Today it is fashionable to seek financial freedom. Dozens of financial gurus have a magic and simple formula to become millionaires. The first thing to say is that achieving financial freedom is not difficult, but it is not without effort either. That is why today we will talk about the 7 easy steps to achieve your financial freedom and the challenges you will have to face to achieve it.
Many times, there are very easy activities to do, and yet we do not. Immediacy, impulse beats us to discipline and effort. So, while achieving financial freedom can be a relatively straightforward process, not everyone achieves it.
Achieving financial freedom is a matter of determination, resilience, discipline, effort, and motivation. Later, we will talk about how each of these 5 attitudes that will help us achieve our goals, and how we can reinforce them.
As we mentioned before, they are easy steps, but they require a positive attitude towards change and a lot of motivation. When viewing the results. It will be very easy to continue on the new path. But to achieve change we must achieve a new attitude, which we will only achieve thanks to motivation.
How to motivate ourselves to achieve financial freedom? First we must know the different stages of personal finance that we must go through to achieve financial freedom.
In this article we will talk about the following points:
- Motivation needed to change.
- Attitudes necessary to achieve financial freedom.
- Stages of personal finance and the definition of each.
- The fundamentals of financing and the first 4 steps.
- 7 easy steps to achieve financial freedom.
Without more to add, let’s start knowing our financial future from the hand of Gustavo Mirabal.
Table of Contents.
Stages of personal finance to reach financial freedom.
Financial freedom is a process that ranges from total dependence and financial insecurity to financial freedom. There are a few intermediate stages that ensure progress. Thanks to the changes in habits and the knowledge acquired in personal finances we will be able to change our lives.
Later we will tell you about the stages from financial ignorance to total financial freedom.
Dependency and financial insecurity
It is the lowest phase of personal finance. At this stage, we are unable to reach the end of the month without going into debt. A person in this situation goes straight to bankruptcy. The first step is to become aware of the situation and adjust expenses to move to the next stage.
It’s the point at which we can cover basic expenses using our fixed income and savings. However, any problem can divert us. We have savings to cope with a problem with our income, but not enough to do it for long.
At the point of financial independence, we could cover some additional expenses, such as nights out or extraordinary expenses. You will be able to cover your basic and extraordinary expenses thanks to savings and income.
This stadium is what everyone aspires to. In this case our basic and extraordinary expenses can be covered with our savings. You can live without working. This may depend on savings alone or passive income. It is a stadium that allows you to live without great luxuries unless the accumulated heritage is very large.
Moving from financial insecurity in 7 steps to financial freedom.
Moving from one stage to the next requires the evolution of mental attitude. Getting out of insecurity is not difficult because it is easy to realize when we are besieged by creditors. However, moving into new stages can be difficult because we assume that fixed income is always going to be there to sustain us.
Therefore, we will talk about the attitudes necessary to achieve financial freedom.
Five attitudes necessary to achieve financial freedom.
- Determination: It is the ability to set objectives and goals and pursue them despite difficulties. It helps us stay on track and not give up despite adversity.
- Endurance: There are people who run very fast for a few meters. But the race to financial freedom is more like a marathon. It requires a sustained effort for months and years. So rather than accelerating fast, we need resistance. Resistance to adversity, temptations, and our own weariness. To achieve this, we will give you some tips to keep you motivated.
- Discipline: Establishing rules of behavior for us is one of the most difficult things. Sticking to our rules and not breaking them is hard. Deciding that we are going to reduce this or that expense and sticking to the plan is difficult. Those who manage to do this are disciplined. Achieving discipline is not overnight, but there are strategies that help us to be more disciplined every day and today we will tell you some of them.
- Effort: To achieve financial freedom we require an additional effort that translates into physical, mental, and spiritual effort. Physical because there are things that we can buy “already done” that we will have to do by ourselves. Mental because we must dominate our mind before temptations and the desire to give up. Spiritual because there are moments that we will feel that the forces fail, however, there will be our objectives and motivation strategies and we know how to resort to them.
- Motivation: This is the key that resides within each of the attitudes necessary above. If we do not know why we want financial freedom, it will be impossible to achieve it. Going through the 7 steps to achieve financial freedom requires high motivation.
7 easy steps to achieve financial freedom.
Financial freedom doesn’t come alone. To achieve financial freedom, it is necessary to actively seek it, and requires a personal effort. Many people dream of financial freedom but very few get down to work. Do you belong to this group? It is difficult to get to work with any task if we do not know anything about it.
That’s why the first step is to be aware of what personal finance means and what I know about personal finance. Therefore, the first 4 steps are the basis for achieving new personal finances.
These 4 steps to achieving financial freedom are the foundation on which your financial freedom journey will be based. If you successfully go through the first 4 steps (which are not difficult at all) you have passed the halfway point to your financial freedom.
Do you want to know what the first 4 steps are? Let’s get to know them below
The first 4 steps…
Then you will get a very brief summary of the first 4 steps of the 7 easy steps to achieve your financial freedom. Each of the steps that we will mention will be explained in more detail later:
- What do I know about personal finance? Becoming aware of my knowledge of personal finance is the first step. I must know what my degree of knowledge about personal finance is and identify which strategies I use in my personal finances.
- Where am I with my personal finances? Am I able to reach the end of the month without going into debt? Is my income greater than my expenses? How much could I save each month and how much do I save? These are questions I must be able to answer to overcome the second step.
- What do I aspire financially for my life? They say that if we don’t know where we want to go, any direction is good. If we don’t know what we want financially for our life, we can’t know how to get there. The truth is that most aspire to cover their expenses at least and many others want to have enough money to give themselves some whims. Most want a quiet old age, but only find out about it when they reach old age. The truth is that we all need some financial slack. Knowing “what I want” is fundamental to know how much effort it takes to get there.
- Save money: Saving lays the foundation for new finances. In order to save, you need to make your income higher than your expenses. Whether it’s increasing your income or limiting your spending, saving forces you to see how far you can go.
The Last 3 Steps to Consolidating Financial Freedom
After creating basic habits to achieve healthy personal finances, we will be much closer to achieving financial freedom. They say that “the first step to change is the hardest” and this is real.
If we already manage to save and face our unforeseen events with them, it means that our debts will not grow. Little by little we can reduce the size of our debts, and we will begin to feel that the money “we have left over”. At this time, we must resist the temptation to start spending more.
When we talk about financial freedom, we don’t have enough money. We may be able to treat ourselves from time to time, but that should be within our budget. Financial goals should continue to be monitored.
We cannot lose sight of our goals if we want to achieve financial freedom. But the question we ask ourselves right now. Are the financial goals of this stage the same as those of the first 4 steps? The answer is no.
This is because in the first stage, we were balancing our personal cash flow. In the first stage we were balancing income with expenses, gaining financial awareness, and starting to save. Now that we save, we do not know what we can do with this income.
The first thing is that this saving is going to be formed in a fund to face the unforeseen. But as time goes by, we can face almost any unforeseen event. Then priorities and goals begin to change.
What will be the new financial goals? Next, we will tell you.
The new financial goals towards financial freedom.
Now that we have quantified our expenses and our unforeseen events, we can know how much our savings reach. Some metrics that we must consider are:
- Can I pay all my debts with what I have saved?
- Should I continue saving or pay my debts?
- For how many months of basic expenses do our savings reach us?
Those questions tell us how close or far we are from our financial freedom.
If we have for the payment of the installments of debts and expenses of about 3 and a contingency fund, we are already at a point of financial security.
If we happen to have the payment of the installments of debts and expenses for about 6 months to a year and a fund for unforeseen events, we could talk about financial independence. We can be stable without having income for a relatively long period.
Finally, if we must have an amount equivalent to the payment of our cash debts, all the basic expenses of a year and a contingency fund, we could be talking about relative financial freedom. We talk about relative because that would give us for a full year of expenses and free of debt.
The next stage is total financial freedom. We can only achieve this with a passive income large enough to cover our basic expenses without touching savings, in addition to our regular income. To achieve this stage of financial freedom we will have to go through the next 3 steps of our 7 steps towards financial freedom.
From 5 to 7, our steps on the road to financial freedom.
Next, we will briefly show you what are the steps to follow to consolidate your financial freedom. Later we will delve into each of these steps
- Pay all debts starting with debts with higher interest rates: The higher the cost of debt, the more you sacrifice your future income. That is why you start by paying the debts with higher interest and go to the lowest interest. In general, principal mortgages are not paid because interest in general is below inflation or the income that our savings give us. So having this debt is positive as we will explain later.
- Start investing when the debts you have have a lower income interest that your investments can generate. In line with the previous point, any debt that generates more expenses than the money that your investments can generate we should try to liquidate them. Paying off these debts has a positive impact on your future balance sheet.
- Make an investment and retirement plan: This will allow you to plan what your expenses are and what your future income is. This will determine how much your passive income should be to achieve the stability you need.
By following these steps, you can consolidate and accelerate your path to financial freedom. These steps allow you to keep your eyes on goals and away from the money you think is “left over.”
Moving the 7 steps to financial freedom… A utopia?
Financial freedom is the dream situation for many. There are people who talk about passive income, but even passive income can vary. They also give us tips to achieve financial freedom.
Therefore, financial freedom includes personal austerity and a new attitude towards life. On the other hand, to achieve financial freedom, the idea that money is bad must be removed from our minds.
Money is not bad, what is bad is that the search, indiscriminate spending, and accumulation of money controls us. If we have a more rational attitude towards money, we can easily achieve our financial freedom, as evidenced by the 7 steps we show in our article.
Financial freedom entails a change of attitude, motivation, values, and life in general. It is freeing ourselves from the yoke of buying as a way of giving ourselves value. We don’t have to involve others in our own vision of life, but we do have to change our own.
If you follow these 7 steps, you will be closer every day to achieving financial freedom. We hope that these tips from Gustavo Mirabal, the financial advisor of athletes, will help you have a happier and quieter life.