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Isn't that everybody's dream? Not having to suffer from that pain when an unexpected car repair bill pops up? Feeling bad about how you are going to pay for other costs, like your kid's birthday? And then next there's the monthly rent! And before you know it, you are sick to your stomach worrying about money!
But what if all those payments were nothing more than just a little inconvenience? This means that you can live in a completely peaceful state of mind knowing that the car repair bill does not disturb anything. But even more, you know you can quit your job and do something you really love to do, even if you're not going to earn as much doing that.
But in general, financial freedom also means, you can make decisions without instantly getting stressed about how to finance all those wild ideas. You are prepared, you are in control of your finances, instead of the other way around where finance controls you and your life.
Achieving complete financial freedom does not happen overnight, it takes time and preparation. It takes discipline and responsibility in how you deal with money from an early age. The earlier you start, the better. We're going to look at several aspects here in achieving that ultimate status of financial freedom. And best of all, you don't have to be a millionaire! Financial freedom is different for everyone, let's find out about your requirements to achieve this ultimate goal. Keep reading our other blog posts.
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When you start making plans to achieve financial freedom, start by looking at the possible financial mess.
This means, repairing some financial mistakes you have made in the past for instance. So look at all your debt, especially from credit cards. If you want to build wealth, then there's no room left for paying high interest on all kinds of debt.
So starting to build wealth means paying down all debt first. Only when that is fully done, you can really take off in building wealth for yourself.
It will be so rewarding you get to keep all your income, and not spend it on debt and interest.
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Some things sound so extremely simple, yet they are so true. If you want to build wealth, you need to save obviously. There are two ways to achieve this. One, try to earn more, second, live below your means.
The first one isn't always that easy. You have to find a skill that the market is willing to pay for, whether it's an employer or a large group of customers. Acquiring a certain skill takes time. But instead, try the second option: living below your means. You can start this tomorrow, and your wealth-building and journey toward your financial freedom will start instantly! Go through all your expenses, and be tough on yourself. Do you really need all that stuff and services?
For instance, buying a brand-new car is crazy when you want to build wealth. Make the calculations, and see how it depreciates over time. But also, you probably have some services with monthly fees that may look small one by one, but in total, they add up. Do you really need all those high-profile brands to show off on your social network?
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Once you are financially free, the worries about money disappear, but to get there you need to take a few steps and learn a few things.
You have to keep track of all your expenses, where does the money go? Make budgets for different types of expenses, so that one budget does not eat away from another budget. Keep it tight, and be rigid about the several limits you have set for yourself. This attitude will help you from day one and into the future.
Even if you have reached financial freedom at some point, don't let go of this attitude. Keep track, and never overspend or else you might lose the freedom faster than you achieved it.
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When people think about financial freedom, very often they think of millionaires. But being financially free really means that your expenses are covered. The lower your expenses the sooner you can achieve that goal.
Does it mean you can drive an expensive car or bike? Do you need to go on expensive all-inclusive holidays or will a visit to a local park do as well? Do you want the freedom to choose a career no matter what the salary or social status is? You can feel like a millionaire without actually being one. But in any case, you have to learn how to deal with money, preferably at a very early age. We'll get into that.
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If you want to grow your capital, you have to learn about your investment options. Just putting it in a savings account at 0,05% is not going to bring you any closer to your goal of financial freedom.
One major key to success in investing is to start early. That's the only way you can put compound interest to work, and with interest, you can read dividend returns as well. Reinvest those, and your total return at the end will be huge!
For all legal and tax details you should probably seek professional advice, but keep a close look at costs. Never choose an investment where the advice is 'free' because what you don't see is that this advisor is likely getting a kickback fee from the product he has suggested you should invest in.
Don't invest in actively managed funds, because research has shown that those funds have huge expenses but not so excellent returns. Instead, look for a low-cost ETF. This is a passive fund exactly following an underlying set of stocks, bonds, etc. No active trading (which is costly), no expensive fund managers, or golf clinics with all their CEO colleagues.
Investing in real estate and actually owning it always seems a good deal. Over time you can increase the rent, and hopefully, the value of the property goes up as well.
All investments have risk, there's no other way. Always make sure you can handle the risk and still sleep well. Also, make sure that all risks of all your investments are of a different type so they don't get exposed all at the same time. Diversify in the type of risk.