Being financially stable or financially independent is being able to support your financial goals with confidence and knowledge to grow your money by creating income streams to fund the lifestyle you desire. Easy, right?
Well, there are many factors to consider, such as what your income stream(s) is/are generating, what exactly are your goals, not to mention your timeline. Taking into account these factors and probably more, here are some steps you can take to ensure your financial freedom (they are in no particular order – each is very important though):
- Define your goals and plan with timelines
Make a budget and stick to it. Manage your finances and live within your means (try a profit and loss analysis).
- You cannot become financially free on active income alone
Build a strategy to make passive income – this is income you make while you’re sleeping or otherwise occupied. For example, investing in shares, bonds, savings account with returns on investments, or even real estate, generating passive income over time. What is your monthly goal for passive income? Whatever it is, try to keep it low resource and low expense.
- Increase your active and passive sources of income and decrease your expenditure
Consider all the sources of income you have at your disposal. Ask yourself, is more going out than coming in? Maybe you want to ensure that you get the most out of your skills and talents. Put them to work. Find an avenue where you can make those skills lighten the load of your expenses. As the previously pointed out, passive income will also help a lot especially when you neither have the time nor energy to invest in another job.
- Manage your spending, savings, and debt
You need to regain balance within your financial life or else you will be taking two steps forward and seven steps back. Try to pay off your debts as quickly as possible, and I know it’s better said than done, but at the same time you need to ensure that loans are kept at a minimum and paybacks are done on time. To help, you can cut back on unnecessary spending, scheduled principal payments and focus on paying off one debt at a time if you have multiple.
Once your debts are no longer taking from your spending or savings allocation, and have been paid in full, you can then focus on putting aside portions to those aspects of your finances.
Truth is, financial freedom is attainable, but it requires time, patience and discipline. The more you are able to plan your finances and have a strategy to cover your expenses without spending above your means, the better financially free you will be. Take your time and pace yourself. Rome was not built in a day and a perfect plan is not in existence. You only have to make a plan for you and stick to it. One size really does not fit all.
By Alexandra Daley