Follow the steps!
Step no. 1 – Visualize becoming financially free
For decades, people have used the skill of visualization to achieve what they desire. Athletes, businessmen, politicians, artists, and educators use visualization to get closer to and eventually achieve their dreams.
Before getting into the specifics of how you can reach financial independence, it is important for you to dream that you ‘are’ actually financially independent. First, visualizing, then believing that you can attain your dream, can prove to be critical steps toward your financial success. Visualization works. Part of your brain, known as the ‘Reticular Activating System,’ works behind the scenes on a non-conscious level. It brings the pieces of pertinent information within reach while discarding the useless ones. Once we can visualize an action, it is easier to execute it. It gives you the feeling of having finished your tasks or even having achieved your goals. At BFI, we are neither theorists nor deep-thinking philosophers: instead, we are well aware that visualization alone does not lead anywhere. Yet, we firmly believe it is a stepping stone to financial freedom.
You need to decide whether you want it more than you are afraid of it. You must have an honest heart-to-heart talk with the ‘deepest’ yourself. You need to define precisely what financial independence means to you! Following someone else’s definition or fancy quote of financial independence cannot get you there. You will need a clear and realistic picture of your current financial status, the stakes lying ahead, and the remedial actions you may need to take in case obstacles appear.
Walt Disney once said, “All our dreams can come true if we have the courage to pursue them.” Whether you are in your 20s or 50s, start visualizing your financial freedom today; be confident that your RAS will reveal the people, details, and opportunities that will help you achieve your financial goals!
Step no. 2 – Live below your means
Spending less than you earn is the most powerful money habit potentially financially independent people can have. Spending less means sacrificing today to provide a better life for you and your loved ones in the future. Spending less means developing financial discipline. Being a smart shopper is the first step to getting rich. Analyze your financial habits, make a budget, cut back on discretionary expenses, pay off your debt, build an emergency fund and, only then, use the surplus to invest. Be wary of little expense; a small leak can sink a great ship!
Experience has taught us that the most significant point of failure with money is relying solely on paycheck to fund short-term spending needs. Unless you have made savings as a result of the estimation of current and future expenditures, financial sustainability may seem to be a challenge. You cannot imagine how many investors grind hours a week to add a tenth of a percentage point to their investment returns when there are two or three percentage points of lifestyle bloat in their finances that can be exploited with no effort. You will never change your financial life until you change something you do daily. The secret to your financial success is found in your daily routine. Reassess your priorities and always make mindful spending. It is not the high salary or the big house that will make you rich. It is your spending habit. Real wealth is, in fact, income not spent!
Step no. 3 – Save, save and save again
The only factor you can fully control in your financial life is your saving rate. Building wealth has little to do with your income or investment returns and lots to do with your saving rate. Investment returns can make you rich but are always in doubt. You never know whether an investing strategy will work, how long, and whether markets will cooperate. On the other hand, saving is part of the equation in control and has a 100% chance of being as effective in the future as it is today. Save for your emergency fund, save for a future valuable purchase, save for investing, save for future peace of mind. You must learn to spend what is left after saving. You must gain control over your money, or the lack of it will forever control you.
No matter how much you earn, you will never build wealth unless you can put a lid on how much fun you can have with your money. Everyone knows the tangible stuff money buys. The intangible stuff is harder to understand, so it tends to go unnoticed. The intangible benefits of saving money can be far more valuable than the joy you gain from your ability to make tangible purchases. You have to realize that saving is not a sacrifice. It is an opportunity.
Do not wait to increase your income to start saving. Saving money is the gap between your ego and your income. Raise your humility, spend less and start saving now. You do not need a specific reason to save. Save just for saving’s sake! You don’t have to see the whole staircase; just take the first step. Saving a small amount soon builds up to a large amount.
The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains mental preparedness, and so broadens the mind. It is great wealth to a soul to live frugally with a contented mind.
Step no. 4 – Insure yourself, your loved ones, and your property
We are not insurance brokers, nor do we aspire to be. But as investors, while trying to reach financial independence, we must look out for events that, if they occur, will materially affect our financial status. We must identify all these risks and either reduce their chance of happening or transfer the risk to another party, an insurance policy being a wise decision to make.
Experience has taught us that people are commonly affected by health issues, from light cases to disabilities and life loss, property damage, and property loss. You, as investors, must assess your circumstances, which are unique, and make sure you have enough insurance coverage to stay in the game of investing. It is not worth investing your money for a 5-10% annual return for ten years without first being insured for unexpected events that would cost you years of planning, saving, or investing.
When choosing between investments and insurance for first-timers, you should know that insurance is essential in any sound financial planning. Early in your journey toward financial freedom, you may want to maintain minimum insurance coverage to keep your insurance expenses low. But, as your wealth grows, your insurance coverage needs to rise. Though we usually do differently, the primary purpose of insurance is to protect your assets. The more assets you have, the greater your insurance coverage needs to be.
You need to bear in mind that your excuses for not buying insurance today will reverberate when difficulties arise in the future. And, in those challenging times, you are in a hurry to sell off your investments. Buying insurance cannot change your life; instead, it will prevent your lifestyle from being changed. Insurance is the safest and most cost-effective mode of making provisions for you and your family’s investing life. Insurance is a matter not to be overlooked.
Step no. 5 – Invest
Invest in yourself first! Investing in yourself helps to create a solid and secure foundation with which to build throughout your investing life and will impact your ability to prosper, perform, achieve your goals, and live to the fullest. Dream, study, exercise, eat healthily and grow constantly. Widen your thinking, educate yourself and add to your knowledge every single day. Build confidence by knowing yourself better and exploring opportunities to improve your life. Say yes to experiences and dare to fail forward. Strive not to be a success but rather to be of value. Be the better version of yourself every day. Be hungry and aim high. Income will rarely exceed your highest expectation. Investing in your self-development is not ‘self-ish’; it is self-care. Investing in yourself is the best investment you will ever make!
Invest in your relationships. Connect with your family, friends, colleagues, and your loved ones. People who are more socially connected are usually happier and physically healthier. Give time, be present, listen, recognize early unhealthy relationships, and move quickly. Think of quality over quantity. Surround yourself with those who bring out the best in you, those that inspire you, and reflect who you want to be. Invest in the right people, and everything is possible. Our world expands when we understand ourselves in connection, not in isolation.
Invest in anything that will bring value to you. Invest in a new idea, your friends’ business, rent out your home, or author a new book. Start a blog or a YouTube channel, create an e-commerce business. Invest in financial markets. Invest in anything that will bring more value to you in the future. Successful investing starts with courage. Aim to invest more in passive income. It is highly unlikely for you to become financially independent with a monthly salary. Try to make money work for you, or you always have to work for money. By investing, you ‘earn’ a day off work.
And always remember, it is not about money. It is about controlling your time. This is money’s greatest value!