STEPS TO FINANCIAL FREEDOM
- Louise Barnard
- Jul 15, 2023
- 3 min read
STEP 1: CREATE A BUDGET
Start planning where your money goes, not wondering where it went. Don't be overwhelmed, just take it one day at a time.
Create a basic budget - Ask yourself what is the difference between a need and a want.
Find an item that can be reduced e.g. reduce "Eating Out" expenses
Apply the difference (how much is left over) to reducing debt
Review weekly, repeat this process
This is an example of a simple XL spreadsheet budget. Click here to download the workable file, and edit the details to match your own monthly income and expenses.
STEP 2: GET RID OF ALL BAD DEBT
Bad debt is anything that you have to pay off yourself. Again, this may feel overwhelming so it is very important to remember to take it one day at a time and get support around you. Fast track the learning curve from the right people, find a mentor that is willing to share his/her success and be willing to learn.
GET STARTED
If you have credit cards with outstanding balances, discipline yourself to use only one or two credit cards. Any new charges must be paid off in full every month. Do not incur any more long-term debt.
Come up with $150 to $200 extra per month. If you have a good financial education and understand how to have money work for you, this should be relatively easy to do. If you can’t generate an additional $150 to $200 per month, then your chances for financial freedom may only be a pipe dream.
Apply the additional $150 to $200 to your monthly payment on only one of your credit cards. You will now pay the minimum payment plus the extra money on that one credit card.
Pay only the minimum amount due on all other credit cards. Often people try to pay a little extra each month on all their cards, but those cards surprisingly never get paid off.
Once the first card is paid off, apply the total amount you were paying each month on that card to your next credit card. You are now paying the minimum amount due on the second card plus the total monthly payment you were paying on your first credit card.
Continue this process with all your credit cards and other consumer-credit debt. With each debt you pay off, apply the full amount you were paying on that debt to the minimum payment of your next debt. As you pay off each debt, the monthly amount you are paying on the next debt will escalate.
Once all your credit cards and other consumer debt are paid off, continue the procedure with your car and house payments. If you follow this procedure, you will be amazed at the shortened amount of time it takes for you to be completely debt-free. Most people can be debt-free within five-to-seven years.
STEP 3: BEGIN THE PATH TO CREATE PASSIVE INCOME
Now that you are completely debt-free, take the monthly amount you were paying on your last debt, and put that money toward investments. Build your asset column. My first recommendation would be to read “Rich Dad, Poor Dad” by Robert Kiyosaki, followed by his book “The Cashflow Quadrant”.
Some say that this path is like the "Game of Monopoly". Invest time in your education first. Then, buy assets that will put money in your pocket after all expenses are paid.
There are many ways to create passive income, this process can be easier, by utilizing the experience of others. If you want to get from A to B then it is important to get the right help. Find a mentor or a business system that has done it before, and done it very successfully. Many people will offer advice or teach, but have not actually done it themselves. A franchise business is a great example of following a successful system. Make sure your mentor has achieved what you want in their own life.
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