Welcome to today’s topic…
” 7 Golden Rules For Financial Freedom (Updated)”
We all need money for all our consumptions. Unfortunately, not all people are good to manage their personal budget. In fact, there are a lot of people who are in trouble with their finances and even up to 80% of people are living paycheck to paycheck.
How you manage your personal finances indicates whether you can achieve financial freedom or you will strive for money for the rest of your life.
Our today’s topic will guide you to financial freedom if you follow these 7 golden rules for financial freedom (Updated – 10th June 2019).
Before I start…
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#1: Have A Positive Cash Flow
“It doesn’t matter who much you earn, what matters most is how much left after all your expenses”.
Even if you earn $1 Million a year, but if you spend $1.1 Million a year that same year. You can not say you’re a millionaire, right?
However, if you, for instance, have a paycheck of $2,000 and all your expenses are only $1,500 and making sure that a $500 automatically goes to your investment account, then your cash flow is positive. Which means your cash inflow (income) is higher than your cash outflow (expenses).
To secure positive cash flow, it is important that you set up your personal budget and make sure to follow it so you’re not running out of money every single money. Unfortunately, there are a lot of people who are already under $800 before the next paycheck.
Personal finances vary according to ages and these are my recommendations in improving it.
For Children – Managing Money For Children
For the 20s – The Power Of Investing Early – 4 Tip for 40s
For the 30s – Best Ways To Manage Your Money At Your 30s – 8 Tips
For the 40s – Top Financial Planning Tips For 40s
For the 50s – Top Financial Tips – Catching Up For 50s
For the 60s – Top 5 Financial Tips For 60s (Pre-retirees Must Know)
#2: Be Debt-Free
Achieving financial freedom means also that you need to get rid of your bad debts if you have some. Bad debts are debts acquired without investment purposes. These are commonly acquired for personal use like shopping around, eating out, taking loans for a simple vacation or holding a party and a lot more.
Paying interest in bad debt is one of the main hurdles in financial success.
On the other hand, good debts are acquired for the purpose of leveraging bank’s or other people’s money. Like real estate and other types of business.
When you get rid of your bad debts, you can focus on investing the same amount of money in something that gives more value and money to your investment portfolio.
# 3: Pay Yourself First
This rule is one of the best and effective to accelerate your journey to financial freedom. “Paying yourself means you need to set a portion of your paycheck automatically BEFORE pay your expenses – yes, even your fixed expenses.
Most of the self-made millionaire I know apply this rule – like Robert Kiyosaki. I watched one of his interviews one day. He stated that he still apply this rule even today.
Robert and his wife, Kim, set a specific amount of money to their investments no matter how much left for the business expenses. And yes, they admit that this could be very challenging especially when it comes to business bills.
How much should you save for your investments?
The ideal minimum investment savings is 20%, which means that the remaining 80% is your budget for all your expenses.
However, if you want to achieve financial freedom in 5 years, you need to apply a reverse equation. You need to save 80% of your income and use only the remaining 20% for all your expenses.
#4: Create Wealth Through Entrepreneurship
One of the popular motivational statement I ever heard for all my life is “School teaches us how to become poor” – Robert Kiyosaki of Rich Dad, Poor Dad.
As a former Accountant, I have reviewed a lot of business financial statements and so I actually know how simple business can earn a fortune. Hearing a bold statement of “poor mindset” made me more convinced that this is what makes us stay in our comfort zone and afraid to take risks.
Working for someone will never provide us financial freedom. When you are employed, you become a modern slave to that company. You need to work the long working hours every single day.
I noticed that successful and self-made millionaires have one thing in common – they are entrepreneurs and they have a brilliant mindset. A typical successful entrepreneur runs multiple businesses that create passive income. This passive income requires only minimal time and while it continuously rolls over time, their wealth continuously grows.
Since businesses with passive income require only minimal time, entrepreneurs diversify and create more businesses, that again creates more passive income. Pretty cool and amazing, right?
The first thing to do is to start with one business that generates passive income. Master the process and reinvest the income to create another business. Before you know it, you already are building your own empire.
Prioritizing and maximizing your passive income is the road to financial freedom. So, stop working hard to climb up the corporate ladder. Even though this is the surest way of making money, it can not create wealth stream as that entrepreneurship can.
#5: Hire Your Money To Work For You
Being an employee is really hard because you need to trade your time for money. If we only trade all the time we have in a day, then we only have 24 hours to trade with.
Today, there are a lot of people working really hard to earn money through their jobs. I know some friends who have 2-3 jobs and they only sleep 4 hours a day just to sustain their financial needs.
On the other hand, I know a lot of successful people, mostly entrepreneurs, who have multiple sources of passive income. They a lot of freedom to do what they love because they manage their money and grow wealth.
Money itself is capable to earn money through proper investments. If you imagine that whenever you invest your money would be “hiring” a worker to work for you and earn money 24/7. How many times would do it then? I bet you would say… “As many as I can”.
The safest way to grow your money is through a savings account. Yes, that seems to be right, but this will only give you a very minimal interest income. Being safe is not what trills an entrepreneur to grow his wealth. It is the possibility of making real money and taking the risks behind it.
Getting around 2% interest rates per year with your savings account will not make you wealthy due to the inflation rate that increases year after year.
So instead, invest your money and grow wealth exponentially in things that can create passive income throughout the years. For example in businesses, real estate and other ventures with great potential to grow continuously.
Investments are risky in nature but the reward is totally satisfying when they pan out. Remember that you will never get rich by playing safe. Starting a business is risky but it has great potential for you to grow wealth exponentially and achieve financial freedom.
#6: The Power Of Doing More With Less
When I was in my grade school, I remember a poster in our classroom saying: TIME IS GOLD. At a very young age, I just thought that it simply means “never waste your time” – you have to be productive by using your time wisely. This has always been true but there’s something much more beyond that.
When I reached university, even though I studied Business Management and Accountancy, the university taught us how to work hard to earn money. The emphasis was based on earning money through employment wherein you have to work a lot of hours because time is gold… time is money.
This poor mindset has paralyzed a lot of people’s potential for wealth. Using a lot of hours to work for someone else will only offer you a very limited source of income and will never bring wealth into your life.
The truth is the more you invest and earn passive income – the more time you would have to do a lot of things you love without worrying about money.
#7: Have A Great Team
As you reach a certain level of financial freedom, you’ll need help from other people to expand your business.
Using other peoples time and skills require a phenomenal team. Starting a business and let someone else manage it for you is the main key to passive income. That means you do not have to take hands-on in every phase of your business.
Having a great team will ensure you a successful business, while a bad team, on the other hand, will sink your business in a short period of time.
For example, having a very good manager will ensure smooth management of your business, while a lawyer will ensure all the legalities and legal documents for the business.
Hiring people on your team is very crucial. You need to select and get the best people to work for you – including your own employees. Do not hesitate to spend the extra money and wait for the best of the best to join your team – where you can rely on these people to get the job done right… even with very minimal supervision.
Last but not least, have a mentor on your team. High financial intelligence is being achieved by educating yourself and by surrounding yourself with successful people. Keep learning.
Learning is a continuous process. Your mentor will guide you throughout your success, especially at the beginning of your business journey and when you meet challenges along the way.
A great team will ensure your continuous success, profit and wealth growth.
Our mindset is our best tool to achieve financial freedom. The only barrier that one can have is the lack of financial intelligence and knowledge in achieving financial success.
Our ancestors and schools have built us the poor mindset of working hard for money instead of investing wisely and let money work for us.
The gateway to financial success has always been open to everyone. You have to enter it and move forward to the road of financial freedom in order to get there.
Before you leave…
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This is the end of today’s topic “7 Golden Rules For Financial Freedom”. I hope you have learned a little bit more about managing your personal finances and can make a better decision towards your journey to financial freedom.
Good luck with your journey to financial freedom online. God bless!