We wouldn’t be wrong in saying that financial freedom is something that all of us aspire to. In simpler terms, financial freedom or financial independence is a state where one has sufficient income to live on without having to worry about holding a day job.
How is any of that possible?
It most definitely is possible. Unfortunately for many of us, financial independence still remains a pipe dream to this day. This is because most of us are simply spending too much and not saving enough.
Along with this, the majority of us usually overlook the importance of developing passive sources of income. The age-old mentality of having a single, sufficient source of income is to be blamed for this conundrum that we find ourselves in.
All of this does not mean that we should give up on being financially free. However, we still do need to confront some hard truths along the way. By looking into the habits of various financially successful individuals, here’s what we’ve learned.
1. Aim to spend less
The lure of the material world is a strong one. Whether it’s a new smartphone or the latest car, there’s always something that needs to be bought. However, when upon closer inspection, most of our purchases are unnecessary ones. If you aim to be wealthy, aim to keep your money and to not spend it.
2. Make your money work for you
Wealth is defined as being the abundance of financial or physical assets such as cash. It is derived from the accumulation of assets not the spending of it. Hence if you’re looking to be truly wealthy, focus on making your money work for you.
This means putting aside funds for investments of all kinds. From fixed deposits to bonds, putting together a health investment portfolio is fundamental to building wealth. Ideally, you should focus on low-risk assets that provide a steady return. Having built a solid foundation, you can then move on to higher yielding but riskier assets.
Remember: Rome wasn’t built in a day, but it was burned in a night. Forget getting rich quickly, build up your assets steadily over time and never squander what you have.
3. Automate your savings
Humans are creatures of habit, but more often than not, bad habits are easier to form than good ones. Thus, if you want to put some money aside for your savings, why not automate the process and leave it to the bank.
Automated savings plans are one of the most effective ways of forcing yourself to put aside some money every month (whether you want to or not). With such a plan, a percentage of your salary will be deducted an debited into a separate savings account each month.
While it may be slow going at first, the money you’ve put aside on the long-term will be a nice surprise for the future you. This cash can then be used for investments to generate additional income.
4. Create multiple income streams
While the economy may be booming, the situation isn’t as such for the typical American. Studies have shown that in spite of strong economic growth, wages have in fact declined by 1.3 percent since the end of 2017.
Along with this, the cost of living has been steadily increasing over the past 4 years. So if you were wondering why you’re still broke despite a booming economy, the answers are clear; you’re being paid less in a time when the cost of living is going up.
Unlike the days of our parents where one could survive on a single source of income alone, things have changed drastically. And in order to achieve financial independence, one has to cultivate multiple income streams.
These can range from taking on a side-gig as an Uber driver or delivering packages for Amazon to selling your skills as a freelancer on Upwork or Fiverr. If you’re a sports fan you can always try your hand at betting on the Kentucky Derby to earn some extra cash.
But as always, knowing your limits and managing your risk exposure should always be a priority. After all, you don’t want to end up losing your hard-earned money.
It’s no secret that the road to financial is a difficult one and many may not even make it to the end. But with care and careful financial planning, you just may be able to come out on top.