10 Proven Steps to Achieve Financial Freedom in Next 5 Years
How much do you have to save in order to not to worry about your income one day in future? Whether you earn anything or nothing in a situation like the present lockdown, it should be up to you and you should not have to worry if there was a permanent lockdown.
If you want to relax with a fat sum in a bank deposit or in investments like your own home, it takes a lot of sacrifice when you are young under 30 and able to earn substantially. When you will be tempted to blow it all up on a world tour or buying a luxurious car, living the lifestyle of a millionaire.
But if you look at real life millionaires, that’s not the case. Take Lakshmi Mittal or Swaraj Paul for example, they live like a common man as if they have not earned anything.
They set aside their money for rainy days and continue working hard until late in their lives as long as they can, in case any windfall like a sharemarket storm could blow away their wealth in a matter of days. Their shares can go down making them lose millions. Like it happened to Elon Musk. It can happen to even Ambani or anyone.
So if you are spending $25000 per month, it’s wise to set aside 10 to 20 times of that amount in savings to achieve financial freedom. Even 25 times, to make sure no windfalls can ever destroy you.
To achieve this kind of diligence and control of your money, you need to have a strong willpower and planning. Let’s take a look at how to make this possible in practical life.
1. Set Life Goals
What is your goal in your life? If you have saved up a million dollars, you can go for a world tour. But to make a million dollars should be your primary goal.
To save a million dollars, some people may take a lifetime and still not save up that much.
Others like Jeff Bezos or Bill Gates will find a way of getting rich in a short time with computers and networking. Zuckerberg started it small with three friends when he thought of big ideas like Facebook or WhatsApp.
Those who became millionaires did so by saving every penny. Not by penny pinching, but putting those pennies away in piggy banks when you don’t need them.
Let your children count those pennies again and again and take care of those pennies without losing them or spending them as they wish.
2. Track Spending
Some people never know where their money went. They will borrow 2 millions today and end up empty handed in two months, this happened in India.
This man is going to inherit 30 millions but will lose it all before he knows it. Lot of planning or keeping track of where his money goes, is what he needs to do.
Take a book and write down your expenses and income so you will know where your money is going. Put some money in your children’s bank accounts to see if they will learn to make it grow or lose it all.
It’s worth it if they learn the value of it when they are young.
3. Make a Budget
How often do people make a budget?
No doubt they have an idea of their income. But to spend all of it without saving would be foolish.
So we see many people borrowing money at the end of the month. It would never happen if they put some money aside without touching it no matter what, for the end of the month.
4. Pay Your Debts in Full
Pay your credit card bills and other debts in full. We all have seen people commit suicides. Because they couldn’t pay their debts. Let us learn from farmers who hang themselves as they borrowed too much. They had assets they could sell and pay off their debts.
5. Save More
If you want financial freedom, you have to save more than you spend and in 5 years your will see some fat some of money in your account.
Obviously spending more than you earn and no saving can land you in trouble although you can’t save when you are building a house or something.
But as soon as the rent starts coming, you have to put some of that away and not spend every penny that you can get from your income.
6. Multiple Sources of Income
If your income is just enough to pay your loans etc. That’s a warning bell. Keep thinking about another source of income you can create in your spare time. There can be several things you can do like grow a kitchen garden.
Even if you have no space, hang some pots on your balcony and grow some vegetables enough for your family. Have a dog to give you some puppies to sell them when they grow up.
Make some pickles or jams on the weekend to sell them.
Get a second job in the evenings.
But if you think you have enough for the month and you relax without any savings, you are making a mistake.
What would you do in a pandemic like we have now and you end up closing your shop or with no salary?
Always think of saving for the rainy days even if there’s no rain.
7. Create an Emergency Fund
Savings should be put away in an emergency fund that you never touch on normal days.
Could be a sickness like corona hit you or your family and then you have to go borrowing when someone is dying.
Nobody will lend you easily and you will be regretting the vacation you had in the exitic resorts while you could have spent your holidays by the seaside near you.
People who put away some money regularly for an emergency will never get into trouble.
8. Invest in Real Estate
It’s a saving if you don’t have to pay rent for the rest of your life plus an asset that will go on appreciating – if you keep up with maintenance.
With no maintenance, the building can depreciate. But the value of the property keeps going up in any case. In 5 years, the appreciation will be very high.
Rarely real estate investment loses value except in ghost towns of Liverpool where people have abandoned their homes.
Some crime hit places in the north of France are selling for €1 just like Liverpool homes are being sold for £1.
You can buy homes in Italy too for 1 euro from the government provided you give in writing that you will spend around 60000 to restore them.
Sometimes you get loans to carry on this restoration. So go for it and invest if you are willing to register these homes in your name for £1 or €1.
You will be required to live there for at least 5years before you can sell them and make a profit.
9. Invest in Gold
You don’t have to buy gold to invest in gold. It’s possible to invest in gold bonds or shares.
Knowing that the value of gold has doubled in every 6/7 years, it’s always a good investment even if you can buy a few grams of gold with your savings.
You can rest assured that you will get more than you invested by doing nothing.
10. Create Source of Passive Income
There are so many other passive income sources that can make your savings grow silently without your having to work for it.
Ratan Tata invests his money in promising startups.
So if you see someone making money with Millet drinks, you can invest with them or partner up with people who are willing to work hard with their promising startups and make your money grow.
All around you, there are people getting rich like Byju’s. Elon Musk will let you invest with him. You can buy his shares as he knows how to make his money grow with yours.
Here you are doing nothing to make your hard earned savings grow but investment. You can rest assured your money will grow with Infosys or Google.
Find whatever interests you and attracts you. Many people made their money grow even in times of corona crisis by selling masks and sanitizers.
So can you.
The steps to achieve financial freedom include setting a goal, budgeting, automating your finances, making smart investments, and increasing your income.
Setting a goal for achieving financial freedom begins by figuring out your net worth, creating a budget, deciding on a timeline, and finding a financial expert to help guide your progress.
Budgeting can be done by setting target savings, tracking your expenses, and staying away from debt. An effective budget helps you understand your financial position, prioritize your spending and savings, and meet your financial goals.
Automating your finances enables you to manage and forecast your expenses, set aside money for long-term goals, adjust your budget as needed, and create and track financial goals.
Investing money should be done with consideration of factors such as age, risk tolerance, and financial goals. Doing research and working with a financial advisor can help you make the right financial decisions.
Increasing your income requires identifying ways you can make more money, such as finding a better job, starting a side hustle, negotiating a raise, or investing in stocks and other forms of passive income.
The amount of time needed to achieve financial freedom can vary significantly depending on your current situation and goals. However, by taking the necessary steps and staying consistent, you can be well on your way to achieving financial freedom.
To stay on track towards financial freedom, it is important to review and adjust your budget regularly, make informed decisions when it comes to investing and increasing income, and stay away from bad spending habits.
Seeking professional help, such as working with a financial advisor or accountant, can be beneficial in helping you reach your financial goals.
To avoid financial pitfalls, it’s important to make informed decisions when it comes to spending and investing, automate your finances, and pay off any debt in order to insure long-term financial success.