7 Steps To Financial Freedom For Unlocking Wealth and Prosperity
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Where's the money for that new dress or a night out at your favorite restaurant? Will we ever be free of this financial prison?
Ever felt that fleeting sense of security after a paycheck hits your account? Bills get paid, groceries fill the fridge, and the lights stay on.
But fast forward a few days, and that security often vanishes. The Netflix subscription is renewed, the gas tank is refilled, and the cycle starts anew.
Financial freedom is having the power to choose how you spend your time and energy, not being chained to a paycheck.
Like working your own hours instead of the 9-5 determined by your boss. Spending time reading, gardening or simply enjoying a stress-free night out without worrying about tomorrow’s bills.
Is this what life is about? Trapped in a paycheck-to-paycheck routine, with little room for things we truly desire?
There's a different story waiting to be written.
Can I Achieve Financial Freedom?
Financial freedom isn't a luxury reserved for the privileged few. It's a state of empowerment, where your money works for you, not the other way around.
It's about having the breathing space to pursue your passions. It's about making conscious choices today so you can experience the life you deserve.
As Dave Ramsey, the financial guru, says:
“ You must gain control over your money or the lack of it will forever control you.”
Lets look at a 7-step action plan packed with practical strategies and clear instructions. Forget the frustration and complexity – build financial freedom, break the paycheck prison, and control your finances to live on your terms.
A. 7 Steps to Unlock Financial Freedom
“Working because you want to and not because you have to is financial freedom.”
Financial freedom in a nutshell is having the power to make choices. It’s not about having a hefty bank balance, a big house, or a fancy car. It’s the security and flexibility to pursue your passions, travel the world, or simply enjoy a stress-free Monday morning.
That’s the charm of financial freedom - having the peace of mind that comes with knowing your future is secure and your bank balance doesn't dictate your choices. It's the empowerment to choose how you spend your precious time and energy, focusing on what truly matters to you.
And it’s possible!
You don’t need to have a bucket load of money or stage a heist to get there. There are many people enjoying financial independence and living their best life. So can YOU.
What Are The 7 Steps To Financial Freedom
Let’s explore the 7 steps to get you started on building your financial freedom and take charge of your wealth.
1. Define Your Freedom
Financial freedom is a personal journey. Before getting started on the strategies, take time for introspection. What does true freedom mean to you?
Is it the flexibility to travel whenever you want, the freedom from the 9-5 routine, pursue a creative passion, or the security to spend more time with your family?
The key is to find out what you want, what drives you, and what makes you feel fulfilled and happy.
For me, it was leaving a high-paying stable job to pursue my dream of having a business doing what I wanted to do - exploring the science of decision-making and its impact on our lives. And teaching others how to navigate the world of possibilities to achieve their goals, ambitions, and dreams.
However, all good things come with time, hard work, and planning. To get here, I first had to learn, experience, and save to be in a position to pursue my goal.
IT executive turned author, Manoj Arora explains this perfectly:
“ To achieve what one percent of the world’s population has (Financial Freedom), you must be willing to do what only one percent dares to do. Hard work and perseverance of the highest order.”
How do you build financial freedom? It begins with:
How To Build Financial Freedom?
I. Identify Your Vision
Write down your vision. Be specific. Imagine your ideal day, week, or year. What activities bring you joy? What kind of lifestyle do you crave? Understanding your why will give you the motivation to begin and stick to the path of financial freedom.
Once you have a clear vision, it’s time to plan and translate your vision into a definitive reality.
II. Setting SMART Goals
Let’s look at an example. Say I want to retire by the age of 40. What do I have to do to achieve this goal?
Specific: I want to retire by 40.
Measurable: I need $500k (liquid + investments), a paid-off house, and a passive income stream to cover your expenses.
Achievable: This requires careful planning and execution over the next 10 years. Analyze your current financial situation by calculating what you own (assets), saving, current income, and potential for future growth.
Relevant: Based on this analysis, you can determine if $500k is realistic or needs adjustment. You might need to increase your savings or explore additional income streams to reach your goal.
Time-bound: With 20 years until your target retirement age, you can reverse engineer a savings plan. Financial advisors or online calculators can help you determine the monthly savings needed to reach your $50ok goal.
Clarity, direction, and targets like the ones given above, not vague goals like I want to be rich or I want to travel is what gets you your financial freedom.
III. Visualize for Success
Take 5-10 minutes daily to visualize yourself achieving your financial goals in 5 or 10 years. As you get closer to achieving your targets, do a monthly review, make your timeline shorter, and find ways to increase your wealth faster.
See yourself living comfortably, debt-free, and pursuing your passions. Feel the emotions of security and freedom. While visualization alone won't guarantee success, it can be a powerful tool for programming your subconscious mind for success and help align your thoughts and actions to your desired future.
Here are some visualization techniques you can try:
Write down your goals, breaking them into small actionable stepping stones to take you closer to your objective.
Practice positive affirmations that motivate you, for example, I will close this deal, or I deserve to live my life the way I want.
Engage your senses: Don't just see your success, feel it! Imagine the sounds, smells, and emotions associated with achieving your goal.
See yourself already achieving your goal, not just working towards it.
Look for things you want, like your dream home, the country you’ve always wanted to visit, or the people who have achieved the things you want. Use this to inspire yourself and visualize where you want to be.
2. Know Your Numbers
Financial freedom begins with knowing where you stand financially, how much you have in hand, what’s coming in, and what’s going out. This plays a major part in curbing money leakages, controlling spending, paying off loans, and budgeting for the short and long term - getting you closer to financial freedom.
How To Achieve Financial Freedom?
Here’s what you need to do:
I. Calculate Your Net Worth
Your net worth is the difference between what you own and what you buy. Let’s take the example of a recent college graduate Jim. He’s set himself a target of retiring by 40 and his starting salary is 5k per month. To get started he needs to understand where he stands financially.
So Jim first calculates how much he owns and the cash he has on hand by:
Checking and savings account balance = 3k
Used car value minus the remaining loan amount = valued at $8k minus a $2k loan: $6k
The small investment account he started with a tax return =$500
Then he lists what he owes by:
Calculating his student loan balance = 25k
Credit card debt from textbooks =$1k
The difference between what Jim owned and owned was a negative $16.5k. This number was far from ideal but it gave Jim a starting point and a clear picture of where he stood financially. Jum’s first goal was to get the pay off what he owed and start building a savings fund to increase his wealth and investments.
II. Apply the 50/30/20 Rule
Jim needed to budget and bring down his expenses and pay off the debts, so he applied the 50/30/20 budgeting framework. Jim tracked his expenses for a month and found he was spending an average of $2.8K per month.
Here's how he broke it down using the 50/30/20 rule of budgeting:
50-30-20 Rule Of Budgeting
Needs (50%): Rent ($1.2K), groceries ($400), car loan payment ($200), utilities ($150), phone bill ($50) = $2,000 total. Jim realized he could save some money on groceries by meal prepping and reducing eating out.
Wants (30%): Streaming services ($50), gym membership ($75), entertainment ($200) = $325 total. Jim decided to cancel a streaming service and focus on free workouts with YouTube videos, saving $125.
Savings & Debt Repayment (20%): $475. Jim set up an automatic transfer of $200 to his savings account and started allocating the remaining $275 towards additional student loan payments.
This gave Jim a savings fund of $1.2k yearly, $3.3k off his student loans annually, additional monthly cash savings of $275 to add to his investment fund
III. Track Your Expenses – Every Penny Counts
Knowing where your money goes is key to making informed financial decisions. Track your expenses for a month (use a budgeting app, spreadsheet, or pen and paper). Categorize everything – groceries, gas, entertainment, and even the little things like morning coffee, chewing gum, etc, because it all adds up!
Short-term tracking: Through diligent tracking, Jim discovered he spent an average of $50 weekly on eating out. By packing lunch three times a week, he could save $75 monthly. Additionally, he realized his gym membership wasn't being fully utilized. Canceling it and utilizing free workout videos online saved him another $100 a month.
Long-term tracking: Jim didn't just track for a month and forget it. He made it a habit, reviewing his expenses regularly. He found he consistently spent more than planned on entertainment. By setting a stricter entertainment budget and seeking out free or low-cost alternatives, Jim was able to significantly increase his monthly savings towards his early retirement goal.
3. Maintain a Spending Balance
Financial freedom is about conscious spending that prioritizes your goals, not living frugally or lavishly. It’s about reaching an objective and taking the necessary steps to get there.
Here's how to strike a balance:
Mindful Spending: Shift your mindset. Instead of deprivation, focus on the value and intention behind your purchases. Jim saved by not not going out to movies and clubbing with his friends that often. Instead he watched movies at home with friends, socializing and having fun but saving more.
Curb Impulse Purchases: We've all been there. Before you swipe your card, take a 24-hour time-out. Is this a genuine need or a fleeting desire? Jim ate out less, preparing meals at home, thus curbing him impulse purchases and still eating well.
Needs vs. Wants: Distinguish between essentials (housing, food, transportation) and desires (dining out, new clothes). Prioritize needs and be mindful when indulging in wants. Jim realized he needed healthy food to stay nourished which could be done with prepping meals at home. Eating out was an unnecessary want.
Identify Money Leaks: Review your expenses for recurring subscriptions you never use, unused gym memberships, or bank fees. Gym membership was a money leak because Jim could easily jog or exercise with a workout video.
“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.”
Saving money, cutting back on expenses, even those that may sometimes feel necessary and making conscious choices with the objective of achieving financial freedom - is what frees you from that paycheck cycle. Mindless spending, no matter how small will always take you further from your goal.
Here’s an example of Pete Adeney, also known as the Money Mustache. He achieved financial freedom before 30 by living frugally, prioritizing needs over wants and saving a whopping 65% of their income.
This freed up capital for aggressive debt repayment and smart investments in real estate and index funds. Their story proves that financial freedom isn't about deprivation. It’s about making smart choices with your money and putting your savings to work for you through calculated investments.
4. Multiply Your Income
Financial freedom means growth, the ability to meet your expenses as they grow and having enough to liberate yourself to achieve your goals. For example, when you’re single, your paycheck may be more than enough for you to live comfortably. Start saving and planning at that exact moment rather than living your best life and spending the rest of your years just surviving.
How To Multiply Income For Financial Freedom?
Once we get married, have children, or grow older, expenses always increase, and most of them are essential expenses. Our objective should always be to expand earnings while minimizing expenses. Focus on expanding your earning potential by creating multiple income streams and passive income.
Here are a few ways to multiply your income:
Create Side Hustles: Explore your passions or skills. Have you always been a great writer? Explore freelance writing to sell your skill. Are you a whiz at math? try online tutoring. Do you make amazing keychains and decorations out of everyday resources? Sell those to make extra money.
Invest in Yourself: This is the best long-term investment you can make. Upgrade your skills through courses or certifications to increase your earning power in your current career.
There are millions of online resources, alot of them free to help you learn more skills. Add those to increase your value and earnings. Develop negotiation skills through self study or learning from those around you to advocate for raises or better contracts.
Generate Passive Income: Explore investments that generate income with minimal ongoing effort. Rental properties, stock dividends, or peer-to-peer lending are examples. Research carefully before investing.
Do you have some savings set aside? Don’t let it sit there or take minimal interest. Find out how you can increase those, even if the profit may seem insubstantial. Over time it adds up to a valuable amount.
“Formal education will make you a living; self-education will make you a fortune.”
Increasing your income alongside smart budgeting allows you to reach your financial goals faster. You'll have more to save and invest, accelerating your journey to financial freedom.
5. Demolish Debts
High-interest debt is a major roadblock to financial freedom. It's like putting a lead weight on your financial progress which only increases with time, eventually crippling you. Focus on getting rid of these debts. Better yet, avoid taking these debts altogether.
“Every time you borrow money, you’re robbing your future self.”
Here's how to demolish those debts:
Target High-Interest Debts First: Focus on paying off credit cards and personal loans with the highest interest rates. Consider the avalanche method (targeting debts with the highest interest rates first) or the snowball method (paying off the smallest debts first for a quick win and motivation boost).
Debt Repayment Strategies: Explore options like debt consolidation loans to potentially secure a lower interest rate, making repayment more manageable.
Beware Lifestyle Inflation: As your income grows through side hustles or passive income streams, resist the urge to increase your spending. Living within your means ensures you channel extra income towards debt repayment and savings, accelerating your progress.
Becoming debt-free is a liberating experience. It frees up more cash flow to invest and build wealth, propelling you closer to your financial goals.
6. Build The Safety Net
Life is unpredictable. No matter how much we plan and try to stay on a set financial course, An unexpected medical bill, car repair, or job loss can derail our financial progress. An emergency fund can be our safety net, a financial buffer to weather these storms without disrupting long-term goals.
I. How Much To Save?
Aim for 3-6 months' worth of living expenses in a readily accessible account (savings account, money market account). The specific amount depends on your lifestyle and risk tolerance. A banker who has a stable job and low healthcare costs like a banker might need less than a salesman who has a commision based income or race car driver with high healthcare deductibles.
II. Building Your Emergency Fund
Set up automatic transfers from your checking account to your emergency savings account. Even small amounts added consistently can build a significant buffer over time.
As soon as your salary comes in, set an automatic transfer to deduct a fixed amount that goes into savings. Once it’s out of your spending account, you’re only left with the money you must manage your expenses with. The savings account is a no-go zone that is not to be touched.
III. Planning for Risks
Life insurance, disability insurance, and critical illness insurance can provide additional financial protection for unforeseen circumstances.
While it may seem like an unnecessary expense, we never know what life can hit us with. Insurance can help protect us from crippling health bills and essential coverage in case of accidents.
Foresee, prepare and plan. Explore various options with a qualified financial advisor to find the right coverage for your needs.
IV. Liquidity and Cash Flow
Liquidity: Your emergency fund should be in a highly liquid account, readily accessible when needed. This does not mean you use it if you want to buy that expensive watch to impress a potential date. These funds are your lifeline for when you really need them and a fallback to prevent taking debt in case of an emergency.
Cash Flow: Maintain a healthy cash flow by sticking to your budget and avoiding unnecessary debt. Stick to using cash on essential expenses to maintain your cash flow. This ensures you have enough money coming in to cover your ongoing expenses while your emergency fund is being used.
Building a robust emergency fund and implementing risk management strategies gives you the peace of mind and confidence to actually pursue your financial goals without fear of unexpected setbacks - getting you closer to achieving financial freedom.
7. Structure For Wealth Management
Financial freedom is a marathon, not a sprint. It’s a steady, methodical process that builds on each step to multiply your wealth and secure your future. This final step focuses on long-term wealth management strategies to ensure your financial future.
Once your high-interest debts are under control and you've built a solid emergency fund, it's time to focus on investing for the long term. This allows your money to grow, building on interest or profit from the initial amount(principal) and generating further interest on it to grow exponentially.
Here’s how you can grow your wealth by investing for the future and gain financial freedom:
Employee Benefit Schemes: Take advantage of employer-sponsored retirement plans such as investing a percentage of salary in shares, insurance and gratuity funds. Many companies offer matching contributions, essentially free money that boosts your retirement savings.
Automate Your Finances: Set up automatic transfers from your checking account to your savings and investment accounts. This ensures consistent saving and investing, a key factor in building wealth over time.
Regular Reviews and Adjustments: Your financial plan should be a living document. Schedule regular reviews (quarterly or bi-annually) to assess your progress, adjust your allocations as needed, and adapt to changing life circumstances.
Seek Professional Guidance: Consulting a qualified financial advisor can help you develop a personalized investment strategy tailored to your risk tolerance and financial goals.
Practice Diversification: Spread your investments across different asset classes (stocks, bonds, real estate) to mitigate risk and maximize potential returns.
Managing your growing wealth smartly is pivotal to achieving financial freedom and securing your future prosperity.
B. Decyz POV on Steps to Achieve Financial Freedom
Nobody said the path to financial freedom is easy and quick. However, the rewards beat the struggle with the end goal being free to spend and live on your terms. Living frugally like Pete Adeney can give you early retirement, Was it difficult? Yes of course. But was it worth it?
At Decyz, we recognize that financial freedom is a lifestyle, one that requires training, dedication, and perseverance to achieve. As American businessman and author Robert Kiyosaki said:
“Financial freedom is a mental, emotional, and education process.”
Financial freedom requires definitive discipline, planning, and struggle to get there. And once you’re there, there’s nothing better than not being dependent on any company, individual, or environment. Your mind, actions, and choices are yours to own.
