How to Make a Plan to Achieve Financial Freedom, Part 3
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Previously, I shared the first 2 parts of How to make a Plan to Achieve Financial Freedom. First part, we discuss how to test and know your current financial status and problems. In the second part, we discuss how to set a goal on how much passive income you need to achieve financial freedom. Both of them are in the preparing stage of this plan.
So in this article, I’m going to discuss how and in what way you can start your journey to achieve financial freedom
How to start the journey?
I always suggest people to start the journey according to the following steps:
- Start a business or build an income source that will generate excessive money for you.
- Manage the excessive money in a proper way
- Invest the excessive money to generate passive income
I elaborated each of the steps below:
Start or Own a Business that Generate Excessive Money
I always recommend people to start by building up a business or any other income source that will generate excessive money to them. In fact, I’m also doing this to achieve my financial freedom.
Let me define the meaning of excessive money:
Excessive money means the amount of money that can pay out all your living expenses and at the same time provide extra money for you to invest and build up your assets.
There are 2 reasons why I recommend to get started in business first:
- Protect Yourself. In my post, how to start a part time business that protects you financially, I already pointed out the important of a business to us. It can generate income to you and help you to build up your assets or as a protection for you at the emergency moment. Of course, business is not the only way to generate excessive money and you can also use your abilities to build up any other income source. As long as it can generate excessive money for you.
- Lower Your own Risks. We are not born to be an investor and in most cases we tend to lose money in starting. However, the more money you lost the more experience you will get and finally you can be a professional investor. I can tell you that learning from your mistakes and errors is the best way to improve. Yes, it is really pain to lose money but because of this you will remember your error very well and make a better investing decision next time. So if you have excessive cash, then the risks of losing money will be lower since it does not affect you life.
Manage the Excessive Money
No matter how much money you make, you must learn how to manage your money. In most cases, people fall deeply in debt not because of their low income, but because of their spending habits and weak in money management.
So even you have some kind of income source or business that generates excessive cash for you, you still need to learn and have a plan to manage them. If not you still can fall into the money trap.
Here, I will recommend you to start a budget. This is the best way to manage your money and gain control over your money. You plan how you spend and spend according to plan.
Now you can use the information that you collect in part 1 of this series and compile your own budget accordingly. Please remember that you must include emergency and investing funds in your budget.
Invest the Excessive Money
By carrying out a budget for your money, each month you will have some money ready for investing. This is one of the reasons why we must start a budget. However we cannot simply go out and dump the money in any investments and wait for the returns. We are trying to learn and invest like a true investor and not a gambler.
I have some suggestions for you:
- Decide what kind of investment you want to start. There are a lot of investment in the market such as real estate, stocks, forex, bonds and etc. So you must decide and select 1 or 2 of them and focus on them. I suggest choosing 1 or 2 of them because it takes time for us to train ourselves to make money from 1 investment. So if we start with so many investments, we will easily get confused and overwhelmed until we stop taking any actions. So we must start small and take baby steps all the time.
- Invest in your brain. There a lot of information we have to absorb and learn before investing our money in one investment. Different kind of investment will have different kind of terms, options, tools and strategies to be used. So in order to learn all this skill, you must read books, attend some courses or even pay a mentor to guide you in this. This is what I called invest money in your brain because you exchange knowledge with money. However, once you learn enough, your brain will put back some “gold” in to your pocket.
- Take some simple actions. I believe we can always leverage on the baby steps to train up ourselves easily. For example, if you choose stocks as your first investment target, then you can start with some free stock simulators and make yourself familiar with the market by using the virtual money. This is a good choice for you to gain experiences without losing any real money.
- Start your investment journals. By keeping a journal, you will keep down your journey to learn something. From there you will keep down what you learn, what mistakes you made and how the market change from in the previous year. This will make your mind clear about what you are doing every day. At the same time, compile and prepare your own investment strategies. The more knowledge you get, the better analysis and decision you can make. Then finally you can start making your own investing plan and strategies to invest.
- Don’t Give Up!
Coming Up next : Next part will be the last part of this series and I wish to discuss the power of mindset in your plan to achieve financial freedom. So stay tune, my friend.
At the same time, why not share with us your action plan to achieve any financial goals?
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Comments
5 Responses to “How to Make a Plan to Achieve Financial Freedom, Part 3”
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I completely agree that an individual must create a detailed plan before begin the journey to wealth. Wealth building involves a drastic lifestyle change that involves total dedication.
Hi Lewis, thanks for the comment.
Wealth building also is a long journey and you have to work hard and be patient enough to achieve what you want.
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