Get Rid Of A Negative Mindset
The first thing you should do is get rid of negative thinking. Many possibilities are squandered because most individuals unintentionally allow pessimism to rule their lives.
Our behaviors are the result of our thoughts, the inner conflict that occurs mostly outside of our conscious awareness. When self-reflection becomes harmful, it can undermine your good intentions and eventually cause you to feel disoriented and lost.
Begin adjusting your everyday behaviors to eliminate this negativity. Habits have a significant influence on nurturing long-term transformation. According to research, having a positive mentality that turns our focus toward our intended outcomes assists us in achieving the results we seek.
A positive mentality also opens up a wide variety of business changes in ones life. There isnt a single negative-thinking individual in the world who has achieved success in business because business professionals constantly see things from a different perspective.
Successful individuals never let a negative outlook govern them, whether they invest in the stock market or buy property in the Philippines.
Begin converting your negative ideas to positive ones, and you will ultimately see the bright side of any opportunity that comes your way.
Where To Cut Costs
Now that you have a spreadsheet set up with at least two months expenses detailed, now we need to look at where we can cut out some costs.
Society is generally quite knowledgeable about how much and when their income arrives, but rarely devotes more than a fraction of that time focusing on their expenses!
| Cash Flow Plan | |
| $ | $ |
In this example, the first column is your TARGET . In addition, youll find the monthly columns that indicate what got spent. In this example, the goal is to achieve $1,092.46/mo in surplus income.
Next, start filling in the past three months of income and expenses.
As you can see, in December and January, there was no surplus. The example person spent $886.84 MORE in December than they earned. If this is like you, dont worry, its not an uncommon issue and is generally easily fixed.
Track 3 Metrics Every Month
There are a million numbers that financial advisors throw around. I focus on three: savings rate, FIRE ratio, and investable net worth.
When I wrote about what 30-somethings need to know about financial freedom, I covered these three metrics in more detail. But heres a quick summary.
Savings rate is the percentage of your income that you put toward savings and investmentsor if you have debts, toward paying them off.
FIRE ratio is the percentage of your living expenses that you can cover with passive income. When you reach 100 percent, youre financially independent and working becomes optional.
Investable net worth is the sum of your investment assets, minus all debts and other liabilities. Exclude your primary residence, vehicle, and any other personal property and only focus on assets that can actually be invested. You can track your net worth automatically using Mint.com.
When you track those three numbers every month, it forces you to pay attention to your progress toward financial freedom. As they say in business, that which gets measured gets done.
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Invest Everything Above That
Once your emergency fund is adequately stocked, you can begin thinking about investing your money. This is important, because investing is about using your money to earn more money. The larger your investment portfolio becomes, the closer you get to financial independence.
Ideally, your efforts to save money should never slow down once you have built your emergency fund. Instead, increase your efforts to fund your investment accounts. That should be easier to do once you have an emergency fund in place.
Financial Freedom Vs Financial Independence
Lets take the toddler whos learning to walk, and apply that to your finances. Are you at a point in your life where youve become mobile, so to speak? Can you go anywhere you want? Or are you living paycheck to paycheck?
Think about it this way. What would happen to your life if you were to lose your job today? Would you still have enough income via sources other than your salary to cover your basic living expenses? Do you have an emergency fund ready as a backup? How about enough income to indefinitely fund your current lifestyle?
And yes, Im talking about income, not savings. Savings will run out sooner or later, but ongoing passive income will last you indefinitely. The income you receive from your job is active income. In order to obtain financial independence and financial freedom, you will need multiple streams of passive income, the kind of money you make while you sleep.
No one achieves financial freedom or early retirement overnight. Its a process, and there are many milestones along the journey.
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Strategies For Cutting Expenses
My favorite way to start an expense-cutting campaign is to make it into a game. Patience is key its something that will take time to get right. First, start slow and work out the easy categories first.
Start with Shopping and Restaurants.
Then, set a goal of cutting these categories worst month by 50%. For instance, in the above cash flow example, the person spent nearly $1,500 in December on restaurants. Consider setting a goal to cut that in half . And then, think about ways you might be successful in doing so. E.g., could you bring food to work or make your coffee at home, and bring it with you outside?
For the shopping category, ask yourself the next time you consider buying X or Y the following questions: Do I REALLY need this and Can I live without it?
Final Words On How To Become Financially Independent
There is no definite, sure fire, easy way to financial independence. What Ive shared with you can and will help you become more financially free. However, only if you make the effort to apply what youve learned.
Dont mistake these smart moves for an easy button though. Why? Because there are no easy-buttons when it comes to financial independence. Hell, there are no easy-buttons when it comes to life. So, you might as well embrace the challenge.
If you make some of the simple moves laid out for you in this article. Moreover, you tattoo the process below into your mind. Certainly, you will just about guarantee your ability to achieve financial independence.
If You Want to Become Financially Free, Do Not Forget This Map:
Theres never been a better time in history to start your own business. As long as youve got a computer and an internet connection or in some instances, just a phone you can make money from wherever you are.
Truly, with enough hard work and a little imagination, anyone can reach financial freedom and design their dream life.
If youve ever entertained the thought of creating a life of freedom a flexibility then weve got the perfect list for you.
This list is a collection of tried and true ways to make money as a digital nomad or lifestyle entrepreneur. Keep in mind that individual suggestions can be combined for even greater financial success!
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Decide You Want It More Than You Are Afraid Of It
OK – that quote is from the recently discredited Bill Cosby, but it’s brilliant nonetheless. And it’s an important point too. One of the reasons more people dont reach financial independence is theyre afraid not of being financially independent, but of the changes in their lives they’ll have to make to get there.
Taylor R. Schulte, CFP, Financial Planner, Founder & CEO, Definefinancial.com recognizes it doesn’t happen overnight:
If you are new to the financial planning process, its important to remember you dont need to go from zero to sixty overnight. Just like a fitness trainer would be hesitant to recommend an all-out body straining routine on your first day in the gym, I wouldnt expect someone to start implementing advanced planning techniques in the first week. Pick a reasonable and attainable goal, and get used to achieving small wins on your track to financial independence.
For example, if you are new to saving, you dont need to immediately put aside half of your paycheck. Start with a small amount – maybe $20 per pay period – and increase it as you get more comfortable with the process. Starting out slow will help you build the confidence needed for long-term success.
In order to become financially independent, you have to have a serious heart-to-heart talk with yourself. You want to get a few things clear in your head, including:
That last point is a discussion all its own
Milestone #2 Financial Independence
If you had enough passive income to fully cover your current lifestyle, including all the little extras beyond the bare basics that you currently enjoy , then you would be considered financially independent.
Being financially independent means that you could retire early and continue living your current life without ever having to work again. In order to be financially independent, you must build multiple streams of income. This allows you to continue earning income regardless of what you choose to do day-to-day.
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The Night That Changed My Life
Then, one evening I heard a knock at the door. It was kind of late at night and it was a rough neighborhood so people didnt really go out at night. Turns out it was one of my tenants there to pay the rent.
There are very few singular events in any persons life that can truly be called life-altering. You might call it an epiphany or a paradigm shift. Whatever you call it, an entire life can be broken down into before and after.
As I collected the rent and sat down on my couch, the wheels in my head began to grind. Though the rent was a measly $500 or so, I realized it was the easiest money I had ever earned in my entire life.
I dont remember what was on TV that night, but I do remember that by the time I went to bed I realized that life is so much better when money comes knocking at my door rather than me having to go earn it.
I knew at that moment I would do real estate for the rest of my life.
It wasnt long until I left the Ph.D. program and was in real estate full time.
The Emotions Of Financial Independence
Is reaching financial independence like winning the lottery with celebrations, balloons, and a ticker tape parade? Not exactly.
The truth is a little more anticlimactic.
Humans are creatures of habit, and Marcus and Tiffany are no different. As disciplined goal-setters and planners, they have a hard time fully accepting their achievement. The possibility of immediately setting a new goal and continuing their march into the future tempts them.
Self-doubt and a hard-wired need for security creep into their thoughts. Voices in their head scream Is this really going to be enough? Do you think youre smart enough or good enough to just unplug from the system when so many other people cant or dont?
They even experience a little-discussed phenomenon called the freedom void. Because their lives have been so full and focused for many years, they actually become a little disappointed or depressed by the reality of their new freedom. Will they become bored? What will they do with their time?
But all of these roller coaster emotions are normal. After all, financial independence isnt just a formula on a spreadsheet. Its a personal growth experience. And Marcus and Tiffany will rise to the occasion just like they have before.
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Financial Independence Vs Independently Wealthy
In the personal finance blogosphere, the term financial independence is much more commonly used than the term independently wealthy.
Although the two terms are similar, I believe there are also some key differences.
Financial independence can mean several different things, depending on who is using the term and also the context in which its being used.
You may read of a young adult being referred to as financially independent after moving out of their parents house and being able to completely support themselves.
In other cases, financial independence could be referring to the ability to live life on your own terms rather than needing to work a full-time job.
When you read about financial independence on personal finance blogs today, the most common meaning is someone who has assets or net worth that exceeds 25x their annual living expenses.
This definition is based on the Trinity Study, which found 4% to be a safe withdrawal rate for retirees .
While the definitions of both financial independence and independently wealthy are flexible and somewhat up to interpretation, there is a valid reason to believe that being independently wealthy is a step above reaching financial independence.
According to the 4% rule, if you live a very frugal lifestyle and your annual living expenses are $30,000, you would achieve the definition of financial independence with a portfolio of $750,000.
Building An Investment Business
Investing in a single property is a great first step, and a necessary one at that. If for nothing else, you cant possibly realize financial freedom with one deal, let alone your first one. Therefore, your goal shouldnt be to compete a single deal, or even two or three, but rather to do enough deals until you are financially stable to build a rental portfolio.
To build an investment business, most investors will resort to using other peoples money. Private moneylenders, as they are typically referred to as, allow prospective investors to buy and acquire assets they would otherwise not be able to afford. More specifically, private money lenders will fund the investors purchase in return for making the money back with interest, oftentimes as high as 12 to 15 percent. That way, the investor gets their deal, and the lender makes money on the back end.
It is worth noting, however, that private money lenders are more than just a source of funds they are the gateway to building an entire investment business. The money borrowed may come at a steep price, but when due diligence is minded, the cost is well worth the investment. Done correctly, borrowing funds from a private money lender will net you profitsprofits that can be used to help you build a business, and eventually allow you to build the one thing all investors view as the quickest path to financial freedom: a rental portfolio.
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How You Can Achieve Financial Freedom With Real Estate
There are several ways to achieve financial freedom, but theres one wealth-building vehicle thats better than most. Real estate is one of the best ways to become financially independent. Many investors know it, and so should you. The amount of passive income you can generate from a portfolio of rental properties is enough to eliminate your dependence on your current paycheck. If you hope to achieve financial freedom, there are several things you can do to help you get started.
Do I Have Time For This
We all know women often shoulder much of the the burden of unpaid work in the household. So why should you add the responsibility of real estate investing to that load? Why not leave it to your significant other?
First, once you learn how to successfully invest in real estate, your skills and knowledge will never be lost. You will always know how to bring in money for your family using real estate investing no matter what happens. Weve all seen the stories of women losing their significant others, becoming sick themselves and going through horrible divorces. I, myself, have been through a divorce. And like others, I had to face the question of how I was going to support myself and my family.
As doctors, we can often fall back on our jobs when things like this happen, but wouldnt it be better if we had our jobs, $100K in semi-passive income coming in each year from our real estate properties AND we felt confident that we could run the business ?
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Real Estate Investment: How To Become Financially Independent In 2022
Real Estate Investment | This blog is the greatest start-up guidance for you if you want to have financial independence and acquire a millionaire mindset!
The fact is that success does not happen immediately. It is the result of hard effort, patience, and sound judgment. The majority of todays successful people have had their fair share of ups and downs in their different careers.
Although there is no precise formula for success, successful individuals would all agree on one thing: they all changed.
With the uncertainty of time in todays fast-changing world, there is no better time than now to make changes in your life. Begin by eliminating these five poisonous habits from your everyday routine.
Insulate Yourself In The Short Run
If you have been living paycheck-to-paycheck up to this point, your first savings goal should be to create a safety net. You can do that by creating an emergency fund.
An emergency fund should be held in a perfectly safe account like a savings account, money market account, or a short-term certificate of deposit. It’s not for investment, because investment involves risk, and that’s not the purpose of an emergency fund.
Your first goal should be to accumulate a sufficient amount of cash in the account to cover 30 days worth of living expenses. Once that’s achieved, your goal should be to add another 30 days worth of living expenses. The account should have between three months and six months of living expenses if you’re a salaried employee, and between 6 and 12 months if you have a self-employed job or paid entirely by commissions.
Andrew McFadden, CFP and Founder of Panoramic Financial Advice thinks it unwise to navigate life without any sort of financial cushion:
Life is full of surprises and changes, and it will do you a lot of good to have a liquid stash of cash you can access quickly in case of an emergency. Emergencies like getting laid off, the car dying, or your child needing an urgent medical treatment, and your health insurance doesnt quite provide the coverage you thought it did.
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