Do you feel overwhelmed by the future and don’t know where to start? Are you consistently late on your financial obligations? Are you planning for your retirement but you aren’t sure how much money will be needed in the future? Do you worry about not being able to save enough money for the future because of unpredictable expenses? If so, then building your financial freedom is something that’s high on your list.
Financial freedom isn’t something that can be achieved overnight; it takes time and dedication to get there. However, with a little bit of forethought and planning, it’s easier than you think. Financial independence is a state of independence from external sources of funding to afford one’s personal lifestyle without monetary assistance. So, how do you build your financial freedom? Read on to find out more…
Create A Vision Of Where You Want To Be
It’s important to have a vision of where you want to be financially. Why? Because it helps you set goals and plan for the future. You can visualize exactly where you want to be and this can help you stay motivated and keep focused on your goals. This can be done by taking a look at your current financial situation. What do you have right now? What would you like to have?
Set Yourself Specific Goals
Depending on your age and savings, you may have different goals to achieve. If you have a specific amount you would like to have saved, try setting yourself a goal of saving a certain amount each month until the goal is reached. You can also set yourself goals of financial independence by working out how much you would like to have saved by a certain date.
For example, if you want to be financially independent by the age of 50, you would like to have $1 million saved. If you wanted to be financially independent by the age of 30, you would like to have $250,000 saved. If you wanted to be financially independent by the age of 25, you would like to have $100,000 saved.
Calculate How Much You Need To Achieve Your Goals
Once you have set yourself a specific amount to save per month, you can then work out how much you need to have at the end of the year to achieve your goal. This can be done by taking your desired percentage, dividing it by 100 and multiplying it by your savings rate.
For example, if you want to be financially independent by the age of 50, and you’d like to be financially independent by the age of 50 with $1 million saved, you would like to be financially independent by the age of 50 with $5 million saved. So, your desired percentage would be 50% ($5 million) and your savings rate would be 10% ($500,000). So, your calculation would be $5,000,000 / $500,000 = 10. So, you would need to have $10 million at the end of the year to be financially independent by the age of 50.
Diversify Your Portfolio
There are many investment options to choose from when building a portfolio, from stocks and shares to property, bonds and investment funds. In order to ensure that your money is safe, you could consider investing in a government-backed bond.
Different types of investments will offer different returns but will also have different risks so you need to make sure that you choose the right one for your needs. You could also consider setting up a savings account so that you’re automatically saving into a regular income account. By being consistent with your savings, you’ll be able to achieve your long-term financial goals much faster.
Build A Stable Financial Legacy
While your specific goals may have changed, it’s important to have a stable financial legacy. This could include setting up a will so that your loved ones know what they’ll receive upon your death. This could include your insurance policy, house, car and other valuable possessions.
You could also consider setting up a trust. This could include your savings, investments or possessions. You could also consider setting up an estate plan to ensure that your family knows what they’ll receive upon your death. It’s also a good idea to build up a retirement fund. This could be done through a government-backed pension plan. This is an option for people who don’t have any self-funded retirement plans.
Track Your Spending And Investments
It’s important to track your spending and make sure that you’re not overspending. This could be done by keeping a monthly spending log. This could include a list of everything that you purchased as well as the items cost. It’s also important to make sure that your investments are properly diversified.
Investing in too many industries could lead to an uneven return and could also be risky. Make sure that you’re investing in the right industries for your needs and that you’re properly diversifying your investments so that you don’t end up losing a lot of money if one industry doesn’t perform well.
Save As Much As You Can
There really is no point in saving more than you need. Make sure that you’re saving at least 10% of your income. If you’re not able to save as much as you would like, consider taking out a loan or finding other ways to make extra money. You should make saving a priority so that you have the money required to achieve your financial goals.
Conclusion
If you look at the time it takes most people to get to their mid-life crisis they are usually in tremendous debt and have nothing to show for it. All they have to show for their hard work is a mountain of debt that they have no way to repay. If you are young enough, and you have the right mindset, you can build your financial freedom much earlier in your life. You can start building your wealth and creating a stable financial legacy as early as your mid-twenties.