People have different definitions of financial freedom, but the bottom line is that it’s all about the abundance of both time and money. That is, having money without having to work. Whether you are working as an employee or working for your business, some extent of financial freedom can be within reach.
If you really want financial freedom, here are the first steps to do so:
- Get The Right Mindset
The first thing that you have to do is attain the right mindset for financial freedom. Now, when you were younger, you were most likely taught by your teacher or parents to save. But for what? Well, I’m sure you were taught to save, so you can buy the latest toy or book. However, the problem with this kind of mindset is that it’s a consumer mindset.
It’s probably okay to have this mindset when you’re a kid, but it’s dangerous when you grow older. The best kind of mindset to have is an investor mindset. This means that you save not to buy the latest iPhone or Rolex, but you save to invest.
- Start Building Your Emergency Fund
This is one of the most important things that you should have. An emergency fund, as the name implies, is money put aside for emergencies. This is money you can dip into when you’re sick or need to pay sudden debts. It’s a good practice to take out at least 10% to 15% of your monthly salary to put into an emergency fund. That way, you’ll be covered in the event of anything. This also serves as your savings account which you’re not supposed to touch unless really needed.
- Start Investing Your Money
Take note that money for investments should be separate from your emergency fund. We recommend that you put aside up to 20% of your money into an investment fund that you can use for investments. Which investments should you put your money into? Well, that depends on your risk appetite.
If you’re conservative, then you might want to put your money into an interest-bearing time deposit, government or private bond, or a mutual fund. These mediums would work on a regular interest once the fund starts making money.
If you’re more aggressive, then you can try stocks or forex. These types of investments are very volatile and would need a lot of studying in order for you to be successful. The great thing about these kinds of investments is that they have a great return if you know what you’re doing.
To keep it simple, study your options and choose the one that suits your personality and your risk appetite the best.
Do you want financial freedom? Then follow the steps given above. At the very least, these tips can help you get started. What you want to do is get the right mindset first, then start saving. After that, study about investments and apply what you learn. Financial freedom requires your decision, commitment, and a lot of action.