Jul 10

Road Map to Financial Freedom| 7 Steps to Financial Freedom Part 2

Financial Freedom Is Your Right

Financial Freedom Is Your Right

In the first part of this series, Road Map to Financial Freedom, I outlined the first 3 steps you should consider when choosing financial freedom as your way of life.  You can read that page by CLICKING HERE.

Steps 1-3 included:

-1- Recognize the Potential in Yourself to Create Wealth,

-2-  Choose to Become Self-Reliant, and

-3-  Create a Practical Plan

In this post I will walk you through a brief tour of the next four steps starting with:

-4- Eliminate Waste

Self-made millionaires who are enjoying financial freedom hate waste of any kind.  They hate to waste time and they hate to waste money.

Around 1998 I started studying wealthy families.  I wanted to know how they acquired their wealth and what attitudes, values and habits they had that were different from 98% of the population. How did they escape the rat race? How do they think? I spent some valuable time interviewing first-generation wealth builders. (See a brief summary of my findings here.)

Inherited wealth is great but most of us don’t come from rich parents and even if we did, many inheritors are like lottery winners—they squander their wealth. I read everything I could get my hands on.  I had to know how they got to where they are. The people I studied made their money from their own productivity. Self-made millionaires enjoying financial freedom make the most of every minute of their day.  They don’t waste time on:

  • Chatting on social sites…they use social sites to their advantage in driving traffic to their business.
  • Lengthy emails to friends, family and associates…they get to the point of their communication quickly.
  • Exploring internet marketing sites…they know any site promoting a get rick quick idea is likely to be a scam.

They also don’t waste money on paying consumer interest with credit card debt, buying the latest fads and fashions, buying expensive cars.  They don’t spend excessively indulging habits like eating out or buying rounds of drinks for friends.

According to Thomas Stanley, author of Millionaire Next Door, most self-made millionaires are very frugal.  By living a frugal lifestyle, they are able to put their money to work in investing in more income-producing assets.

People who enjoy the peace of financial freedom take seriously the words of Benjamin Franklin…

 “The way to wealth depends on just two words: industry and frugality.”

-5- Learn to Save and Invest Wisely

Learn to Invest for Your Financial Freedom

Learn to Invest for Your Financial Freedom

When it comes to saving money, credible financial advisers recommend saving the first 10% of your income in an interest bearing account.  This is the sound financial principle of “paying yourself first”. Most financial planners advise to set aside a minimum of three months living expense in the event of getting laid off or incurring an emergency of some kind. Obviously saving 6 months is even better–especially if part of your financial freedom plan includes starting your own online business. But, until you are able to increase your monthly income to significantly exceed your minimum monthly outflow, saving money can be difficult.

Don’t fall back and take that as an excuse to continue any bad habits of consumerism and overspending that you may have developed.  If you are a consummate shopper or someone who uses your credit cards to buy things you do not need because you have “shiny new object syndrome” or you have to “keep up with the Joneses”, please take a look at my article on Ten Pitfalls to Financial Success and let me help you by saying, in order to accumulate wealth you must first consider yourself worthy to to have wealth. When you do, your need to buy things just to feel good or look good will disappear.

I want to encourage you to set aside at least $1,000 in an emergency fund as quickly as you can and then add $50 or $100 dollars a month to it until you get a three month living expense reserve.

After you get at least $1,000 in reserve, open up an online trading account and then set aside as much as you can each month into a balanced portfolio.  Start with three asset classes–growth stocks, income producing assets and cash. The younger you are, the more weight you should have in growth stocks. Growth stocks as an asset class will typically add 10% growth or more to your investment portfolio over time. Quality Income producing asset like REITS or Master Limited Partnerships could bring a consistent 15 -20% income.

Income producing assets could include rental real estate properties, REITS or Master Limited Partnerships. Of course, every one needs to have some money in cash and cash equivalents in the event of an emergency.  Keep in mind, the quicker it is to liquidate, the less interest you will earn.  In other words, the lower the risk the lower the return.

If you are serious about learning to invest wisely, my best advice is to study the investment habits and philosophy of Warren Buffet.  Invest at least 30% (more is better) of your portfolio in great blue chip companies like Coca Cola and Johnson and Johnson and hold those high growth, dividend paying stocks for the long haul.

-6- Eliminate Debt

Debt is the greatest enemy to your quest for financial freedom. You have to master money in order to experience financial freedom and become a lifetime millionaire.

Consumerism is a deadly disease that has inflicted millions of Americans. Granted, it is very easy to finance your lifestyle on credit and maybe there are days when it feels good to go to the mall for a little “shopping therapy” but in the long run, you’ll feel far less stressed when you are in the position to pay cash for everyday purchases.

I’ve found a debt-management software program that you might want to check out.  I like DebtCalc Debt Elimination Planner by Slateboard.com.  It’s easy to use.  You can get a home version for $39.95. It will calculate exactly what you are paying in interest payments.  It will also help you figure out how long it will take to pay everything off. Check it out at www.slateboard.com. Another great debt elimination tool is www.readyforzero.com.

-7- Increase Your Income

Having a substantial income under their control is the biggest distinction between self-made millionaires and those struggling for financial freedom. Regardless of where you are in your life, increasing your income could help you:

  • Provide a better standard of living for your family
  • Give you more money to save for retirement
  • Help you eliminate your debt more quickly
  • Give you the money you need to invest in a high-growth portfolio
  • Allow you to fire your boss, and work for yourself
  • Help you transition from employment to empowerment

You can easily increase your income by:

  • Moving the lazy cash from your savings account into an income producing asset
  • Revamping your portfolio into one that offers more robust dividends and capital gains
  • Starting an online business that includes passive affiliate and online advertising income
  • Using your experience and creativity to produce an eBook or online Plug-in or mobile App

And that is just the tip of the iceberg when it comes to increasing your income.

Thank you for reading this post.  Please do me a favor and share your wisdom in the comment section below so other readers can benefit from our discussion.  Also, feel free to share this post with friends and family.

Are ready to get started on your path to millionaire success? I can help! Contact me for a FREE consultation.

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