I put my blog together last year to teach about good money management skills to decrease money-related stress and ensure a secure retirement. It’s ambitious, but NOT out of your reach.
But what if your goal is even more ambitious than that? What if you want to retire early?
This contributed post today is all about achieving a new level of wealth known as financial freedom.
Financial freedom/independence is something of a big deal in the money blogging community.
And the idea is starting to spread to the rest of us.
For those of you not in the know, financial independence is simply the name for that state of affairs where you no longer have to rely on your job to support you.
Financial independence is where you have enough passive income from investments and other ventures to support your lifestyle and bills for the rest of your life.
It’s sort of like the state that most people get to in retirement, but even then they have to watch the pennies, because the money can run out of it is not continuously invested.
Financial freedom has no such limitation. If done properly, and managed well, the money won’t run out, leaving you free to pursue your dreams.
While increasing your income and saving the gains is one way of gaining financial independence, there are other ways to achieve this rare state of affairs. You don’t need to earn more money in order to have more money.
Spending less than you earn and then saving/investing that money, is the way you achieve financial freedom.
Saving Money to Invest
With that being said, there are numerous routes to achieve financial freedom. Perhaps you want to invest in property and become a buy to let landlord or lady? Maybe instead you’ll want to invest in vending machines. Your job is to pick a path, learn as much as you can, and follow it until successful! (And before moving on to something else ideally)
Make sure you have a mentor who can help you on your journey too before committing too much financially.
If you are serious about achieving this state of affairs, then you’ll need money to do it. If you’re in a precarious financial position, and you need to pay off debt with high interest rates, so this first.
Then there are some ways to dramatically cut some of your costs to free up money to stay throwing into some new ventures.
1. Your House
Let’s go straight for the big one: Your house. Your home is by far your biggest expense. If you’re renting, and want to be financially free, you could buy instead (if it’s financially viable).
Rent is money down the drain, and it typically costs you more to rent a property than the mortgage on that home would be. However, renting may be the best thing for you right now, and if that is the case, then build up other assets and a decent chunk of savings first.
But let’s say you are a homeowner and you are paying your mortgage off at a steady rate. Ensure the mortgage is a repayment one though. There are millions of people on interest only versions, which means they will never pay off the mortgage. Bad news.
Just remember, no mortgage means no huge monthly expense, and money to throw at other investments.
The easiest way to pay off your mortgage is to downsize. Most people buy homes that are far larger than what they need. You may have a couple of kids, but do you really need a huge four bedroom house when you only have two children? Use a company like Flying Homes Ltd to get an idea of what your property is worth, then have a look at smaller homes you like the look of. Any profit you make can go straight into paying off a lump sum of your mortgage.
2. Your Car
Your next biggest cost is probably your car. These days, everyone has to have the latest model, and it has to be a premium brand to boot. How many hundreds per month are you spending to make sure that you have the latest car? And when the three years payments are up, you either pay a huge lump sum to own the car outright, or you start the whole process again with another new car, which is more money down the drain.
This may financially make sense for businesses, but for the majority of us, it’s not a great strategy.
Break the cycle and buy a used car outright. After three to five years, most cars are worth around half of their new value, and at five years old, most cars are still full of fairly new technology.
3. Those Pesky Daily Costs
The smaller costs are the ones that you don’t notice so much, but they still add up quicker than you might think. That daily trip to Starbucks might only cost you a bit of change, but all that change adds up over the month. Start to keep track of the small purchases that you make; you will be shocked at how much money you are spending without even realising it.
The path to freedom
There you have it, a few simple ways to cut down on your monthly costs and take a few steps closer to financial independence. It won’t be an easy journey, but if you truly want it, then it can be yours.
I hope this price gave you some inspiration! You might not be interested in achieving this goal, but the same principles apply even with reaching retirement, so it will all help.
Now your turn. What are your goals? What are you willing to do to achieve them?
Until next time,