Your Seven-Step Plan to Gain Financial Freedom
Many of us dream of achieving financial freedom, whereby we no longer depend on a traditional job for income, and we don’t need to worry about running out of money in retirement. Far from being a pipe dream, securing a financially-free future is actually relatively straightforward. However, it does require discipline and the earlier you start on your journey, the faster you’ll reach the finish line.
In this post, we’re going to share with you a simple seven-step plan that can take you from where you are today to where you want to be. So without further ado, let’s get straight into it with step number one.
Step #1: Define Your Goals
Aiming to become “financially free” isn’t specific enough. You have to ask yourself, what is financial freedom to you? Write it down in as much detail as possible, from how much is in your bank account to the lifestyle you lead. The more specific you get, the more likely you are to achieve those objectives.
Once you’ve got them nailed down, it’s time to set out financial milestones along the way. For instance, it may be that by age 35, you want half of your income to be generated from passive investments, or you want to have paid off over half of your mortgage by age 45.
By remaining focused on these smaller goals, you’ll accelerate much quicker towards your overall target of financial freedom.
Step #2: Perform an Audit of Your Current Spending and Make A Monthly Budget
When was the last time you took a hard look at where your money is going each month? Do you know how much you spend on take-out pizza or that gym membership you never use? Track your expenses for at least three months to get an accurate picture of what you spend your money on.
Using your data, then pledge to eradicate all unnecessary spending. You might think that you don’t spend unnecessarily initially, but after three months of logging every cent, you’ll soon find hundreds of dollars you can put to better use each month.
Then it’s time to create and, more importantly, stick to a monthly budget. Budgeting is the best way to guarantee that all bills are paid, and your savings and investments are on track. It’s also a routine that reinforces your goals and bolsters resolve against the temptation to spend.
Step #3: Pay Off Your Credit Card Debt
There’s nothing that stifles wealth more than debt. The good news is that student loans, mortgages, and other similar long-terms loans typically have low-interest rates, so paying them off is not an emergency.
However, credit cards and other loans attached to consumer spending are high-interest and cripple your ability to achieve your dreams. You need to get yourself out of this debt as fast as possible. There are numerous approaches, such as the snowball or avalanche methods.
No matter which method you pick, the point is that you can’t start to accumulate wealth while you’re deep in debt. So do everything you can to get back into the black before starting a savings and investment plan.
Step #4: Pay Yourself First Each Month
You’ve probably heard the expression “pay yourself first” before. But in case you haven’t, “pay yourself first” means putting a specific amount of money in your savings or investments before paying anything else, such as bills.
The reason this is so effective is that it removes the temptation to spend it. If the money goes straight from your paycheck and barely touches your bank account as it heads into savings and investments, then you won’t be able to spend it. People who leave savings till the end of the month often have nothing left to save.
Take advantage of work schemes too. You can maximise interest made on your pre-tax dollars by investing a wedge of your paycheck in your company-sponsored retirement plan. By doing everything you can to put your money to work for you, those passive income streams will eventually overtake your employment income.
Step #5: Build A “Rainy Day” Fund
So many people get off to an excellent start with wealth creation and then get derailed by a surprise bill or an unexpected financial event that forces them to drain a proportion of their savings. You might be aware of this startling fact, but 40% of Americans can’t afford to pay a $400 unexpected bill.
Don’t let something as benign as an unexpected trip to the hospital ruin everything you’ve been working towards. Instead, build up a separate emergency fund that you can access in case of unexpected events. You can then use that to pay off the unexpected expense rather than liquidating a high-yield investment such as a distressed note.
Step #6: Start Investing as Soon as Possible
Being on the right side of interest and investment returns allows you to take advantage of something called compounding. Einstein called it the eighth wonder of the world for a reason. The more you can invest at a young age, the more significant the payday will be when you come to (hopefully) a very early retirement.
Let’s give you an example. If you invest a sum of money that returns a 10% ROI for five years, you will multiply your wealth by 1.6 times. If you invest your capital at that rate for ten times as long (50 years), you will not multiply your wealth by 16 times. Instead, you will multiply it by more than 117 times thanks to the wonder that is compounding.
Pretty mind-blowing, right? But if you were reading between the lines, you’ll notice that time is literal money when it comes to investing. The more you can invest now, the faster you can accumulate wealth to reinvest and grow even more.
Step #7: Live Within Your Means
When you boil it down, wealth creation (and your path to financial freedom) is dictated by one rule, saving more than you spend. That doesn’t mean you have to sell all of your worldly possessions and live out of your vehicle. It’s about making small adjustments by distinguishing between the things you need and the things you want.
In 1958, Warren Buffett purchased a five-bedroom home for $31,500, and he hasn’t moved out of it since. His net worth? A staggering $90 billion. Of course, he can afford a much larger and more expensive home, but living well within his means is one of the reasons he’s one of the world’s wealthiest individuals. If he can manage it when money is no object, then so can you.
Start Your Journey to Financial Freedom With Revolve Capital
If you’re ready to take the first steps of your investing journey, or you’re ready to add low-maintenance passive income streams to your portfolio, then we can help you here at Revolve Capital.
Our distressed note opportunities allow you to achieve stock-market-beating returns without any of the associated risks since your investment is backed by the asset of a physical property. The best part? You can manage them all from the comfort of your computer. Yes, it’s really that simple!
If you would like to learn more about buying distressed notes, you can head over to our FAQ page. Alternatively, if you’re ready to view our portfolio of distressed notes, head over to the buyer application form to begin the verification process.
We look forward to helping you achieve your financial freedom goals here at Revolve Capital!