There are so many people who want the formula for financial freedom and they’re looking for the secrets to get to it. Well, I have it. And guess what? It’s no secret. Most of you already know it. It’s so simple that you’re going to slap your forehead and call me Captain Obvious. The problem is, most people simply DO NOT follow these steps and therefore never achieve the financial freedom they want.
Get your pens and paper ready. There are TWO steps to financial freedom and you must accomplish both in order to reach your goals.
Formula For Financial Freedom
1. Spend less than you earn and invest the difference.
*facepalm* Yeah, simple, isn’t it? But most people DON’T do that. Most people spend MORE than they earn and therefore don’t invest at all. As soon as they get that paycheck, the money flies out the door in futile attempts to keep up with the Joneses or impress people. They imprison themselves with credit card debt, mortgages they can’t afford, car payments they can’t afford, etc.
It’s an extremely easy trap to fall into if will power and discipline isn’t exercised. It happened to me and my husband. We paid off all our debt within 3 years and started saving and investing, which has sustained us since both of us were laid off years ago. We would have been completely SCREWED if we hadn’t learned this lesson in time.
My dad once told me “Nobody ever gets rich working for a living.” He stressed to me the importance of investing my money, having my money work for me, so that eventually I’ll have an income without having to work for it. That’s the ONLY reason to invest: to have an income for life without working. You want to go from trading your time for money to trading your money for money. THAT is true financial freedom.
2. Reinvest your returns for compounded interest until you reach a critical mass of investment capital that creates the annual income you want.
Make the commitment right now to pick a specific percentage of your income to invest periodically, either monthly or annually, no matter what. Then, put a portion of that investment into three different “buckets” of Asset Allocation. These three buckets are:
- Security Bucket – Items in this bucket also include cash for 2-6 months of expenses (this is SO important for emergencies), your home, IRAs, insurance, fixed income and low risk investments that have a guaranteed rate of return. These investments are going to take care of you and cover your basic needs.
- Growth Bucket – Items in this bucket are stocks and other investments that you’ll buy and hold/trade, generally higher risk, but higher reward than investments in your Security Bucket. These investments will grow your income.
- Dream Bucket – These investments are for all your wants: traveling, owning a vacation home, getting that dream car.
There you go! A simple, but actionable, formula for financial freedom. You probably knew all this, didn’t you? Or maybe it's all new to you. In either case, are you acting on it? If you aren’t, get started! If you are, great! Now, do what it takes to grow those investments and ensure your financial freedom. That includes seeking out financial planners, educating yourself, and keeping a close eye on those investments.
I knew all of this, but I occasionally need to be reminded of it. If you want to learn more about securing your financial freedom, check out Anthony Robbins’ “Unleash The Power Within”.
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