10 Steps to Financial Freedom

Financial freedom has a lot of different meanings to different people. The way I understand financial freedom is this: Having a passive income that exceeds your expenditure. To achieve this goal of financial freedom, there are lots of steps that one needs to take.  Here are my 10 personal tips on the road to Financial Freedom.

Tip #1 - Have a Plan in Mind

As the saying goes, failure to plan is planning to fail.  In order to achieve financail freedom, one should have a goal that is specific, measurable, accurate, realistic and time-bound (SMART goals).  A simple goal for financial freedom could be like :

To reduce my spending by $100 a month by eating out less often.  To achieve by end of 2009.

Having a series of goals in mind to achieve your overall plan will thus help you in achieving financial freedom in a more structured manner.

Tip #2 -  Purchase insurance first

Always protect what you cannot afford to lose.  Insurance helps to protect against life's unexpected events and will help minimise the financial impact that such events can have on your financial freedom journey.  It is thus important to ensure that one is well-insured in the various areas so that large medical bills don't disrupt your finances later on in life.

Tip #3 - Spend Less Than You Earn

As simple as this tip may sound, it is often lost on people.  The key to being financially free essentially involves one to save/invest.  The only way one can go about starting a savings plan or investment plan is to spend less that he earns such that he will have a positive cash flow each month.  Saving 10% - 15% of your monthly salary will be a good start

Tip #4 - Earn More

This is the other side of the equation that one needs to manage.  Basically, if your expenditure keeps going up over the years, you basically need to increase your earnings.

Tip #5 - Buy Assets Not Liabilites

This is a lesson from the Rich Dad Poor Dad series.  Basically, buy assets that puts money into your pocket each month.  Such assets could be stocks, businesses, rental property, etc

Tip #6 - Increase Your Financial IQ

Read books on personal finance. Surf the net for articles on personal finance.  Basically, increase your financial IQ so that you are financially savvy and know how to go about saving and investing.  As they say, knowledge is indeed power.

Tip #7 - Work Part Time

Working part time helps to increase your monthly income and also serves to decrease your expenditure (hopefully since you will be working more often).  Part time work often pays well too.

Tip #8 - Take Care of Your Health

Health is Wealth.  A person without good health will never be able to enjoy his wealth.  A person who has good health will be more likely to attain wealth.  Think about the medical costs that one saves just by keeping a healthy lifestyle.  So start losing weight and exercising!

Tip #9 - Pace Yourself

The road to financial freedom is a marathon and should not be treated as a sprint.  Always pace yourself such that you do not burn out.  The journey to financial freedom often takes years.  You should not look for get rich quick "solutions".

Tip #10 - Believe and You Will Achieve

Last but not least, it is the mindset that you have which will determine whether you achieve financial freeom.  So believe in it