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How to achieve financial freedom in 5 years

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What is financial freedom?

Financial freedom is about taking ownership of your finances. You have a reliable cash flow that allows you to live the life you want. You don't have to worry about how you will pay your bills or sudden expenses. And you are not burdened with a pile of debt.

It's about realizing you need more money to pay off debt and maybe increase your income with a side hustle - we'll get to that in a minute. It's also about planning your long-term financial situation by actively saving for a rainy day or retirement.



Financial freedom. It may sound like a nice theory. But the truth is that anyone can achieve it. And I mean anyone—even someone who once had tens of thousands of student loan debt like yours. No matter what financial problems you have today, there is always a way to get back into the black. Maybe your first step is to try a budgeting app.

In this article, we'll dive into the importance of financial freedom and share some tips for financial freedom, including some that have worked for me.

How to achieve financial freedom in 5 years


#1. Be aware of where you are

You cannot achieve financial freedom without knowing your starting point. Looking at how much debt you have, how much savings you don't have, and how much money you need can be a daunting reality. But it's a valuable step in the right direction.

Make a list of all your debt: mortgages, student loans, car loans, credit cards, and any other debt you've accumulated. Don't forget to include money you've borrowed from friends or family members over the years.

Now take a deep breath. And one more. Then add up all the numbers.

how much debt do you have

If it's a big number, don't worry, I promise I'll share a few ways to pay for it later in this article. If it's a small number, congratulations! Feel free to share your financial freedom tips in the comments below.

Next, take a look at all the money saved.

Make a list of all your savings: savings accounts, stocks, company share comparison programs, company pension comparison programs and pension plans. Then we add the recurring monthly payments you receive such as salary, side money and so on.

Keep these numbers in mind as we work through a few more tips for financial freedom.

#2. Look at money positively

Debt can certainly be a bit of a deterrent.

But remember that money is a good thing, even if it seems like it's carrying a heavy burden right now.

You deserve to achieve financial freedom.

According to You Are a Badass at Making Money by Jen Sincero, people who don't make a lot of money often feel ashamed when it comes to making money. And so the biggest obstacle that many people experience in making money is the feeling that having money is bad. Many feel guilty for having it and guilty for wanting it. Sincero said of money, "We use it every day to improve our lives, but we always seem to focus on the negative."

Money is simply a necessity like food or water. It helps you buy the things you need and live the life you want.

To experience financial freedom, you will need to look at money as a tool to help you achieve your dreams, recharge your batteries, and live a stress-free life that you can enjoy.

Because if you view money negatively, you're subconsciously sabotaging your chances of making and keeping it.

#3. Write down your goals

Why do you need money?

Want to get out of debt for good? Desperate to escape the 9-to-5 grind? Is there a place you've always wanted to travel to? Do you need to save for your wedding, children or retirement?

When I achieved financial freedom, it was because I tied it to an emotional goal. My goal was to get out of student loan debt and save for my first home. And honestly, it's been a euphoric experience watching my debt shrink and my savings grow.

When I saw the numbers change, I was so excited that I worked harder to make more money to see a bigger change in my personal finances. Would I have achieved my goal of financial freedom if I hadn't tied that goal to something emotional? Probably not. I was desperate to get out of debt and move out of my parents' house. That desperation motivated me throughout my journey.

Another interesting thing happened. In February 2016, I wrote down a few of my goals on a piece of paper:

Make $100,000 Selling Products Online
Save $20,000 for your down payment
Pay off $24,000 worth of student loans
I ended up misplacing the paper and completely forgot about it. And then one day, a little over a year later, when I was already living in my new home, I found it in my laptop. Sure enough, I accomplished all three things. The funny thing was that I wasn't even consciously thinking about those goals.

You may not be able to do everything you would like in a month. But a year is a long time to make progress on your goals. Make sure your target is tied to the specific number you want to hit. Believe it or not, you will start working towards these goals without even realizing it.

Knowing exactly what you want to achieve makes achieving financial freedom a million times easier.

#4. Track your spending

An important step to financial freedom is tracking your spending.

You can use a tool like Mint to let you know how much money you're spending, what categories you've overspent in, how much money is in all your accounts, and how much debt you have.

Another great thing about Mint is that it allows you to set goals on your dashboard. You can track your goals and know the exact month you are expected to reach the goal based on how much money you put into it. This will keep you accountable and remind yourself that you're putting money into it for you.

After using Mint for a month, I managed to save some extra money towards my new wedding fund goal. Mint helped me stay focused on my goal and pushed me to create more passive income to reach my financial milestones.

#5. Pay yourself first

You've probably heard the expression "pay yourself first." But in case you don't, "pay yourself first" means putting a specific amount of money into your savings account before you pay anything else, like bills. And the act of paying yourself first has helped countless people get closer to achieving financial freedom.

Why?

Because if you want to pay yourself $1,000 per pay period first, then whatever is left over has to go into accounts. And if you don't have enough to cover those bills, then you're forced to pick up a side income to cover the costs.

By paying yourself first, you ensure that you are always putting money aside to invest in yourself. When you do the opposite, you only get what's left, which usually isn't substantial enough to help you experience financial freedom.

You can also pay first in other ways. For example, if your company has a pension savings scheme, you can apply to withdraw money for retirement. In this way, you first invest in yourself and your future. The money is deducted from your paycheck, so all that's left is money to put aside for your bills and expenses.

#6. Spend less

In 1958, Warren Buffett bought a five-bedroom house for $31,500 and hasn't moved out of it since. His net worth? A staggering $90.3 billion. He can afford bigger and more expensive housing. But his thrift may very well be the reason why he is one of the richest people in the world.

Warren Buffett


The truth is, a lot of rich people don't look like rich people. Zuckerberg literally wears the same boring t-shirt and jeans every day.

Buying fewer things can actually help you get richer.

By spending less, two things work in your favor. First, you'll have more money to put aside for your financial freedom. Second, you'll find that you actually need a lot less stuff to survive, which also helps you put more money away.

And that brings us to our next point…

#7. Buy experiences, not things

Life is short. It's not about hoarding all your money until you're 65. You can enjoy life while you're alive.

Ultimately, the things that help you live a more fulfilled life will be your experiences, not the products you own.

And do the things you buy make you happier in the long run? Is the debt you have from buying a bunch of stuff making your life easier?

Now flip the switch.

What is your happiest memory? What did you do? who were you with

Let's make more memories.

Maybe you have a friend that you enjoy working out with. Invite her to do a free YouTube playlist workout at home.

It's a date. You want it to be memorable. Find a great activity you've never done before on Groupon for a fraction of the price.

You've always dreamed of going to Rome. You have been saving money for a year to experience your dream vacation. Go on that holiday feeling guilty. You didn't go into debt for it, you earned it. Or you can become a digital nomad and travel the world while working abroad

Life is made up of moments. The best ones come from quality time spent with friends and family. While some products can help you get closer to your family (such as weekly family video games), most don't add much value.

Don't spend money, you don't have to pretend you have money.

#8. Pay off debt

Some people will tell you that it is wiser to invest your money in stocks instead of paying off debt. If you're an expert stock picker, maybe that's true. But if you've never invested in stocks before, you could be in debt.

Many people feel the same thing after completing their last debt payment: relief.

If you have $50,000 in debt, even though you have $30,000 in cash in the bank, you can't really call yourself financially free. You're still $20,000 in the hole.

While paying someone else isn't as glamorous as having money in the bank, it does get you closer to financial freedom.

There are two main ways to pay off debt: snowball and avalanche. Snowballing is when you pay off the smallest debt first. Avalanche is when you pay off the debt with the highest interest rate.

You have to decide what is best for you. But as I worked to be debt free, I did a snowball effect. It helped me stay more motivated. Since I was able to get rid of my first debt, a $1,200 credit card bill, in just a month, the sense of accomplishment motivated me to take on a much larger, ongoing student loan.

And since credit cards were no longer an issue, I would pay on average about three times the $300 minimum payment. It ended up taking about three years to finish paying off my student loans instead of the nine years I was given.

Paying off a large debt will lift a huge weight off your shoulders. After you pay off your debt, you see the amount of money you have in the bank go up. It feels amazing to watch that number go up (even if you had to watch it go down in the beginning) and it keeps you motivated to keep growing.

#9. Create additional sources of income

Okay, so at this point you're probably thinking, "My debt is way more than my salary, how can I pay it off if I'm not making enough?"

If you are serious about financial freedom, you have to sacrifice some blood, sweat and tears.

Your 9 to 5 might not cut it. If that's the case, you need to step it up and look for money outside of your current job.

Some experts recommend having seven streams of income. If you have a 9 to 5 job, congratulations, you have one, just six more to go!

Now you can look at your sources of income in two ways: active income (time to trade for money) or passive income (money that can come in even while you sleep).

If you trade your time for money, you are limited by the hours of the day. Here are some side tasks you can do to earn an active income:

  1. Become a freelance writer and search for work on ProBlogger
  2. Help a business owner as a virtual assistant with jobs on Upwork
  3. Gain new skills through online courses for entrepreneurs and monetization
  4. Become an Uber driver
  5. Homework help on Task Rabbit
  6. Pick up odd, casual jobs on Craigslist
  7. And more!
If you don't have much time to devote to earning income, you can focus on increasing your income with passive income such as:

Starting a dropshipping online store with Shopify
Start your own custom clothing store on Shopify
Sell ​​profitable content (blog, ebooks, courses, webinars, audiobooks, podcasts, apps)
Become an affiliate marketer
Buy properties and rent them out
Invest in stocks
Fortunately, all seven of your income streams can come from the same source. For example, if you are an e-commerce expert, your income streams may come from creating seven different stores. And remember: you don't have to start with seven streams, you can add to it over time.

#10. Invest in your future

The final financial freedom tip is important. Let's say you follow the advice and recommendations in this article, get out of debt, and grow your savings. This might help you now. But what if something unexpected happens? Will you be ready for it?

It's important to save money for rainy days, retirement, and (sorry for being morbid) in case you die to ensure your family isn't drowning in paying your funeral, debts, and taxes. Okay, now let's get back to that happy place.

If you have a 9 to 5 job, talk to your company about adding a pension plan or check to see if deductions are already being made. The deduction is taken before it hits your account, so you never feel like you're missing out. And it's pretty cool to check it regularly and watch your savings grow.

You also want to save enough money for an emergency fund. Some experts say $10,000 is fine, while others say six months of your salary. And to be honest, those numbers can seem pretty high if you're not making a lot of money. Instead, start with a goal you can afford—like $100 your first month. And once you start earning more active or passive income, start increasing your goal to $500 a month to $500 every two weeks and so on. If you've spent on credit and come up with a high credit card bill, don't use your emergency fund – focus on more active income options to pay them off faster.

An emergency fund is only for unplanned emergencies, such as a tree crashing into your home, a car accident you have to pay out of pocket, or a hospital visit.

By saving money for rainy days and retirement, you'll be less likely to end up back where you are now: yearning for financial freedom.

Conclusion

 Achieving financial freedom in 5 years can help you take ownership of your finances, and more importantly, your life. It's about living within your means, being a little frugal, and making sure that money is spent on the things you really need, like food, shelter, and even vacations (relaxation is important too, you know). By following the financial freedom tips in this article, you'll be one step closer to achieving the financial freedom you deserve. So look at those finances, build other sources of income, pay off that debt and you'll be free before you know it.

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