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4 Secrets of Financial Freedom

4 Secrets of Financial Freedom

Everyone is looking for financial freedom, and we try to do it by getting involved in something we are passionate about. Many people have found this freedom by starting a business or working their way to the top in a company. In the past 5 years, there have been more millionaires than in any other period looking back. Much of their success can be attributed to the popularity of the internet, and the resources available online. The cool thing is that many people have written about this success offering their insight into what makes a person successful, or what someone must do to stay ahead of their competition. These same people have mentioned the “secrets to financial freedom” and have written lengthy books while making millions of dollars through sales. Today, we’ll be going through something very special…

We’ll be exploring the “so-called” secrets and what you can do right now to start working your way towards financial freedom. However, it’s very important to mention that this freedom does not necessarily mean you’ll be happy because no amount of money can buy happiness. However, you can use the money you earn to help others and build a wall of happiness around you.

Let’s get started and your feedback will be greatly appreciated:

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1. Money Management

You might have a great foundation with your family supporting you or have a high paying career, but you won’t get closer to financial freedom if you don’t know how to manage your money. I know many people who spend more than they make, and this doesn’t bring them closer to their bottom line. To achieve true financial freedom, you must know how to manage your money and learn how to save, letting your money work for you. Many of the top money managers have stated that if your spending habits are uncontrollable, then you’ll end up worst off then some of the people who don’t make much at all. Therefore, saving money is one of the most important steps to financial freedom.

Start to understand your spending habits, and jump back on track by controlling your expenses, learning about savings and budgeting. Know what’s important right now in your life and what you can do to reinvest into your savings. Identify the areas where money spent truly pays off in a better quality of life for your core interests. For example, some people spend money on their business because they know long-term this will increase profits, grow their customer base and ultimately their business.

2. Your Career Choice

This is going to be one of the most important decisions you’ll make ever, and you should spend time making it by researching growth markets. For you to get closer to financial freedom, you must love what you do, and be earning enough money doing it. However, on the other hand, I know a lot of people who make enormous money but are miserable getting up to go to work in the morning. Follow your passion and everything else will fall into place accordingly.

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Some of the best advice I can give you about choosing a career is to get involved in one which plays to your best strengths, and where you’ll be an asset to the company. If you start your own business, then base it around those very same set of skills.

3. Always Set Goals

Someone once provided me with a great analogy about why setting goals is important, here what they said –

“When you set goals, you’ll be like a ship with a compass knowing exactly where it’s going. However, without goals, you’ll be lost at sea”.

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Therefore, you should have a clear-cut plan about what you want to accomplish, and how you’ll get there. You should set small goals which, when combined” will lead you to a higher purpose. Setting smaller goals provide you with motivation each time you check something off your list. So, what makes a great goal plan?

Let’s look at some of the questions you should be asking:

  • What is my main objective?
  • How can I achieve my end goal?
  • What is the time-limit I must meet this goal?
  • Can I network with others for help?
  • What other way can I achieve my end goals? Hiring help, working for others, etc.

4. Network with Others

This can also be commonly grouped with helping others, and building a network of people that you can rely on to get the job done No matter what successful entrepreneurs you ask, they’ll all give you the same advice – you must get help and then help others to succeed. There are people who have been involved in the same business before you so know creative ways to get the job done. They know the right people which will be a great asset when trying to grow your business, and to your bottom-line. However, for you to benefit you must reach out to people in your industry and build close relationships with them. These people can help increase your brand awareness, profits, guide you in the right direction, and finally help you from making common mistakes.

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How can you find the right people to network with? Luckily, we live in a period where resources are available online so all you should do is a quick search. I would search in Google and find bloggers, companies or even marketing companies who are in your niche. Find and connect with the right person and reach out to them making sure your follow-up afterward. Tell them about your passion and ask them for advice on how you can grow your business leading you to faster financial freedom. Remember, financial freedom is all about making enough money to save, invest and using it to provide you the freedom you are looking for.

Final Thoughts

In the end, everyone is trying to achieve that complete financial freedom so they can live a more enjoyable fulfilling life. However, gaining this freedom does require smart investing and money saving. For example, it’s difficult to gain that freedom when you have uncontrollable spending habits without a clear vision. It’s time you start saving and investing in your business so you achieve that complete financial freedom.

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Rizvan Ullah

Rizvan is the founder of CareerCrawlers. He shares career and motivational advice on Lifehack.

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Last Updated on September 2, 2020

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways to set financial goals and actually meet them with ease.

4 Steps to Setting Financial Goals

Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

1. Be Clear About the Objectives

Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

2. Keep Goals Realistic

It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

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4. Short Term Vs Long Term

Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

How to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a two-step process:

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

Ensuring Healthy Savings

Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

If you’re not sure where to start when tracking expenses, this article may be able to help.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

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Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

3. Make a Plan and Vow to Stick With It

Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

Nowadays, several money management apps can help you do this automatically.

At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

  • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
  • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
  • If you go shopping, always look out for coupons and see where can you get the best deal.

The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

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5. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

6. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

Making Smart Investments

Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

1. Consult a Financial Advisor

Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

2. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

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3. Compounding Is the Eighth Wonder

Einstein once remarked about compounding:

“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

Use compound interest when setting financial goals

    Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

    Start saving early so that time is on your side to help you bear the fruits of compounding.

    4. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

    If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

    Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    Managing your extra money to achieve your short and long-term financial goals

    and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

    More Tips on Financial Goals

    Featured photo credit: Micheile Henderson via unsplash.com

    Reference

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