From Budgeting to Building Wealth: Master These 6 Steps for Ultimate Financial Freedom

Six Steps To Financial Freedom

Are you over 40 and still feeling stuck in the same financial rut? If so, financial freedom may seem like an elusive dream. But it doesn’t have to! Nobody should feel shackled by their finances, regardless of age.

With a few simple steps and dedication, anyone can enjoy all the benefits of attaining financial freedom—peace of mind about money matters, more time with those we love, and increased security for unexpected emergencies.

This won’t be a theoretical article, but my wife and I use these six steps to become financially free.

Key Takeaways:

  • Financial freedom is achievable regardless of age or current financial situation.
  • Identifying financial goals and priorities is crucial in attaining financial freedom.
  • Understanding one’s current financial standing, including creating a budget, controlling debt, and starting to save, is important in taking control of finances.
  • Determining one’s “financial freedom number” and the number of cash-flowing assets needed to meet this goal is essential in achieving financial freedom.
  • Repeating the process of acquiring cash-flowing assets is necessary to steadily work towards reaching financial goals.
  • Seeking advice and joining a community can provide support, resources, and guidance in achieving financial freedom.
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Step 1: Identity What You Want From Financial Freedom

Identity What You Want From Financial Freedom
Identity What You Want From Financial Freedom

Financial freedom is something that many of us dream of, but to make that dream a reality, we need to identify what exactly it is that we want from it. Setting financial goals is crucial to staying motivated and holding ourselves accountable for our progress.

Whether saving for a down payment on a house or building up a retirement fund, having a clear understanding of our financial priorities will help us stay on track and make informed decisions about our money. S

So take some time to reflect on your financial goals and aspirations – once you’ve identified what you want from financial freedom, you’ll be well on your way to achieving it.

Each person’s definition of what they want out of financial freedom is different. For some, it might mean having enough money to pay the bills and live comfortably.

But for others, it’s about something more than just money. It’s about buying time to spend with loved ones, focusing on my hobbies and interests, traveling the world, or relaxing and enjoying life. Money is merely a means to an end, a tool to help us achieve our true desires.

That’s why achieving financial freedom is essential first to identify what you truly want from it. Once you have clarity on your goals, you can create a plan to make them a reality.

Step 2: Identify Why Being Financially Free Matters

Identify Why Being Financially Free Matters
Identify Why Being Financially Free Matters

However, let’s take it a step further; why are those things you identified above vital to you?

When it comes to financial freedom, it’s about so much more than just cold hard cash. It’s a multifaceted concept involving supporting those you love and nurturing your personal growth.

Financial freedom has two key components: the ability to be present for my family in every way possible and the opportunity to expand my mind and soul. I emotionally support my siblings through complicated illnesses and physically and psychologically help my father as he ages and his memory fades.

It’s not just about having money – it’s about having choices and the power to live a fulfilling life.

In the end, the true meaning of financial freedom is a beautiful blend of love, growth, and freedom.

Step 3: Understand where you are at right now financially

Understand where you are at right now financially
Understand where you are at right now financially

Understanding where you currently stand is one of the most critical steps in gaining control of your finances. Taking a hard look at your finances can be daunting, but it is necessary to make positive changes.

Establish a budget

Creating a budget or cash-flow plan is critical in controlling your spending and saving habits. This will help you see exactly where your money is going and where you may need to cut back. It may seem overwhelming initially, but with time and effort, you can develop a solid financial plan that sets you up for a secure future.

Control your debt

Before taking the necessary steps to control your debt, you must understand your financial standing. Calculating the total amount of money you owe is crucial, as noting the interest rates, repayment due dates, and minimum repayments.

One important caveat is that contrary to popular belief, not all debt is bad debt. We believe in the same notion as Robert Kiyosaki (read more about his financial books here) that good debt, also known as leverage, is essential to generating wealth in a compressed timeframe.

Briefly, debt is good when it is used to acquire assets that put money (aka cash flow) into your pocketbook.

This information gives you a better understanding of your financial situation and lays the foundation for future financial planning. It’s important to remember that debt is not always bad, but it is essential to manage it carefully. Making the minimum repayments is a great start, but it’s not enough to eliminate your debt. Developing a plan to pay off your debt should become a priority to create a healthier financial future.

Start saving

Understanding your current financial situation is the first step toward achieving financial stability. Whether you are just starting or have been in the workforce for years, knowing exactly where your money goes each month is essential.

The 50/30/20 rule is a popular budgeting method that can help you manage your finances effectively. Splitting your monthly income into needs, wants, and savings categories can help you prioritize your spending and start saving for the future. By allocating 50% of your income to conditions, including housing, utilities, food, fuel, and debt repayments, 30% to wants, such as dining out and entertainment, and saving 20%, you can create a sustainable budget that allows you to achieve your financial goals. Remember, the most significant savings mistake is never getting started, so start saving today.

Another popular savings framework is the 10-20 rule of budgeting, which follows similar principles as the 50-30-20 rule.

Finally, to truly take control of your finances, it’s essential to understand where you stand currently. And that means not only assessing your financial situation but also determining just how financially free you are at this moment.

That’s where our financial freedom calculator comes in. Specifically designed to help you evaluate your financial standing, this tool will help you better understand your current level of financial freedom.

Armed with this knowledge, you can begin taking steps to improve your financial situation and achieve the financial freedom you desire.

Step 4: Determine your “financial freedom number”

Determine your financial freedom number
Determine your financial freedom number

To achieve financial freedom, it’s essential to determine your “financial freedom number.” This number represents the amount of cash flow needed to cover all of your monthly expenses.

To calculate this number, start by adding up all of your necessary expenses, such as groceries, mortgage payments, and car payments. This exercise is not about what you’d prefer to have or your current costs but rather about where you are currently and what you need to live off of. By knowing your financial freedom number, you can work towards achieving this goal and ultimately attain true financial independence.

Consider this number the amount of cash flow you must generate monthly to cover your expenses.

Next, consider utilizing cash-flowing assets to produce income month in and month out.

For some, that will be dividend stocks, others owning a business, but for us, it’s buying and holding cash-flowing real estate.

You can find more details about our complete financial freedom plan on this site.

Step 5: Determine how many cash-flowing assets you need to meet your financial freedom number

Determine how many cash-flowing assets you need to meet your financial freedom number
Determine how many cash-flowing assets you need to meet your financial freedom number

When achieving financial freedom, a key factor to consider is determining how many cash-flowing assets you need to reach your goals. This essentially involves understanding how many pieces of real estate or dividend stocks or businesses you need to acquire and how long it will take you to do so.

Let’s take our plan as an example.

To do this, there are two essential steps to follow. First, you must calculate how many cash-flowing assets you must accumulate so that your total cash flow equals your expenses.

This can be achieved using a simple formula of Monthly Expenses divided by Cashflow per Asset, which gives you the number of assets you need.

For example, if your monthly expenses are $5,500 and each asset you acquire gives you a cash flow of $243, you will need 23 assets to reach your financial goals.

While it may seem like a lot at first, it’s important to remember that the second step involves assessing how long it will take for you to acquire these assets.

To do this using the example of cash-flowing, single-family real estate, visit our financial freedom plan page, download the free Google Sheets calculator, and determine it for yourself.

Step 6: Repeat step 5 until you reach your financial freedom number

Repeat step 5 until you reach your financial freedom number
Repeat step 5 until you reach your financial freedom number

Now that we have established a plan to achieve our financial freedom, it’s time to talk about the type of real estate that will get us there. Forget about hunting for bargain properties and starting renovations; there’s a better way.

By purchasing cash-flowing assets, we can create a steady income stream requiring less time-consuming work. Imagine just one autopilot asset generating a lucrative monthly cash flow. This is what we should be striving for. By repeating the process of purchasing these assets, we can steadily work towards reaching our financial goals.

At this point, it’s simply a process of repeating this repeatedly.

The analogy I like to use is that of a baseball game. While it’s great to hit home runs, when that is all you are trying to do, you might also strike out a lot.

Focus on small successes, hitting single after single. Eventually, you get to a point where you consistently drive in runs and score financially.

Bonus Financial Freedom Step: Get Some Advice And Join A Community

Get Some Advice And Join A Community
Get Some Advice And Join A Community

When achieving financial freedom, seeking advice and joining a community is crucial. We must recognize that we don’t have to go at it alone. Building wealth and achieving financial freedom can be considered a team sport.

Not only will you need help from CPAs, tax advisors, lenders, and others, you’ll want to be a part of a group trying to do the same thing as you are.

For us, joining a community like Cashflow Tactics can help provide the support, resources, and guidance needed to reach your financial goals. Being part of a community allows you to learn from others who have already achieved financial freedom and to connect with like-minded individuals who share similar goals.

We joined this community in 2019, attend yearly conferences they run, and listen to weekly Q&A & education calls.

Don’t underestimate the power of seeking advice and being part of a community to achieve financial freedom.