Achieve Financial Freedom In 7 Simple Steps
In this blog you will learn to Achieve Financial Freedom In 7 Simple Steps. This information is taken from the book "Financial Freedom" written by Grant Sabatier.
Author Grant Sabatier has completed his studies at a very good college, he got very good marks and has been doing a very good job for the last 3 years. He was performing very well according to society. But after doing all these things he was struggling a lot, he could barely survive his expenses and at the age of 24, he lost his job.
He was unemployed and living with his parents. It's not a big deal for Indians but in a country like America where people start living away from their parents as soon as they turn 18, it was a shameful thing for the author. There were 2 dollars left with the author.
One day the author calculated and noticed that he has traded 4,700 hours of his life to earn money and by investing 4,700 hours of life the outcome was 2 dollars and this thing was very disappointing. Now the author decided that he will be financially independent before the age of 30.
He calculated and understood that he needed to earn 1.25 Million Dollars to be financially independent. In order to achieve this, he read 100 books and guides and decided that he will do a job and as a side hustle he will launch 2 new companies from which he will earn money and invest that money to become financially independent.
Doing this thing was not easy at all, he failed many times and made a lot of mistakes but he finally achieved his dream and became financially independent. Today I will share some important lessons from his book “Financial Freedom”.
The author discovered that a person has to go through 7 stages to become financially independent.
- Clarity
- Self-Sufficiency
- Breathing Room
- Stability
- Flexibility
- Financial Independence
- Abundance Of Wealth
Now I will share 7 steps that which author used to achieve financial freedom and will be useful for you if you follow them correctly.
1st - Calculate How Much Money You Need
In the 1st step, you have to calculate how much money will make you financially free. The amount will be different for different people. Let's take the example of the author.
When the author was 30 years old, he had saved 1 million dollars. Although 1 million dollars is a huge amount, spending a whole life is not that huge. Therefore he invested those 1 million dollars in stocks where he got an average return of 7% i.e he was getting a profit of 70000 dollars every year.
He can spend his whole life with that interest but instead of spending all 70000 dollars he spent only 40000 dollars and invested the rest 30000 dollars in stocks. Now due to compounding effects, his money kept growing.
Now to calculate how much money you need for being financially free make a list of your annual expenses. For Example, you spend 4 lakh rupees in a year. Now Multiply this number by 25. 25*4=100 Lakh. Now 100 lakh is the amount which you will need to be financially free.
2nd - Calculate Your Net Worth
Now the 2nd step is to calculate your net worth. [ Net Worth = Assets - Liabilities ]
Assets are those things which when you sell you get money for them. Eg dividends
Liabilities are those things which take money out of your pocket. Eg loan
Now make a table and make 2 columns one of the assets and the other of liabilities and calculate your net worth. Author suggests calculating net worth frequently so that you know how far you are from your financial independence journey.
3rd - Know the Value Of Your Time
Suppose a 90-year-old man offers you 100 million dollars and says to exchange your time with his money, so will you? Of course, you will not do it because time is more valuable than money.
You can earn a lot of money but you can't earn your time back. Therefore you have to calculate the real value of your time. To calculate the value of your time, divide your salary by the number of hours you work and you will know the actual value of your time.
Suppose you have to buy your dream car which is 30 lakh rupees. Now you can calculate how much time you have to spend in order to earn those 30 lakh rupees and remember if you invest those 30 lakh rupees in some stocks and let them grow then the amount invested can become 1-2 Crore.
It means if you are buying that car then you are giving 1-2 crore and thousands of hours of your life. Do you think it is worth it?
4th - Spend Carefully
In this step, the author says to observe your expenditure because whether we will become financially free or not depends on how we spend our money. If we spend our money carelessly and buy liabilities with it then we can’t become financially free but if we spend it carefully then we can become financially free very soon.
To buy anything, the author says that you ask this question yourself.
- How many hours of your life would you have to trade-off for that thing?
- How much do you have to spend every year to maintain that thing?
- Is that thing really useful for you?
- Will buying that thing make you feel happy in the long term or are you just buying it for short-term pleasure?
If you answer these questions honestly then you can save a lot of money in future.
5th - Earn More By Doing Side Hustles
Just saving money is not enough. One disadvantage of saving is that you cannot save more than your income. Therefore you have to do a side hustle in order to increase your income.
One of the author's friends, Jimmy, was doing a job and started a finance blog in his spare time and that blog became so famous that he sold it for 3 million dollars.
6th - Invest Intelligently
Warren Buffet says
“If you don't find a way to earn money while you sleep, you will have to work until you die”
It means that you can’t become rich until you invest the money which you have earned. Investing is the secret that people use to become rich and the author says, the sooner you start investing, the sooner you will achieve financial freedom.
7th - Enjoy Retirement
The author says if you follow the steps then you can achieve financial freedom in just 5-10 years and can enjoy your retirement.
Retirement means you can do whatever you want without thinking of money.
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