With financial freedom, the future is always an open book. For some who achieve this goal, it provides the ability to continue working until ready to retire — but in a fulfilling career with ample opportunities and challenges. For others, it is the opportunity to see the world and enjoy all it has to offer.
While a worthy goal, many people start on the journey to financial freedom with a minimum of instruction from traditional educational institutions and family, according to Laetitude. Often, informal instructions are even unintentionally incorrect for building wealth to the level of true independence as quickly as possible.
The truth is that many traditional financial plans focus overwhelmingly on more conservative savings blends. While these are essential for retirement planning and emergency funds, they are the path to financial security and not necessarily freedom. A mixture of traditional plans, a diversified portfolio, and strong, high-return investments are required to achieve full liberty.
- Establish a budget
The most fundamental building block of any financial plan, including one for ultimate freedom, is establishing a budget. Without adequately reviewing mandatory income and expenditures and establishing spending for discretionary items, personal finances can be a bit chaotic, and the ability to save and invest effectively is limited.
A significant focus in traditional budgeting education is the need to increase savings through literal savings in the budget via expenditure reductions, but managing income is as important — if not more so — when looking for financial freedom.
- Manage income
There is only so far a person can cut a budget before encountering either extreme hardships or additional upfront costs to generate savings over a future period. When discretionary spending is already managed or cut as far as an individual wants, income is the most significant variable. This makes seeking ways to increase income extremely important.
Laetitude is a major believer in investing to increase income, but earning income from traditional pathways to fund initial investments is crucial for achieving financial freedom. Be aggressive in wage discussions with current employers and seek out new career opportunities when personal compensation is not matching the value brought to an enterprise. Working on personal ventures? Ensure the time invested provides both a satisfactory monetary return and personal satisfaction.
- Prioritize saving
While building income, it is still important to save wisely. This means reducing debt as far as possible to avoid losing unnecessary funds — and the ability to earn a return on those funds — to interest. Establish an emergency fund to support several months of living in an easily tapped or liquid savings vehicle.
Rate of return takes a backseat to security and access here. It’s also a great idea to meet personal targets for any tax-advantaged plans, such as personal retirement or health savings accounts. After the traditional investment goals are met, it’s time to branch out into more lucrative investments, per Laetitude.
Getting started in investing can feel overwhelming, but it is essential to obtain financial freedom. To avoid early mistakes, begin by establishing an account with a brokerage. Many of these feature educational materials, suggestions, and investment funds designed to help inexperienced investors learn the ropes. Take advantage of these learning tools to better manage a self-directed investment account and develop a strong portfolio. As experience grows, it is also possible to self-direct retirement savings versus relying on the managed plan.
Using third-party educational platforms is also valuable for gaining fresh perspectives and learning about new possibilities for wealth generation. Some investors, particularly those with a high level of assets and minimal experience, find the services of a financial advisor invaluable for an introduction to investments and long-term portfolio management.
As a personal portfolio grows, it is important to diversify holdings across stocks, bonds, real estate, cryptocurrency, and other opportunities. Choose a blend of long-time and short-term investments and always watch for growing enterprises.
With a wider net cast, an investment portfolio enjoys greater resiliency in market fluctuations, and returns are explosive when the economy is booming. It is possible to achieve financial freedom and personal independence through saving, strategic investments, and earning on earnings. These same techniques also help retain the hard-earned freedom.
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