Achieving financial freedom means breaking free from that cycle and having the peace of mind that comes with knowing you have enough money to live the life you want.
Achieving financial freedom can seem like an unattainable fantasy for many people. However, the secret to financial freedom consists of some easy-to-follow steps and determination.
Read on to discover the secrets that will help you achieve financial freedom.
1. Create Financial Goals
The foremost secret to financial freedom is to set clear financial goals. To do this, you must first understand what financial freedom means to you and set goals accordingly.
Setting financial goals helps you understand what you want to achieve with your money and the steps you must take.
Clear financial goals with a set timeline can help you stay on track while managing your finances, make informed decisions, and focus on the bigger picture.
2. Create a Budget and Stick to It
Having a budget is a crucial step toward achieving financial freedom. A budget helps you track your expenses, prioritize your spending, and enables you to work towards your financial goals.
By creating a proper monthly budget that tracks your income and expenses and then sticking to it, you can see exactly where your money is going and what adjustments you may need to make in case you’re overspending.
You can form a budget on a spreadsheet or use a budgeting app to keep track of your finances. The key steps you need to remember while making a budget are:
- Identify all sources of income – e.g., salary, investments, etc.
- List your expenses.
- Prioritize your spending – needs vs. wants.
- Allocate money towards each expense.
- Adjust as needed.
3. Pay off Your Bad Debt
Bad debt is high-interest-rate debt, whether it be from personal loans, mortgages, or credit card payments.
Anything around 7% or higher is considered bad debt and will likely hold you back from achieving financial freedom.
If you are borrowing to support an expensive lifestyle you can’t really afford, you should reconsider your budget and financial plan and make sure you are not digging yourself into a deep financial hole. If you are borrowing money to buy assets or investments, you are investing on leverage, which is a risky venture and not recommended for everyday investors.
No matter how much money you have in the bank, high-interest payments will eat away at your finances until you completely rid yourself of the debt.
Paying off all of your debt is easier said than done, but prioritizing debt repayment and paying everything off as soon as possible will allow you to achieve financial freedom faster.
Depending on what works for you, you can pay off your debt by using either the snowball method or the avalanche method. The avalanche repayment method focuses on high-interest loans first, as those debts tend to get larger over time and are harder to pay off.
The snowball method requires you to pay off your smallest debt first while making minimum payments on the rest. This would mean prioritizing the $1500 credit card bill and fully paying that off before you tackle the thousands of dollars on your student loans. The snowball method can help you gain momentum and keep you motivated as your debts disappear.
Whatever method you choose, the most crucial thing to remember is not to take on any more debt as you repay your old one. So avoid using credit cards or taking out loans unless it’s absolutely vital.
4. Live Below Your Means
Ironically, the key to financial freedom lies within restraint. Restricting your spending and living below your means can help you maintain greater control over your money and ultimately help you achieve financial freedom.
Living below your means ultimately means spending less than you make, allowing you to save money, repay your debts, and invest in your future.
By learning to differentiate between needs and wants and then cutting down on your non-essential expenses, you can save a lot of money in the long run. Living below your means doesn’t mean cutting out all the fun from your life. It means finding alternatives that you’re satisfied with to help you achieve your long-term goals.
5. Create Additional Sources of Income
Creating additional sources of income is an extremely powerful and effective way of achieving complete financial freedom.
Most of us only have one source of income – our jobs. Often our salaries are not enough to allow us to be financially independent.
Multiple income streams can reduce your dependence on your job and increase your earning potential to achieve financial freedom faster.
Here are a few ways to create additional sources of income:
The Bottom Line
Financial freedom does not happen overnight. The road to financial freedom is long, requiring your time, dedication, and patience, but the rewards are worth it. By implementing these secrets in your life, you can take control of your finances and start the journey toward complete financial freedom. Good luck!
Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.
Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.
Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.
Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.