10 Steps to Achieve Financial Freedom in 2020
Financial freedom may sound like it's hard to come by. But with some effort, it's possible. In this video, we take you through what you need to do to live debt-free and happily. Like most things, it's easier said than done. But if you put your heart to it, you'll get there one day.
Video transcript: Financial freedom, it can sound like a nice theory, but it's actually possible for anyone to achieve it, and I mean anyone, even someone who had thousands of dollars of student debt like yours truly. No matter what financial troubles you're having today, there's always a way to get back to black. Trust me on this one.
I'm gonna give you a ten-step formula that you could follow in 2020 to achieve financial freedom. At Oberlo, we are here to help you learn, hustle, and grow. So let's just get straight to the list.
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What is Financial Freedom?
Financial freedom is all about taking ownership of your finances. It means having a dependable cash flow that lets you live whatever life you want to. You aren't worrying about bills every month and sudden expenses. Also, you aren't burdened by a pile of debt that follows you everywhere. It's about recognizing that you need to find ways to make enough money to pay down your debt, save, and invest.
Don't worry, we'll get to that. It's also about planning for your long-term financial situation and making sure that you're saving for a rainy day or an emergency. Build, learn, grow, and build your life.
Step 1: Know Where You’re At
Let's start with tip number one: Understand where you're at.
You can't achieve financial freedom without knowing where you're actually starting from.
Looking at how much debt you have, how many things you owe, and what credit cards you haven't paid off yet, can be anxiety-inducing. But if you want to fight it, you need to acknowledge it first. Compile a list of all your debt: Mortgage, student loans, credit cards, and put it into one big list.
Now, take a deep breath and look at the final number. How much money do you owe? If it's a big number, don't freak out. I promise, there are a lot of people out there who have had way worse debt, have been in worse situations, and have been able to pay it off. The key is to go step-by-step. But first, you've got to acknowledge it. So pat yourself on the back if you did that.
Next, compile a list of all your savings. This includes your investments. Also, make sure to note down how much money you're bringing in from your workplace or any other business. Keeping these numbers in mind is important because it's going to take financial freedom dreams and turn them into an actual reality for you.
Step 2: Look at Money Positively
Tip number two: Look at money positively. Debt can definitely be super, super discouraging to look at, but you need to remember that although debt is discouraging, money has the power to take away your debt and help you achieve a lot of your dreams, goals, and ambitions.
Remember, you deserve to achieve financial freedom. According to the book You Are a Badass at Making Money by Jen Sincero, people who don't make a lot of money often feel a lot of shame when it comes to money.
And so one of the biggest obstacles that a lot of people experience when it comes to making more money is that they actually feel a huge shame and guilt when it comes to finding strategies to make even more money. Many people feel guilty for having it, and even guiltier for making it.
Sincero says that money is extremely important because it can help you achieve your dreams and ambitions and yet, for a lot of us, it's very taboo and something that we feel guilty even thinking or wanting.
To experience financial freedom, it's imperative that you look at money as a tool to help you achieve your goals, dreams, and, also, to live a stress-free life.
Step 3: Write Down Your Goals
Step number three: Write down your goals. Why do you need money? Is it because you want to be able to retire comfortably? Is it maybe because you want to escape your 9:00 to 5:00 corporate grind? Or maybe it's because you want to prepare a college fund for your kids?
If you just ask somebody, "Do you wanna make more money?" Of course, the answer would be yes. But if you actually know why you want to make more money and how much more money it is, it'll be a lot easier for you to have a tangible goal to work towards. And as you work towards that goal, it'll be a lot easier for you to get excited and you'll start to feel euphoric as you pay off your debt and start going in the direction that you want to.
When you write down your goals, you need to remember that this isn't going to be an overnight thing. You need to work at it day in and day out. Things might not happen in a month. However, a year is definitely a long enough time for you to make a huge impact on your financial goals.
Make sure that when you write down your goals, you write down a specific number.
It will be a lot easier to work towards something that's specific than super ambiguous like, for example, becoming a millionaire. If that is your goal, that's awesome, but start by writing down one million. Once you get to that point, it'll be a lot easier to get to the second.
Step 4: Track Your Spending
Step four: Track your spending. An important step towards financial freedom is to track your spending. There are a lot of different ways that you can track your spending. Some people like to do it with an Excel spreadsheet.
Other people like myself find that way too difficult to keep up with, so I would suggest using an app like Mint. Mint is an app that allows you to punch in all your expenses, as well as how much money you're bringing in, and your financial goals and savings that you'd like to make.
It will track everything that you spend money on, and it will also let you know if you've overspent in any of your categories. Mint is amazing because it helps keep you accountable. And when you're held accountable, you're a lot more likely to actually succeed and put money where it's important, rather than impulse spending.
Step 5: Pay Yourself First
Tip number five: Pay yourself first. You've probably heard this expression before: Pay yourself first. But do you know what it really means? When someone says, "Pay yourself first," what they're saying is that you should be putting money into your savings and ideally, into yourself before you spend it on anything else.
The act of paying... Maybe it's a principle. The principle of paying yourself first has helped countless people achieve financial freedom. But how has it actually helped so many people achieve financial freedom?
That's because if you're dedicated to putting $1,000 into your savings each month, then whatever you have left over goes to bills. However, if you don't have enough money to pay those bills, then you need to either work on getting a pay increase or starting a side hustle.
By paying yourself first, you always guarantee that you're setting money aside to invest in yourself.
By doing the opposite, all you're getting is what's leftover, and that is no way to achieve financial freedom.
Now, you don't need to pay yourself first only with cash. If, for example, your work has a retirement savings account and you can dedicate part of your pay to go to that first, that works, too. Just remember, if you want to achieve financial freedom, you need to put yourself first.
Step 6: Spend Less
Tip number six: Spend less. In 1958, Warren Buffett purchased a five-bedroom home for $31,000 and hasn't moved out of it since. Isn't that crazy? I wish I could buy a five-bedroom home for $31,000. That's nuts! That'd be a good investment. I wouldn't move out of it, either.
His net worth? An astounding $90 billion. If there's anyone that could afford a bigger and more expensive house, it would be Warren Buffett. But as you can see, he's very frugal. And this is definitely one of the reasons that he's become one of the wealthiest and most successful people in the world.
Kanye West, on the other hand, isn't afraid to flaunt his wealth. He lives in a $20 million home and at one point, with $53 million worth of debt, he asked Mark Zuckerberg for a $1 billion loan on Twitter.
The difference between these two successful gentlemen? Warren Buffett never spends more than he needs to, whereas Kanye West is always spending more. The truth is, plenty of rich people don't actually look like rich people. Look at the classic Mark Zuckerberg example. He is always wearing the same T-shirt and jeans.
And buying less stuff can definitely help you become richer, quicker.
By spending less, two things work in your favor. First, you'll have more money to actually invest into your financial goals. Second, you'll be able to see how little you actually need to survive. And that works perfectly to take us to our next tip.
Step 7: Buy Experiences, Not Things
Tip number seven: Buy experiences and not things. Life's short. It's not all about hoarding all your cash until you're 65. You definitely deserve to live a little. Ultimately, the things that will help you live a more fulfilled life will be all the experiences you have, rather than the things that you own.
Think about the things that you buy or that you've treated yourself to at the mall. Have they actually made you happier? Now, let's flip the switch. Think about one of your happiest memories. Was it something that you purchased, or was it actually an experience that you shared with someone? It's important to focus on creating more memories just like that.
Life is made up of moments.
Wow! That was deep. Life is made up of moments. The best ones are created with friends and family. So next time you think about purchasing something that you might not actually need, think about what kind of memories it will create, and if it's really worth it. Or if it's worth it to just spend some time with someone that you really care about instead. And that brings us to our next tip.
Step 8: Pay Off Your Debts
Tip number eight: Pay off your debts. That was pretty obvious. That one is so obvious, but it is a lot harder to do than to say. Some people will tell you that it's actually wiser to invest your money into stocks, so it can grow faster, and then you can pay off your debt.
However, if you've never invested in stocks before, then do not do this. That's extremely risky and there's a good chance you'll end up with way more debt to pay. Even though stocks are risky, there's one thing that isn't: The feeling of relief when you actually get all your debts down to zero.
If you have $50,000 worth of debt and you have $30,000 worth of cash in your bank account, you are not financially free because you still have that $20,000 that will be looming over you wherever you go. Obviously, paying off that debt is not as glamorous as having all those zeros in your bank account, but it is the right way if you actually want to achieve financial freedom.
There are two main methods for paying off debt. One is snowball and one is avalanche. Snowball is where you pay off the smallest debt first, whereas avalanche is paying off the debt with the highest interest rates. You need to decide what works better for you.
Through all my research and reading from personal experiences, I would say that the snowball effect is the easiest strategy to follow. That's because, with the snowball strategy, you focus on small debts first.
This helps you get into the mindset of paying off your debts, and it also gives you motivation as you pay off small ones and you start to focus on bigger goals.
Paying off your debt lifts a huge weight off your shoulders. You will feel completely free. And the feeling of getting paid and knowing that all that money is gonna be going to you, instead of the debts that you owe, is huge.
Step 9: Create Additional Sources of Income
Tip number nine: Create additional sources of income. Okay, so at this point, you're probably wondering, "My salary isn't enough for me to actually pay off my debt. So what should I do?"
If you're serious about becoming financially free, you're gonna need to sacrifice some blood, sweat, and tears. Your 9:00 to 5:00 might not cut it. And that's just a fact. If that's the case, then you need to look outside of that for other ways to bring in income.
Now, you can look at your income in two ways. The first is active income. That's your 9:00 to 5:00 job where you're actually trading money for time. The next is passive income. And this is a stream of income that can make you money without you actively working on it. If your only income stream is active, like your 9:00 to 5:00 job, then you can only make so much money in a day. It's important to realize that if you want to make more money than that, you need to find a passive income stream.
If you're looking for unique ideas for additional income streams, then make sure to check out the video that we made last week, where we cover seven ways to bring in money from home online for free.
Step 10: Invest in Your Future
The last tip, tip 10 for achieving financial freedom, is to invest in your future. This last step for financial freedom is an important one. Say you follow all the advice in this article, you save some money, you become financially free, and pay off your debts.
But what about the future? What if something happens? Will you be prepared?
It's important to set money aside for rainy days, retirement, and not to be morbid here, but if anything happens to you, to make sure that your family is secure.
If you've got a 9:00 to 5:00 job, then I will suggest reaching out to your company and asking if there's a way that you can set aside some of your income into a retirement fund. This way, you won't really notice it when it comes out of your paycheck, but it will make a huge difference over the years.
Next, you also want to save enough money for an emergency fund. Now, most experts would suggest saving up at least $10,000 or six months of salary. Now, if you don't have any savings, I know that can seem like a very intimidating number. Yeah, just save $10,000. I know, it's a lot easier said than actually having done it.
However, start with a small goal. Start by saving $100 or $1,000. Anything helps. Anything more than zero actually helps. And if you ever, unfortunately, find yourself in that situation, you'll be so thankful.
By setting money aside for rainy days and retirement, you'll ensure that you don't ever fall back into a place where you're stuck and trying to become financially free again. Financial freedom can help you take ownership of your finances and more importantly, your life.
Did you find this helpful? Please let me know down in the comments below which tip was your favorite or which tip drastically changed your life if you've tried it before.