How to reach financial freedom: 3 clever steps

In other words, financial stability encompasses feeling secure about current finances and confidently managing future financial matters, alleviating daily stress, and enabling focus on personal goals for sustained well-being. To attain this stability, prioritise the following three practical steps:

Designing an optimal financial budget and committing to it

A standard financial budget serves as a roadmap to achieving financial stability by assessing current financial status and identifying pathways to future stability. Developing a strong financial literacy is essential for effective resource management, whether for short-term or long-term needs. This entails acquiring funds judiciously and managing them wisely while preparing for unforeseen circumstances. However, creating and adhering to a budget can be challenging, demanding careful planning and fostering financial discipline.

A budget should be based on net income, which excludes gross income and debts. Net income is determined by subtracting fixed expenses such as taxes, rent, and bills. A practical budget should prioritise essential weekly or monthly expenditures, ensuring needs come before wants. Regularly reviewing and updating the budget is also crucial for accuracy.

Two sides of the same coin: savings and financial stability

Saving money might appear daunting, but financial experts believe that anyone can manage expenses to set aside a fixed amount for savings. Tracking all expenses over a specific period, regardless of size, and then reducing unnecessary costs by opting for more economical options is advised. It is also crucial to identify discretionary expenses like unused subscriptions, frequent dining out, or unnecessary purchases. The key goal is to save money by cutting these expenses rather than completely avoiding them.

Allocating a part of the monthly income before any other expenses is an effective savings strategy. Another method is using a piggy bank to save money over time. Effective saving also necessitates a thorough understanding of one's financial situation and secure investment options like depositing money into savings accounts. Some banks provide specialised accounts designed for specific purposes, such as education or purchasing a home or car.

Investment and building wealth

Many assume only the wealthy can invest, but it is feasible to start with modest funds and generate passive income. This involves earning additional returns without full-time work or having another job. Opportunities include stocks, real estate rentals, or business investments. Despite the misconception that investing is challenging, educating oneself on various investment approaches is crucial to achieving the desired financial outcomes.

Earning passive income and investing with minimal upfront capital can be achieved through several promising avenues. One approach involves writing or translating ebooks and selling them on dedicated online platforms. Other options include developing and selling online courses or creating custom applications and websites for clients. While these options may not yield immediate financial gains, they also mitigate the risk of substantial financial losses.

However, alternative methods can carry risks and may fail to yield the desired results. For instance, investing in volatile stocks, or real estate ventures that can pose challenges such as rental collection issues or substantial maintenance costs, potentially resulting in significant financial losses.

In conclusion, achieving financial stability demands patience, commitment, and living within one's means, avoiding debt or loans. It involves prioritising personal financial goals over comparisons with others. This approach builds a secure financial base, offering peace of mind during unexpected crises like illness or job loss, and empowers the pursuit of future financial goals and aspirations.

References

[1] valleyfirst.com, 11 Ways to Stick to your Budget and Jump Start your Savings
[2] investopedia.com, Best Ways to Earn Passive Income
[3] foolproofme.org, Don’t Let Coronavirus Make Your Savings Sick
[4] mywisely.com, Understanding Financial Stability  
[5] rocketmoney.com, Financially Stable: What It Means – And How To Get There