Understand what it means
Financial freedom is having enough income (from investments and passive income) to afford basic living expenses without having formal employment. If you own your own business, this can mean hiring and delegating the work so that you don't have to be working 40 hours per week in order to keep it running. In some cases, the passive income is great enough that no employment is needed.
Save 10% of your net earnings
"It's not what you make, it's what you keep that matters."
Rather than spending your income each month and trying to save after the fact, pay yourself first by putting 10% of your net earnings into an earnings or investment account. If you can reach 10% on a consistent basis, always aim to increase this percentage over time.
Create a budget
Use 80-90% of your income to create a budget based on necessities. Keep track of the expenses you incur on a monthly basis and use that to distribute your earnings and see how much of your budget you have left for desires or additional savings. Be realistic about what is a necessity and what is a desire when completing this step, but don't ignore your desires completely.
Put your money to work for you
As you begin to accumulate wealth, ensure that you're maximizing your savings by investing in the right spaces. Keeping your wealth in a bank account is going to give you a minimal return, as opposed to investing in stocks or Real Estate can give you a healthy return. Having professionals to help put your money to work for you is a crucial part of reaching financial freedom.
Protect your wealth
Rather than "get rich quick" thinking, ensure your investments are secure. When you compare investing in penny stocks to investing in real estate, the pros far outweigh the cons when analyzing the real estate market. Having proper life, disability and umbrella insurance is important to protect your wealth. An insurance professional will help you choose a plan that is best for you.
Make your home a profitable investment
As you make payments on your home, that money comes back to you - take advantage of that! Owning a home rather than renting is a great start to becoming financially free. Over time, you can leverage that investment for more passive income which can benefit you immensely.
Ensure future income
Aside from investing in real estate, set yourself up for success by securing income for your future self. Putting money aside into an IRA, 401(k) or rental properties will secure a stream of income for years to come. This is yet another area where a financial advisor would benefit your wealth planning to ensure you're selecting the right options for yourself.
Increase your ability to earn
At all times, be in the mindset to move up and increase your earnings. Do not do so to the extent that you're burnt out or unhappy, but small increases in your income will, over time, result in large increases in your passive income. As you begin increasing your earnings, aim to increase the amount that you're saving as well.
Above all else, realizing that financial freedom is attainable for you is the first step to reaching it. Learn about investments, real estate and creative ways to make a passive income that will allow you to live a life that you are happy with. Our Art of Homeownership professionals are always here to advise and connect you to resources that can help!
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