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Achieve Financial Freedom: 11 Proven Strategies for Success
Most of us dream of financial freedom, but what does it mean?
Put simply, 'financial freedom' is having enough investments, savings, or accessible cash to live the life you want for yourself and your family.
The importance of financial freedom in your personal and professional life cannot be understated.
Why?
Because it means you're not dependent on other individuals and/or organizations for your financial welfare and well-being.
So, if you want to kickstart your journey to financial freedom, you're in the right place. Here, we'll explore:
- 11 tips for getting on the right path to financial freedom
- The importance of building and protecting your assets
- Answers to some FAQs
- Some example success stories
There's lots to sink our teeth into, so let’s dive in.
But first:
Understanding Financial Freedom
First, let's clarify what we mean by 'financial independence.'
Ultimately, this is when you can live the life you want without working (unless you want to, of course!).
This is slightly different from financial stability. I.e., when you have sufficient resources to pay your bills and are debt-free with savings for the future and any emergencies.
Being financially stable doesn’t necessarily mean you’re wealthy; it simply means you don’t necessarily have to worry about money. Instead, you can enjoy life while living within your means.
On the other hand, financial freedom comes with greater benefits than simply not worrying about money day-to-day or month-to-month.
For example, there are several psychological benefits to achieving financial freedom. You may feel a sense of accomplishment and pride in reaching this stage, resulting in increased self-confidence and self-esteem. In addition, you may no longer experience distress about needing more money.
So, now we have a clearer idea about what financial freedom is, let's look at what you can do to achieve it:
- Setting Financial Goals
Set short and long-term financial goals using the SMART criteria:
- Specific
- Measurable
- Achievable
- Relevant
- Timebound
For example:
- “I want to be mortgage-free” (Specific)
- By overpaying a set amount of your mortgage each month (Measurable)
- Being realistic about what you can pay (Achievable)
- Linking this goal to an emotional tie, such as being debt-free to pursue experiences important to you like travel (Relevant)
- Being accountable with your goal, i.e., “I want to be mortgage-free by the time I’m 45” (Timebound).
You may find aligning your goals with personal values and aspirations easier. For example, if family is important to you, achieving financial freedom might be something you want so you can work less (or not at all) to spend more time with family.
- Budgeting Strategies for Success
Creating a realistic budget is essential for achieving financial goals.
If you don’t do this, you face disappointment.
A budget helps you track where your money goes each month, giving you greater control over your finances - because when you know how much you’re spending, you can better plan for future expenses.
Here are a few budgeting tips:
- Identify necessary expenses (rent, mortgage, bills, car, food, commuting costs, etc.). Then, look where you could cut unnecessary expenses such as expensive magazine and online streaming subscriptions, buying clothes you don’t need, gym memberships you don't use, etc.
- Put money aside for emergencies, e.g., needing a new car or home repairs.
- Put money aside for the future (retirement accounts and savings accounts). Experts generally recommend around 15% of your monthly income.
Some experts work with the 50/30/20 rule:
- Spend 50% of your income on your needs (rent, bills, mortgage, etc)
- Spend 30% on your wants (holidays, trips, nights out, etc.)
- Spend 20% on your savings (savings and retirement)
If in doubt, the 50/20/30 rule is an excellent starting point for budgeting your finances.
- Investing Wisely for the Future
Once you’ve set your financial goals and your budget realistically reflects those goals, you may want to look at wise investments for the future.
There are a range of investment options available, for example:
- In the UK, you could save up to £20,000 each tax year in ISAs (Individual Savings Accounts).
- In the US, consider Municipal Bonds, tax-exempt Mutual Funds, and other options.
- Opening an online brokerage account and making automatic payments to your portfolio weekly or monthly.
- Open a 401(K) retirement savings plan. This offers tax advantages for the saver and is something many US employers provide.
- In the UK, employees earning £10k+ can enroll in their employer’s employee pension scheme, which the employer contributes to.
- Build a sustainable investment portfolio. By this we mean two things:
- Build a portfolio you can easily manage and not be overwhelmed by
- Build an environmentally and socially responsible portfolio by investing in companies prioritizing sustainability.
- Invest in REITs: with minimum investments as low as $500, you can invest in a real estate investment trust platform. REITs pool the capital of numerous property investors, making it possible for individuals to acquire dividends from real estate investments—without purchasing property themselves.
Lastly, when making investments for the future, it’s essential to diversify and be aware of any risks. Investments aren't immune from failure - so don’t put all your eggs in one basket. Spread your investments around. It's also wise to work with a reputable and accredited financial advisor to help manage your investments.
- Passive Income Streams
For the uninitiated, passive income is just what it sounds like - i.e., financial earnings that take minimal effort to obtain.
While passive income streams usually require time and effort to get up and running, eventually, they typically generate revenue without you having to do much (if anything).
Here are just a few examples of potential passive income streams:
- Start a dropshipping store
- Create a print-on-demand store
- Build an affiliate marketing business
- Buy property and rent it out
- Sell online courses
- Shop through cashback sites like Rakuten and TopCashBack
Passive income while working your day job can help you achieve financial freedom faster.
However, the critical thing to remember is that you'll need to allocate time to balance both active and passive income streams so your primary source of income isn’t impacted.
- Debt Management
Before going any further, it’s worth highlighting the importance of not ignoring debt.
If you have debts, such as credit cards or loans, paying these off is necessary. These are what are called "bad debts."
In contrast, "good debts" can potentially increase your net worth or accumulate greater future value (e.g., a house you sell for more than you paid for).
If you have "bad debts," employing these strategies to pay them off could prevent the accumulation of unnecessary debt:
- If possible, pay off your credit card balance each month.
- Continue paying off other debts such as student loans, mortgages, etc.
- Use credit cards to your advantage, transferring balances to 0% interest cards, and when that runs out, move your balance to another 0% provider.
- If you have a range of debts, consider consolidating them into one lower-interest loan.
Ultimately, paying off debt is essential for achieving your financial goals, saving for your future, and maintaining a solid credit rating.
- Building Multiple Income Streams
Consider building multiple income streams. So, aside from your day job and possibly generating passive income, consider other sources of revenue.
For example, monetizing your skills and talents. Let’s say you’re great at art; why not utilize that skill by selling your artwork?
Or perhaps you have tons of knowledge from your day job that you could use to fuel a side hustle? For example, creating a Patreon account where subscribers pay to access your wisdom.
Again, if you have niche expertise, you could work as a freelancer, e.g., if you have tech, social media, copywriting, web development, etc., experience, you could market yourself as a freelance professional and sell your services accordingly.
Another side hustle is selling your old stuff online. Do you have clothes and other items you no longer wear or use? Try selling them on Facebook Marketplace or Vinted.
Alternatively, you could explore part-time opportunities besides your regular job.
That said, we caveat everything we've just said by stressing the importance of factoring in time for a reasonable work-life balance. Otherwise, you run the risk of burning out!
- Continuous Learning and Skill Development
It's worth mentioning the role education plays in achieving long-term financial freedom.
For example, if you've risen as far as possible in your current role, research the qualifications/skills you'll need to advance the career ladder to a better-paid job.
Courses can be expensive, but completing free or partially free online courses is possible. For instance, check out the following:
- Stanford and Harvard Universities offer some free certificate courses
- FutureLearn provides some free courses in a range of areas, including law, IT, and business
- LinkedIn Learning provides free courses for remote workers, managers, job seekers, and more.
- Google and Microsoft also offer free courses that come with certificates.
- Entrepreneurial Ventures
Launching your own business to help obtain financial freedom may not be a smooth path, but that doesn’t mean you should avoid it.
There are several steps entrepreneurs can take to help them grow a successful business and mitigate against risks and challenges, for instance:
- Have a solid business plan, including a financial statement and goals.
- Ensure your budget includes money for startup costs.
- Use free online tools to help you build the foundation of your small business, e.g., Google Analytics, Hubspot, Canva, and Trello.
- Explore different funding avenues, such as crowdfunding and Small Business Administration loans in the US and UK government-backed startup loans.
- Keep a close eye on cash flow.
- Do your homework, including reading about successful entrepreneurs and learning about what they did well.
That said, accepting and learning from your mistakes is essential for entrepreneurs - no one will get everything right the first time around. So be kind to yourself in the process.
- Mindset Shift for Financial Success
While all the above are predominantly practical tips for achieving long-term financial freedom, it’s worth pausing to consider something else: mindset.
Financial psychologist Brad Klontz describes having a “wealth mindset,” telling CNBC,
“The wealth mindset is less about taking a chunk and trying to multiply it and is more of an approach, a philosophy.’” Adding:, “‘If you’re trying to take a chunk of money and get rich quick, if that’s your mindset, you’re going to do everything wrong.’”
In other words, think long-term and strategically, not in a rushed and panicked get-rich-quick kind of way.
Consider your core beliefs about money and what you were taught about money when growing up. Holding limiting beliefs about money will reduce your potential to achieve your goals.
Examples of limiting beliefs include:
- That you’ll never make money or be rich
- I’m always broke
- I don’t deserve wealth
- Money doesn’t buy happiness
Dwelling on limiting beliefs makes it harder to adopt a positive mindset toward taking advantage of opportunities that can lead to financial freedom.
Instead, focus and appreciate what you have and what you’ve achieved so far. This goes a long way to cultivating a confident, optimistic, and productive mindset for building clear financial goals.
- Tax Planning Strategies
Tax planning is the process of analyzing your financial position and planning accordingly to generate the most money possible while paying the lowest taxes (legally).
For instance, the most common way to reduce taxable income in the US is to see if you’re eligible for tax deductions or credits.
Tip: Seek professional advice to help optimize your tax planning strategies.
- Building and Protecting Assets
As you probably already know, ‘asset accumulation’ refers to generating wealth over time through your acquired financial assets. Typically, these produce an income - for instance, bonds, retirement accounts, and dividend-paying stocks.
If you have (or are planning on obtaining) financial assets, look into asset protection. I.e., ways to legally protect assets from lawsuits, debts, and taxes. For instance, domestic asset protection trusts, insurance policies, prenuptial agreements, etc.
The key to asset growth and preservation is planning ahead. Circling back to the first point we made, if accumulating financial assets is a possibility for you, factor this into your financial goals and adopt strategies to negate risks from the get-go. After all, it’s usually too late to adopt protection strategies once a lawsuit is filed or a tax bill is charged.
Frequently Asked Questions
We’ve covered lots of ground, so before pushing on, let’s answer a few frequently asked questions surrounding financial freedom:
What is the first step to achieving financial freedom?
Setting financial goals is imperative. For more information about setting financial objectives, scroll back towards the top of the page.
How can I overcome financial setbacks during the journey?
The best way to avoid financial setbacks is to set realistic financial goals, stick to them, and live within your means.
However, sometimes, financial knocks occur outside of our control.
In those instances, we advise accepting the reality of your new financial situation and pivoting accordingly. This means taking stock of your financial resources and reassessing your financial goals.
Often, during periods of financial stress, we’re tempted to make rash decisions. However, we urge you to consider the best way forward and, if possible, consult a professional before acting.
Is it possible to achieve financial freedom with a low income?
In short, yes. Although achieving financial freedom with a low income is more challenging, it’s not impossible.
Kyle Borawski is an excellent example. Kyle was a college student who used Spocket to fuel his online store. He generated over $224,923 in sales from August to October 2019, with over $85,205 in October alone.
‘I would cut hair and budget how much I would spend on ads based on how many haircuts I did that day. You may not get rich quick doing this; however, you can make little differences on a small budget like $30 a day.’
What role does financial education play in the process?
Financial education plays a predominant role in financial freedom - being open to learning more about the finance industry is imperative for equipping yourself with the knowledge and mindset you need to make informed financial decisions.
How can one balance saving for the future and enjoying the present?
To balance enjoying the present with saving for the future, it's helpful to plan your finances in smaller blocks (perhaps a few years), alongside putting money aside for emergencies, retirement, etc.
This might be more motivating than overwhelming yourself by looking at the rest of your life.
However, only you can decide what’s important to you, so spend time analyzing how you want to spend your money and budget accordingly.
Success Stories and Case Studies
In addition to Kyle Borawsk (as mentioned above), Marc Chapon made $178,492 in three months by dropshipping US and European products using Spocket. You can read more about his strategies and decisions that led to his success here.
Pitfalls to Avoid on the Journey
This could be a whole blog post in itself, so we won’t cover this extensively.
However, we’ve listed a few common mistakes people make on the road to financial freedom to help you avoid making the same blunders:
- Not having a plan that includes a budget - as we’ve mentioned throughout this blog post, having a plan and budgeting is imperative for achieving financial freedom.
- Living beyond your means - this is a surefire way to land yourself in debt, making it much harder to put money aside.
- Not seeking professional advice.
Monitoring and Adjusting Financial Plans
Your plans for financial freedom aren’t static; they’ll evolve as your financial situation changes. So, conducting regular financial check-ins and adjusting your plans and budget according to your cash flow is imperative.
On top of that, periodic financial check-ups are helpful for:
- Pinpointing where you can decrease outgoings and/or increase revenue
- Monitoring tax obligations to avoid paying penalties
- Ensuring your retirement and investment strategy will meet your needs
Celebrating Milestones and Progress
It’s important to celebrate the financial goals you meet. After all, observing your wins helps track your progress, keeps you accountable, cultivates a positive mindset, and sets new financial goals to aim for next.
Building a Support System
It’s great to network with like-minded people and seek mentorship from financial experts. Again, this is fantastic for fostering accountability, extending your financial knowledge, and keeping you on the right track to financial freedom.
Are You Ready to Embark On Your Journey to Financial Freedom?
That brings us to the end of our thoughts on how to best position yourself to achieve financial freedom. We hope these ideas provide a good starting point.
In summary, we encourage you to do the following:
- Set financial goals
- Create a budget and stick to it
- Make wise investments
- Consider setting up passive streams of income
- Manage your debt
- Consider building multiple income streams
- Be open to learning and gaining new qualifications
- Contemplate launching an entrepreneurial venture
- Adopt the right mindset for financial success
- Implement tax planning strategies
- Take steps to acquire and protect your financial assets
Suppose you're looking for your next entrepreneurial venture to create an additional income stream. At Spocket, we'll happily help you kickstart your dropshipping business. Contact us today to see how to get the ball rolling!
