumulative of the quarterly or half-yearly average household.

Month                                                  Cumulative Expenses

1                                                              $8,200

2                                                              $5,020

Quarterly                                            $13,220

4                                                              $9,090

5                                                              $12,100

Half-yearly                                         $26,440

The above quarterly or half-yearly number will look like huge for the first time. But this is achievable, we are discussing creating multiple sources of income to expand earning and come out of limiting believes about money.

(b) Make a plan to save

Once you have the numbers you can simply multiply average monthly expenses with three. To achieve this goal you need to put a plan to save money every month. Sit down and have a brainstorming session to find the scope of saving. Like, instead of buying a luxurious home utility item go for a less expensive one.

You can achieve the goal if you keep things within your reach. For example, if you think you can save approx $200 each month then you can easily raise $12,000 worth of cash reserve in a five-year plan.

(c) Put your plan into action

The saving plan is ready with you. Do not set aside, get ahead with it. The key to success here lies in the discipline. Consider this as one of the recurring expenses and keep on adding month after month.

If you already have extra cash available with you then you can invest that money in a scheme which entitles you interest every month. Use that accumulated interest to fill up the emergency fund packet.

#4 Pay off existing debts – the sooner the better

What will you do if you have $50,000 sitting cash in your bank account? Most people will either start investing the money in stocks to create a bigger wealth portfolio or may land up spending in lavish vacations or shopping.

Having money in bank account brings you closer to the financial freedom but having debt in any form makes your goal most difficult.

Make a plan to clear off your debts – the sooner the better. Break it into smaller instalments and keep on shedding the debt regularly. Imagine the feeling you have when you become debt-free.

#5 Keep the momentum going

After going through all the hard work keep an eye on everything. You need to maintain the same pace, energy, and enthusiasm even when you achieve the goal of financial freedom.

The best way is to have some kind of review mechanism in place, to track things together. Your goal always should be to use automation tools and process that keep things simpler and faster.

Conclusion

Financial freedom is not about becoming rich; it’s all about positioning yourself where you have the freedom to spend and do activities what you love. To achieve this financial freedom goal you primarily need to focus on three things – boost your existing income, pay off the debts, and keep an eye on your expenses. If you are searching for financial freedom through the internet then start building some online assets today!

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