Do you have a goal? If yes, do you have a plan to achieve it?

As you know, I have a goal to achieve financial freedom before the age of 30. For me, this not a dream instead it is a goal that I must achieve for my life. I understand that achieve financial freedom is not really easy and in order to be success, I have to pay the price of it – hard works and time. Yes there are a lot of ways to achieve financial freedom such as inherit my parent’s wealth or marry a wealthy girl. However this is the only way that I choose to achieve financial freedom because I have no choice since my parent is not wealthy and I’m not handsome! :).

Achieving financial freedom is a life long journey and it is hard to achieve because of our unpredictable life and not enough hard works. Maybe today you set a goal to be financial free within 5 years. However, something happens in your life and makes your plan delay to 10 years or longer. Or you don’t have a money usage plan and you use your money wrongly until you cannot achieve your goal within the time. Another most common reason why people fail to achieve financial freedom is they are lack of motivation to take action. Financial freedom only is a forever dream for them. So, in order to achieve it, you must have a plan on money related subject in your life. Besides that, by having a plan, you are telling your mindset that you have set a goal with a plan and this will motivate you indirectly. It will act as a guide to help you focus on your goal no matter what happen in life. To me, it also has the “reminding” effects for me and keep remind and refresh my mind that I must achieve financial freedom.

So today I want to discuss the topic on how to make a plan to achieve financial freedom. In this article, I just share my own experience in planning and I hope it can inspire you to make one for yourself. Here we go…….

Run a “Blood-test” over your Current Financial Status

Everyone can achieve financial freedom! This is a strong believe in my mind. The only difference here is different people with different financial background will have different plan to achieve financial freedom. So I suggest that you must sit down and survey your current financial status so you can understand better your own finance and then make a plan that suits your needs.

Below are some of the points that I think you must consider in this stage:

1. Your Income Source. You must know how you make money. Maybe you have a job with steady income or have a business that has the potential to grow higher. Maybe you are a student with limited income or you from the group of irregular income. You must understand how you make money and if possible try to do some prediction over your income growth for the next 10 years. From here you will have a clear picture on your ability to bring money in and so you can see how far you can go in your plan to achieve financial freedom.

2. Your debt. As you know, your burden of life will be higher if you have debts to pay and you have to adjust your plan of financial freedom accordingly. Whether you should pay off your debt before investing or vice versa. Below I have a section that discuss more about should I pay the debt first….

3. Your Expense Loophole. Here you must consider what kind of expenses that you can’t avoid such as your mortgage payment, car loan payment, living expenses and so on. This is what we call basic living expense that you cannot avoid but only can reduce it by living below your means.

If possible, you may start a budget over your money and keep track your cash flow for 3 months. Then you will get a big picture on your spending habits. From there you must figure out a way to manage your money more properly so you will have more money to invest and achieve financial freedom. This is why budget is the first important steps to financial free.

Should I pay the Debt first?

There are a lot of people asking whether they should pay their debt first to achieve financial freedom. What do you think?

Actually it really depends on you. I have provided some tips below to help you make decision whether you should pay off your debt first or go the other way round.

1. Consider your debt interest rate. What is the interest rate of your debt? This should be the first question that comes to your mind. If you have multiple debts, get a piece of paper, or open your excel program and list down the debt with interest rate on it. Now you should know whether there are some high interest debts you must pay attention on.
   
2. Compare your debt interest rate. The second question to ask yourself is Will it give a boost over my finance if I pay down the debt? The simplest way to answer this question is compare your debt interest rate with your income growth rate or your investment tools. If the interest rate higher, then you should consider paying down the debt as you have nothing to afford the interest rate. This will definitely hurt your finance in long run.

3. Analysis your debt. Is your debt a good debt or bad debt? Generally, a good debt is a debt that will bring income into your pocket and bad debt will increase your expenses. For example, your rental property’s mortgage might be your good debt and credit card debts are bad debt. Of course, your target should be focusing on getting more good debt and reducing the bad debt.
   
4. Analysis your credit scores. Credit scores are very important for you to achieve financial freedom especially you decide to leverage on others people money in future. If you want to buy a rental property for passive income, then you have to get a mortgage. So it will be an advantage if your credit is high as you can easily get some good deal. So if your credit is low, paying down some debt might help you out.

5. What do you think about debt? Are you feeling stress by having some debts with you? I really saw some people feel stress on their debt. If you are one of them, then you should consider paying off your debt in order to get a peaceful mind. Another way to fight your phobia of debts is changing your mindset and accepts it. This is because you will achieve financial freedom faster by leverage on debt or so called other people money in future.

Generally, it all depends on your current financial status to decide whether you should pay off your debt. This is why I advise you to start a budget and get an overall picture over your current financial status in this planning guide. So what are you waiting for? Start a budget today!

Coming up next: We will discuss how to decide the amount of passive income to achieve financial freedom.

See You Next time & Good Luck!

Harrison

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