How To Get Financial Freedom
In this blog, you will learn about How To Get Financial Freedom. This information is taken from the book “Total Money Makeover” written by Dave Ramsey.
Many people in this world live their life as a compromise where they sacrifice one thing to attain another thing.
For example - You might have seen many times that people would like to go on vacation or buy something big which they would love to buy but still, they can’t buy, can’t travel because, in the back of their mind they know that if they spend their money on these things then how will they pay their Rent, EMI’s, Bills and they keep sacrificing like this in their life for many things because of which their life gets dependant on paycheck to paycheck. They spend their life as average and keep sacrificing.
Now to challenge this thing there is a book called “Total Money Makeover” by Dave Ramsey. The author says that you can change this entire situation and there are some proper steps to change it. There are some steps that you need to follow if you want to achieve financial freedom.
This book is said to be one of the most powerful books to achieve financial freedom. I am going to share the content of this book in today’s blog. I am going to tell you many specific steps which will help you achieve financial freedom.
“You Must Live Like No One Else Right Now So That You Can Live Like No One Else Later”
If you want to achieve a life where you have financial freedom, where you have all those things which you desire then right now you need to live a life that maximum people are not living. If you want to be in the 1% of people who don’t have any problem with money, then you shouldn’t do those things that 99% of people are doing today.
To do all those things you need to remember one thing: Financial Freedom is 80% Behaviour and 20% Knowledge.
I am going to say 5 specific behaviours which you should remove from your life if you want to achieve financial freedom. All 5 behaviours are very important so don’t miss even one.
1st Behaviour Is Living Life In Denial
Look, one big misconception many people have is if they have to change their life then they have to do grand steps and do big things. Maximum people, when they think to change their life when they think to do something big, the biggest and the first mistake they make is that they start setting goals larger than life.
They set very big goals which are many times unrealistic at their current level. They think these are things they need to do to change their life. If you want to change your life then you should not do big things but do small things and do them repeatedly.
The author James Clear, says in his book, “Atomic Habits” that you can change your entire life just by doing small changes in your life and this same theory is been said in the book “The Compound Theory” where the author says, “Habits are the compound effect of self-improvement” your life doesn't change from those big decisions which you take sometimes but your life changes from those small decisions which you take every day, consistently.
The first thing you need to do is to understand your current financial situation. Many times people live in denial and don't want to accept that they have a lot of EMI over them. They are not able to live the life they want, they live in so much denial, many times what they do is buy expensive things without thinking about what will be its implications.
So the first thing checks right now is what is your current income and then on the other side, what are your expenses, where do you spend most of your money, how much is your monthly savings, and if you have a credit card, costly phone, or a car then what are its EMI's and limits.
If you do this simple thing, the bubble you have that you are safe and secure that bubble might burst, you might even fear that but doing this is very important to you if you don't want to fall ahead don't want to face a big calamity then it's necessary for you to get out of this denial and to do that, do these small things which I said you.
2nd Behaviour Is Never Thinking About Emergency Fund
Many times this might have happened to you that you have to go somewhere when it's raining. You wish from your heart that please if I get out it should stop raining but what happens, as you come out, it starts raining. Many times, while driving, people are stuck in traffic on the line they are in, apart from that, all other lines move and as you go to other lines, even that stucks.
All these things relate to Murphy's Law, that is, "If Anything That Can Go Wrong, Will Go Wrong" so it's better to be prepared for it.
So the author says, the most important thing which will take you to financial freedom is that you must create an emergency fund where you must save at least 77,000-78,000 rupees.
Your first aim in life must be that you can save this much money for yourself. This money which you will save, don't use for birthday parties or for buying pizza. This will be your emergency fund which must be there to use in your worst life situation. Keep this amount in a place where it is not easily accessible.
3rd Behaviour Is Not Using Debt Snowball
You might have seen or learnt that if you take a snowball and throw it from a hill full of snow then it will start rolling as it rolls, more snow sticks to it and as it comes down, that snowball becomes very big.
The most powerful weapon with you is your income but your biggest enemy is your debts, loans, and EMI, therefore, you must finish them if you want to be rich.
There is a method to finish these debts. Write all your loans and EMI's on a sheet that I had taken 10,000 loan from him then this and this… and then keep the lowest amount in those debts above and then write your debts one by one in ascending order after that, the lowest debt in your list. Try to finish that as early as possible after that, finish your next debt by investing as much as you can.
This is not gonna be easy but as I said to you a line at the beginning which the author repeats "You must live a life like no one else right now, so that you can live like no one else later". If you want to achieve financial freedom like that 1% then right now do differently than those 99% people.
4th Behaviour Is Create A Runaway Fund
Once you have cleared all your debts and are completely debt-free, then after this, don't lend money to anyone and don't spend money here and there. This is your time to create a runway.
Now the extra income you have which you were using to clear debts earlier using that, save up to 3 months of living expenses which is kind of an extension of an emergency fund if there is any problem or emergency you can have some money
For example, your one month of expenses according to your current lifestyle is 30,000. Now your goal is to save 3 months' expenses 3 x 30,000 which is 90,000 rupees. The author says, if you save for 6 months instead of 3 then it's even better. You will have 6 months of time to work on new sources of income, to find a new job if you don't like your job.
5th Behaviour Is Never Thinking About Retirement
The author says, there is a single trick to achieve financial freedom where you have to make short-term sacrifices for long-term gains. Now you don't have any debts, you have made yourself financially secure for 1 year by creating different funds and you are financially fit.
Now it's time to maintain financial fitness. Like when you are physically fit after hard work then you just do maintenance and you don't need to do aggressive exercise nor do you need to follow your diet strictly. Similarly to maintain your financial health, the author says you must invest 15% of your income for your retirement.
By investing consistently every month you will keep increasing the runaway fund where, at some point, you will have so much money that you will be financially free for your entire life. You can live your whole life without even working for a single day and by doing all these you can say you financially retreat and achieve financial freedom.
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