- January 26, 2018
- Posted by: fortunatetrader
- Category: Finance 101
7 Main Steps for Financial Freedom
Wouldn’t it be great to be financially free?
Wouldn’t you love to get rid of all of your debts?
Start a budget
It all starts with making a budget.
I know. I know.
Don’t throw stones at me.
No one likes making a budget.
The exception are numbers-freaks like myself.
If I find 10 cents on the street then I add it on.
You don’t have to become that intense.
But if you want to get out of the rat race faster you have to know what to do.
And knowing what to do it all starts by acknowledging it when you get to see the total in a budget.
Acknowledge your expenses
How often do you go out?
How much money do you spend at restaurants each month?
Is your car costing you more than $400 a year in repairs and maintenance?
How much money do you spend on lollipops?
It all start here.
Sort them by category
Create the categories that fit your day life.
If you don’t have a car change it to public transportation.
If you are like my wife you might want to add a “Candies” category as well.
Make it yours; it’s yours.
I would suggest to have a maximum of 8-12 categories to start with.
Don’t get too precise with expenses like “shoe cleaner” or “toothbrush”.
You can put those in with “clothes” and “drugstore”.
I love colors to distinguish the different categories so I use a lot of different ones.
I suggest you do the same.
You might also like to put your favorite ones for your favorite categories.
“PLAY” for me is orange, I’ll let you figure out what is my favorite color.
Cut or reduce the expenses of some categories
You’ve done the exercise and noticed that some of the categories are skyrocketing eh?!
I’m very proud; and excited. The homework is working.
For me it started out like a game and not like a chore.
I knew why I wanted to reduce some of my expenses so I was now aiming for the “what” and “how”.
It is not about staying home and eating cat meals.
It is about focusing on your “WHY”.
You want to tight up the belt for a certain period and adjust the way you approach your finances.
Trade fees into money
Bank fees, cellphone charges, car expenses, groceries, TV and internet provider, car insurance; all that money spent and you think you can’t do anything about it.
Start shopping once every 6 to 12 months with all your providers.
TV, Internet, cellphone, etc.
Call them and tell them that you are paying too much. Not that you “believe” or “think” that you are paying too much. Be affirmative.
You want to see if it’s possible to reduce your monthly bill with them.
Insurance might be different.
Start looking at other insurance companies or call an insurance broker. These professional services are free. I’m a mortgage broker by profession and I’m always stunned when people think that they have to pay for my services.
Yes, it might involve you stopping at two or three different places to make it to the bottom of the grocery list.
You don’t have to become a coupon advocate but maybe buy avocados at $1,50 each instead of $3,00.
People don’t take groceries seriously.
That is one of the easiest places to cut down on costs and it’s where you can start saving immediately.
I’m a ambassador for eating well and eating good fruits and vegetables so don’t start going to big fast food chains just because they offer $5 meals. Stay smart.
Being wealthy and rich starts with your body and your health but that’s a completely different topic that we are going to cover later.
Open your computer and google “free transactional bank account”.
You might have found several banks that offer a free checking account with no transaction fees.
I actually use Tangerine bank for 95% of my transactions: no fee.
I pay all my bills online; I even receive monthly interests in every one of my accounts.
How cool is that?
If you are from Canada do this after reading the rest of the article.
Go to TANGERINE
Use this PIN number 43668511S1 when registering it will give us both a $25 to 100 in our account depending of the actual promotion.
Pay yourself first
I suggest you to go and read a very good article about the “Jar system” after this one. Blog of Dee
The biggest mistake I made in the last 15 years was to pay everybody first and myself last.
When I received money from any stream of income I was always paying the cellphone provider, the bank for the mortgage, the dealership for my rental, my insurance company for my protections, etc.
And after that with what was left I either spent it on a fun activity or invest the rest.
I have learned in several great books* and articles in the last years that this mindset is wrong.
You have to pay yourself first!
What do I mean by paying yourself first?
You make money
You take a portion of that money and you put it in your FFA account: Financial Freedom Account.
With the rest you pay others.
Not the other way around.
This will change it all.
Live below your needs.
For a number of years, I was living above what I had been earning.
That’s another powerful mindset to understand.
Why the heck wasn’t I ever able to pay myself first without going into debt?
Because each time I earned more I was buying more things or doing more expensive activities.
New car, new clothes, new house, more travels, more gifts, and so on.
You have to get to a point where you are comfortable with what you have and stick to it for a while. Even when you earn more.
I know it is difficult because we are human beings.
We want more.
If you are like me you might love to experiment, to discover, to spoil yourself.
If you do so without putting money aside first and staying away from debt, you will never become financially free.
The bar will just keep getting higher.
You will make 25K a year and spend 26K.
You will then make 50K and spend 60K.
100K … 125K…
You get the picture?
If you make 35K net a year and you spend 20K that’s another story.
I know, I know…
How can I just spend 20K a year and live and breathe?
Some people do it. So did I.
It might take some concessions at first but the end result is worth it.
Download the workbook
If you haven’t done it yet, please download the free workbook available for you on the main page: 11 Easy Steps for Financial Freedom. I have added some steps to make it more complete.
I’m also giving out the Fortunate Trader Budget System that can help you start your journey.
Change the categories for the ones that fit your lifestyle and start tracking.
When you understand where your money is going you can adjust your actions accordingly.
By understanding where you spend your money, by keeping a big portion of it for yourself, and by spending less than what you have left, I believe that you can achieve your financial freedom in no time.
Have fun doing it.
– Make It Happen –