Start working on your dream
What is financial freedom?
Not a dictionary definition, but your own. Can you put it into words? Do you want to share it in the comments section?
If we all do that, we will see there are as many concepts of financial freedom as there are people thinking about it. It looks different to all of us.
To some, it might be the possibility of never working again in our lives while traveling luxuriously around the world. To others, the same idea of never working again but living in peace and quiet in the woods, staying put. And to many of us, it might be deciding which projects we dedicate our energy to.
Whatever your definition of financial freedom is, you are likely not there yet.
Below you will find three steps you can take today to accelerate your journey towards your goal.
1. Excuse Me, How Much Did You Say?
First things first: you need a number.
It seems basic, right? If you are working towards something, you ought to know what that is.
But you’d be surprised at how many people don’t know their magic number.
What’s the magic number? It’s how much you need to become financially free.
As we mentioned, financial freedom looks different to everyone. Even if the concept is the same — say, never have to work again and enjoy a regular lifestyle at home — the amount of money you need still dramatically depends on where you live. $20,000/year would be more than enough in Belgrade, Serbia, but you would starve in New York City.
Is your plan to never work again? You need to reach a certain amount first, and you might want to look into the 4% rule.
But if you still want to work and generate some income (but less than you did before), you need to define both a starting amount and the new amount you must make per year in this new lifestyle.
Don’t let these calculations discourage you. It might be scary to realize you need half a million dollars upfront to never work again. But at least you have a number, and you can start working towards it.
2. Stir Away From These Statistics
The amount of people who don’t have a clue about personal finance is outrageous.
It’s not me saying it, it’s these numbers:
- The lack of financial literacy cost Americans $415 billion in 2020
- Around 40% of Americans have less than $300 in savings
- Only 24% of Millennials have basic financial literacy
Do you know exactly what all these terms mean? Emergency fund, compound interest, index funds, bonds, asset, liability, bull market, bear market, diversification, dividends, dollar-cost averaging, stock options, inflation, stock, risk tolerance, yield… We could go on.
If not, it’s time to start your Finance 101 journey. If you know about all these, congratulations! Your financial knowledge is above most people’s. Still, there is always more you can learn.
To work on your knowledge, try a combination of books to teach you fundamentals and articles, videos, and podcasts to keep you up-to-date on current affairs.
For books, these are my recommendations:
- “Rich Dad, Poor Dad” by Robert Kiyosaki
- “The Psychology of Money”, by Morgan Housel
- “Money: Master the Game” by Tony Robbins
- “I Will Teach You to Be Rich” by Ramit Sethi
For Youtube channels, try these:
- Andrei Jikh
- Sorelle Amore Finance
- Nate O’Brien
- Whiteboard Finance
3. Understand That Money Equals Value
When thinking about increasing their net worth, most people focus on what they can save, given their current earnings. But there is only so much you can cut. At the end of the day, you still need to pay your rent, food, and other basic necessities.
Instead of thinking about what you can cut out, invert the problem. Look at it from an abundance point of view: how can you increase your earnings?
You can negotiate a raise at work, or even change jobs. But the gains will be marginal.
The truth is you will never get rich with a 9–5 job. You need to get creative and come up with side projects that generate the money that will allow you to save a considerably higher amount.
What this side project looks like is up to you. Maybe you already have an idea and the necessary skills to make it happen. If not, identify a niche in the market that you can fill. To do so, think of an activity and answer these three questions about it:
- Am I good at it, or could potentially get good at it?
- Do I enjoy doing it?
- Is there someone who would benefit from it?
If the answer is “yes” to all these questions, you found your niche.
Now, get to work. Create the necessary infrastructure to make it marketable, sellable, and profitable.
Does this sound like a lot of hard work? It sure is. But you didn’t think financial freedom would be easy, did you?
Let’s be real: you won’t achieve financial freedom overnight.
But each day you postpone working towards your goal is one more day you lose in vain. Do you remember the term we mentioned above, “compound interest”?
It means that the sooner you start, the longer compound interest will have time to do its magic. So why not start today?