Knowing how to be financially free is more important than ever. There’s no need to win the lottery and/or buy the next Tesla stock in order to get there. All you need to do is take intentional steps and almost everyone can be financially free. Money is not the end goal, financial freedom is the end goal.
Who doesn’t wish that they could just clock out for the day without caring about anything else? Who doesn’t want to work a little when they want to instead of when they have to? Almost everyone would want to. The good news is that it’s possible for the vast majority of Americans and/or people alike.
Some may be financially free faster than others and some may get there slower than others. That’s completely OK. It’s not about how fast or slow you get there. As long as you get there. There are bloggers I see who’ve made no more than $100,000/yr over 20 years.
Yet they retired with a $3M+ nest egg because they took the steps to get there. In their 40’s, at that. While raising a family and children. How to be financially free is accessible for the vast majority of people. Some may have to put in more work than others and that’s completely OK.
You don’t want to be dependent on your employer on where your next paycheck comes from. You want to stand on your own two feet and be independent from someone else giving you a paycheck. Otherwise, a loss of income will hit you immensely hard. That’s not a good position to be in.
How to be Financially Free
The first step in knowing how to be financially free is to SMASH that social share button and post to your favorite social media! Your friends could be wanting to know the exact same things. Let’s help each other out.
So with that said, let’s get into how you can reach financial freedom!
1) You Have to Want to Put in the Work
There’s no point in knowing how to be financially free if you’re not willing to put in the work. You have to want it. You have to want to sacrifice things in order to get you to where you want to be. The road to a million dollars+ is not easy. It takes a huge mental toll on people because you need to make sacrifices.
The first step has to start with your desire. Do you want it badly enough. Are you willing to cut out going out to dinners? Are you willing to stop purchasing so much stuff on Amazon? It starts with your desire. Some people absolutely cannot cut back on these small purchases.
I highly disliked having to work for an employer so much that I lived very poorly after graduation. I deprived myself of joy and freedom for a couple of years. Because I knew that it was for the greater good. However, I can attest that this lifestyle is NOT for everyone. It’s difficult.
2) Set Motivational Reminders
In the how to be financially free journey, you’re going to feel discouraged at times. Where you question if the process will ever work. Look at the lost decade of stock returns where it essentially returned 0% from 2000 – 2010. 10 years of investing just to end up in the exact same spot?!
That’s demoralizing. You have to set motivational reminders and to celebrate milestones where it’s necessary. The first $100k is the biggest milestone that you will reach. Afterwards, it should get easier and easier going forward. It’s only a matter of time before your investments start making you $100,000 per year.
There are many times that I wanted to give up. SO many times. I don’t know what I would’ve done if I didn’t set motivational reminders in order to keep going. The price to reach financial freedom is NOT cheap. However, it can all have been worth it if you look at it in hindsight.
3) Create a Budget
So now let’s get into the nitty gritty of the how to be financially free. You got the psychology and the motivation down. Now you move on to the action steps. The first thing to do is to create a budget. It can be a bare bones budget or it can be a budget with a little bit of fun added on top.
Whatever it is, track where your dollars are going in and going out. Otherwise, your money is going to slip out of your hand free and clear. Without you having a clear path towards it. Make a budget and stick to it. Budgeting is an underrated tool that many people don’t use on their way to financial freedom.
I personally know generally how much I spend each month. It’s about $900 per month, excluding rent, that I spend money on. That includes food, car insurance, utilities, and the like. Every dollar of mine has a purpose that brings me utility and/or more money. It should be the same for you.
4) Increase Income
After you figure out the expenses side of the equation, now it’s time to figure out the income side of the equation. Figure out how to increase income. You shouldn’t try to increase income by an extra $100/month. Yes, every little bit helps. However, figure out a way to increase income by meaningful amounts.
How to be financially free isn’t about saving dollars that turns into hundreds of dollars down the road. It’s about making $100’s of dollars that turns into tens of thousands of dollars down the road. Increase income by having a lucrative side hustle you can generate $1,000/month after 2 – 3 years.
Don’t go for the side hustle that makes $300 per month with no upside potential that you miss out on going for the side hustle that makes $1000’s+ a month after 2 years of effort. Your time is worth more and more valuable than you think.
You can also spend time changing jobs to a more lucrative career that will pay you more. The answers are out there, it’s up to you to find them.
5) Live Below Your Means
This one is HUGE. No one ever got rich by spending more than they bring in. They got rich by living below their means. They spend less than they earn. Without a doubt. I personally bring home six figures of income per year yet only spend approximately $25,000 per year.
That’s living way below my means. I know one day, the bet is going to pay off and I can confidently say everything was worth it. $100 saved today will turn into thousands of dollars in 40 years. As long as you invest your money properly. Skip out on eating out. Don’t buy the latest iPhone.
The first five years will feel painful but once you get over the hump, it becomes much easier. That’s when your investments do the heavy lifting for you and pays for all of your living expenses. Once you do it consistently over the years, that’s when you’re going to feel like you made it.
6) Never Neglect Health
There’s no point in knowing how to be financially free if you neglect your health. Your health matters more than money. It’s something that money can’t buy. I have to wear glasses every day because my eyesight isn’t the best. It’s not the best thing in the world to go through something like that for the rest of my life.
Your health is something much more valuable than money. There’s no point in trying to be rich if your health isn’t taken care of. Money should always be at least number 3 in the order of importance of your list. Health should be at least in the top 2.
Sleep well, eat well, and exercise periodically. Our bodies are not built in order to sit still and work on spreadsheets all day long. Be active and go outside for a walk or a run. It makes all the difference to your mood. You cannot be financially free if you don’t have good health. Hospital bills are expensive.
7) Automate Finances
Automating savings is my favorite thing to do in personal finance. Whenever that direct deposit hits my bank account, I automate even further by letting Autopay take care of my credit card expenses. My monthly recurring bills are on Autopay as well. Internet bills, phone bills, and the like.
Hands free personal finance is the best because you don’t have to remember anything that you’ve done. All you have to do is let the code execute and you have everything working for you. It’s like they’re your personal employees when you don’t even pay for their services. They are accurate as well.
Too many people manually pay for their expenses because they think that there will be a bill that is paid late and they’ll incur late fees. That kind of stuff doesn’t happen often and even then, companies are more than likely (not always) willing to waive the first late fee due to a malfunction of Autopay.
8) Use Debt Wisely
For 99% of people, how to be financially free requires you to have NO debt. However, if you’re one of the few who knows how to use debt to your advantage, then there’s nothing wrong with that. I personally do not use debt in order to increase any returns. I personally use debt in order to have liquidity for a rainy day.
Mortgage debt on an investment property that cash flows is a good use of debt. Using debt in order to increase returns of the stock market is not a wise thing to do. Use debt wisely. We need a credit score in order to move along our personal finance journey.
Using debt wisely could just be paying off your credit card balance in full every month. That way you don’t incur any high interest debt fees for your credit card. That way when you do have to take on debt to buy a house, as an example, you can get favorable rates and lenders fighting to have you as a customer.
9) Invest Your Money to be Financially Free
The last thing you have to do in how to be financially free is to invest your money. You cannot build wealth with a savings account. I kept approximately $40,000 in my bank account for the month of January 2022. The bank paid me $12 in interest. What! That’s just wrong.
You can’t build wealth and be financially free by saving your way to wealth. You have to invest your money in appreciating and cash flowing assets in order to be financially free. Stocks and real estate are great asset classes to invest in. There’s no need to take a very large amount of risk, either.
You can do boring index investing that’ll get you there. Once your money starts to consistently make more money than your entire paycheck is when you know you made it. Your money is meant to be invested, not to be spent or sitting in a savings account somewhere.
Be Financially Free Because You Deserve It
It’s more important than ever to know how to be financially free. With the Great Resignation at play, employees are fed up. They don’t want to work under inhumane working conditions. They want to break free and pursue their own passion interests. You deserve to pursue your own interests.
Instead of working hard to make someone else be richer. You deserve to be richer yourself. Financial freedom is not easy and it will require sacrifices in order to get there. Once you get there, it will all have been worth it because it’s not an insignificant achievement. There are 60 year olds today who yearn for financial freedom.
You deserve it. This isn’t just a magical land for the rich and the famous. Financial freedom can be achieved by you as well. Look at this example of Dale. He made ~$48,000/yr over the most of his life and has over $3 million! You can get there on a low income as well.
If Dale could reach it on a low income, so can you. You may have to move to another city or you may have to take on a higher paying job. Whatever the case is, the game is to put money from the pockets of others onto yours. That’s how to be financially free. There’s always a way for you to get there.
It may take longer than others and it may take much more sacrifices than others. However, you can never say that it was impossible during your life because it is a possibility for a large percentage of the population. Then once you get there, you can pursue your own passion projects instead of working for someone else.
How to be Financially Free Shortlist:
- You have to want to put in the work
- Set motivational reminders
- Create a budget
- Increase income
- Live below your means
- Never neglect health
- Automate finances
- Use debt wisely
- Invest your money
