Financial freedom has become a buzz word in our society. So many people are working towards it, but do we truly understand it? There are a few different ways you could define financial freedom, but the one I’m going with here is from my teachings on Money Mastery. Financial freedom when your ability to earn money isn’t contingent on the hours you spend working. In today’s blog post, I’m going to show you how you can achieve this level of financial freedom.
How to Achieve Financial Freedom
Start by Eliminating Debt
In order to be truly financially free, I believe you have to be debt-free. When you have debt, you pay interest, and that interest takes away from the money that you could be using to build wealth. In other words, you’re actually building someone else’s wealth when you pay interest.
As a note, I don’t count real estate as debt in this instance, I’m talking more about consumer debt, car payments, etc. I use real estate as a source of passive income, which we’ll discuss later.
To eliminate debt, I encourage you to list out all your debts and start paying more than the minimum amount on your lowest debt. This will give you momentum to keep paying off the others!
Accumulating wealth is the beginning of the Second X. This is where you start your emergency fund, start saving for retirement, and buy a house. I posted a blog on this on Monday. If you find yourself in this stage of financial freedom, I encourage you to read it!
A lot of people ask about renting and buying. As long as you are settling down in an area for a while and are able to not overpay for a property, I would suggest that you buy instead of rent. Remember when you buy your first house, you’re buying an asset. Therefore, it will appreciate in value.
Participate in Wealth Acceleration
Owning an asset, and managing it closely, will really grow you before you move on to build the Second X. This asset could be a business you own, or real estate you rent out, or stocks that you buy. Here’s the point: You have to start building some kind of asset base.
For instance, let’s look at Peyton Manning. He was paid as a quarterback for the Denver Broncos. That was his First X income (and it’s a lot more than most of us will ever make with First X). He gets a big contract and makes a lot of money, but in addition to this he also does commercials for Papa John’s and Best Buy. (He also purchased a couple of Papa John’s.) These things have nothing to do with actually playing football; they have to do with what he is. He actually set up a business to receive income from advertising.
So, the point is, you have to find something that can increase your income but isn’t reliant on how much time you spend working on that project.