10 Steps towards financial freedom and building wealth
If you are looking for financial freedom or want to build massive wealth then I am sure you won’t be looking for a lottery ticket or a get rich scheme. Because these ideas of getting rich overnight is very slim. Then, What it takes to get rich is working hard as well as smart.
Here I have outlined ten steps to become financially free as well as to build wealth.
1. Write down Your Current Situation.
Write down your one month’s spending. Be it paying bills, buying food, entertainment, it doesn’t matter what it is, if it costs money, write it down. This will give an idea about your monthly expenditure verses your income. You can check about your expenditure is higher or lower than your income. You may be surprised to see at how much you are spending on the things that is absolutely worthless.
2. Categorize Your Debts
If your current financial situations are not good the it is always possible that you have many or few debts on your head. This is the most negative aspect of wealth building. Money owed reduces your net worth and is a barrier between you and saving money. There are different types of debt. First make a list of all debt that you owe. Categorize the list into these sections. A. Home mortgages B. Auto loan C. Credit cards D. Anything late or potentially damaging to your credit. E. Miscellaneous debt such as that loan from your uncle. Once it is categorized, it will be easier to prioritize the actions against each of them.
3. Take Actions To Eliminate Debt
I know, I am telling you to spend your money when you are trying to get more of it but trust me; this is the real way to get rich! You took the time hopefully to list your debt into the different categories. Now, take anything that is late and make it your priority. If everything is current, knock out any small bills that you can eliminate quickly. These small successes will keep you motivated and free up what you have available to pay down on the larger debt. Pick a debt to begin to focus on. My best advice is to choose the debt that is charging the highest amount of interest. The more you pay down, the less they will be tacking on in interest at the end of every billing cycle.
4. Know Your Credit Score
Your credit score affects many aspects of your life beside your ability to get a loan. Opening accounts and getting a job just to name a few. Your payment history along with debt level and public information such as a bankruptcy all play a part in the score. I strongly suggest you get a copy of your credit report and review it for errors. You can log on to www.annualcreditreport.com for a free copy of your credit report. Also, there are sites available to help you obtain and manage your credit report for different varying fees. If your credit needs work or if you had problems with identity theft, I suggest you begin working with one of these organizations. You need to know what is on that report, everyone else does.
5. Eliminate Hidden Costs
Any drain on your available cash will add up over time. Making a payment late that generates a fee, annual fees on credit cards, monthly fees for bank accounts are all unnecessary. Review each account to see if they are taking on any charges. Paying a fee for a checking account is ludicrous these days. The banks are competing for your business. You can find many accounts by searching the internet, no fees, some with higher yield interest rates if you open a checking account at the same time, others have programs available that reward you for simply doing business with them. If you have open lines of credit search for options to transfer into a lower interest rate, any reduction in continuing expenses are a few more dollars toward your financial success. Avoid doing a debt consolidation loan that stretches your payments out for longer periods, yes it looks good on paper, lower payments and even lower interest but averaged out over time it will cost more in interest.
6. Plan For Emergencies
Many experts say that you should have at least three months worth of living expenses put away. Reality has most of us living paycheck to paycheck. When something like a car repair comes up, we find ourselves putting off important payments in order to get the emergency taken care of forcing a game of catch up often times for months after. Start with a lower amount. Have a garage sale, sell stuff that you really don’t need, do whatever it takes to set aside $1000.00 for emergencies. Statistics show that having that amount set aside will often take care of the emergencies that crop up. The emergency fund should be held where it is not accessible for simple purchases and no, pizza and a movie are not constituted as an emergency. If you find yourself having to dip into the emergency fund, stop paying extra on the debt until you have replenished it.
7. Set Goals
Having a plan is the only way to work for something. How often would you jump in your car to go on vacation without a destination in mind? It may sound like fun but at some point you are going to have to make a decision. So why on earth we try to stumble through life without a plan is beyond me. Goal setting can be kind of scary. Why? Because you are committing yourself to accomplish something that we are not quite sure how we are going to get there, so the fear of failure comes into play. Its ok, everyone goes through it. Write down what you would like to achieve. Make them big because you are going set some time limitations and plan the actions that you need to take to get there, one step at a time. That is how we learned to walk isn’t it? Break down each goal into actions that have to occur in order to accomplish it. Make sure that each action is not complicated, if there is more than one thing that has to happen to finish the action, break it down further. Write down tentative deadlines for achieving each action. Leave room next to the date to write down when the action actually was completed. Post your goals somewhere that you will read them every day. I like to suggest the refrigerator. I know I visit mine frequently enough! This is your map. Review them monthly to add or modify, we know that life brings about surprises, good and bad, we have to be able to adapt. Finally, talk about your goals, vocalizing them will further cement your commitment to them and to yourself. If you find that people are negative toward your desire to change your situation, realize that often times they are jealous of your motivation and truly want the same for themselves.
8. Learn to Save
As you begin to pay down your debt, you should be finding yourself with more available cash. An aggressive goal for saving money would be 10% of your income. It is hard to save as often times when bills are getting paid we feel a sense of freedom and want to enjoy the finer things in life. That is ok, after you have met the goal of saving money. I myself, being a normal American, have a tough time committing money to savings; it is easier if I am working toward something. My goal of purchasing a home is my motivator. That still doesn’t seem to work all the time, so I have found avenues to increase my saving. I found a bank account that every time I use my debit card, it rounds my purchase to an even amount and transfers the change into my savings account. The really cool thing about it is the bank actually matches the amount up to $250.00 per year. Folks that is free money!
9. Adjust To Set-Backs
Let’s face it, stuff does happen. When the unexpected occurs, you have to be diligent enough to sit down and refigure your plan of action. Whether a major set back or something minor, it is very easy for us to throw our hands up and give up the fight. It may be tough but remember, procrastination and complacency are evil monsters and often times the reason we find ourselves in situations that are undesirable. Rework your budget, rework your goals, rework your commitment, but do not give up. You wanted to build wealth right? Very little worth having comes easily regardless of the get rich quick programs you can buy for $29.99 on the internet. Who is getting rich when you buy one of those anyway? Don’t take my word for it, just look at where you are and see what has worked the best for you so far.
10. Start Today
In closing, I want to touch base on when you should start. TODAY!!! It is human nature to pick a time and date to create a basis of measurement. That is fine but why put two more weeks out of your new life to wait for the first of the month? Make the commitment to yourself to begin making changes now. Like I had mentioned earlier, every small success, every bill that goes away, will increase your motivation and confidence. So resolve not to resolve any longer, planning is yet another form of procrastination. I am a planner and a list maker. If I had back every minute that I spent on planning and poured that into action, I would be more than 50% closer to achieving my goals. Keep positive and good luck!
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