Tips for Financial Freedom
Posted: Dec 22, 2020
Have you heard of financial freedom? It is a straightforward concept, although it is difficult for most to attain. When you are financially free, you do not have to depend on a single income source. Suppose you just got laid off. If you are financially free, then this won't really impact you. Unfortunately, simply knowing about the concept does nothing to get you there. That is up to you.
1. Common Money Mistakes That Get You in Debt
First, you need to learn how to manage your money. It would be best to start by avoiding common mistakes. It is a lot easier to spend than it is to earn. Plus, mistakes often stick with you for a long time.
Taking Out Unproductive Debt:
When you spend money on your credit card, that is unproductive debt. Think about it this way. Productive debt either increases in value or generates revenue. Credit cards don't do either. In fact, all credit cards do is drain your money.
Not Paying Credits Off in Full:
Now, that does not mean credit cards do not have a place. On the contrary, responsible use of credit cards can be beneficial. However, unless you pay them off entirely, it would be better not to use them at all.
Neglecting to Save an Emergency Fund:
Not having an emergency fund is another incredibly common mistake. By neglecting to maintain one, small problems magnify. For instance, when an unexpected expense occurs, you have to pay with credit.
Impulse Shopping or Bandwagoning:
Finally, you should always be mindful of your spending habits. For example, instead of upgrading your smartphone, keep using the one you have. As long as it works, a new one is just throwing away money.
2. Tips To Become Financially Free
Now, once you are aware of the most common mistakes, you can craft a proactive strategy. How much you earn does not matter nearly as much as how you spend it.
Only Take Out Debt When It Is Productive:
Debt is only a good idea in specific circumstances. For now, we recommend only taking out debt for productive reasons. The best example would be real estate. When you take out a mortgage, that debt can earn you additional money. Not to mention, you could turn the property into a revenue stream. By buying a rental, you get guaranteed monthly income.
Pay Off All Your Unproductive Debts:
Unproductive debts are bad because you pay interest on them. Any money you pay on interest is simply money you give to the bank. Pay off all your unproductive debts to minimize the interest you pay monthly. That way, you can put that money towards better purposes.
The Comparative Shopping Technique:
Comparative shopping is crucial. Never accept the first offer you find for a product or service. Suppose you have been shocked by your utility bill. Then, you should compare different providers. Once you find a better deal, do an electricity switch. That way, you aren't wasting money on something you could get for less.
Invest a Portion of Your Income:
Now, you've optimized your cash flow. Next, you should automate your investments. To start, set aside a small portion of each paycheck. It works best if you never even see the money hit your bank account. That way, there is no temptation for you to spend it. By investing your money, you harness the power of interest. Instead of paying interest, you are earning it.
Financial Freedom: Regaining Your Independence
After you become financially independent, a day job is optional. It takes time for you to get there. Nevertheless, it is a worthwhile goal. By achieving financial freedom, you become the true architect of your life. Not to mention, the journey always starts with the first step.
BioGenerator is an evergreen investor that creates, grows, and funds innovative companies and talented entrepreneurs in the St. Louis region.