For the modern money warrior, the term "rich" is beginning to get replaced by the description "financially free." Many of us are chasing freedom, not riches. But, we understand that money is vital for freedom.
The state of being "rich" has become more subjective than perceptive. A person of low income could feel much richer than someone who has a high income. Financial intake doesn't necessarily determine financial freedom.
The key to achieving true financial freedom is having a stream (or multiple streams) of passive income that either matches or exceeds your expenses. Of course, it can take years to build reliable sources of passive income. So, we must start with the first step toward financial freedom.
It actually doesn't require us to make more money. As financial freedom means passive income that matches or exceeds your expenses, the first step is to decrease your expenses. This becomes an automatic shortcut toward a financially stress-free lifestyle.
In truth, the first step is composed of two parts: minimizing and simplifying.
Minimizing could be considered the prequel to simplifying. Although it's true that financial freedom allows you to purchase whatever you wish without overthinking it, there will always be something that will overtrump your budget or income.
Even if you make $1,000,000 a year through a passive income, it wouldn't help to spend $800,000 a year on designer clothes. Minimize your lifestyle expenses if they portray a false lifestyle. Not only will you save money on purchases, but your money also won't depreciate.
In the end, reinvesting the leftovers of your passive income could eventually lead to a higher financial intake, which will slowly improve your lifestyle. An effective stepping stone is to replace certain lifestyle expenses with similar ones at lower costs. For example, if cable TV costs roughly four times as much as a Netflix subscription does on a monthly basis, the downgrade probably hardly impacts your lifestyle. But, it greatly improves your finances.
Take a look around the house, and revisit your current lifestyle up to the microscopic level. See whether you can find anything that's either eating up your money or simply could be traded in for dollar value.
If you have a motorcycle that's costing you annual fees in registration and insurance, even if you only take it out once a month, maybe it's worth selling the vehicle and hiring one only when you actually need it. If you have old gadgets or clothes that are still in great condition, consider selling them if you no longer use them.
Anything that becomes a regular expense, but isn't necessarily a necessity, such as a magazine subscription, could easily be reduced. This not only leaves you with more money, but it also gives you more flexibility with the money you actually make. It brings you closer and closer toward financial freedom.
The habit of simplifying also helps you avoid future financial mishaps, as you'll be highly accustomed to a simplified financial lifestyle. There's no point in cluttering your life when you're rich. Everything has breathing space when you're still financially struggling.
Minimizing and simplifying make up the first step toward financial freedom, and you don't have to make more money. There will always be something you can't afford.
Also, just because you can afford it, that doesn't mean you deserve it. Financial freedom isn't all about frugality; it's about consistent intelligent choices toward your money and where it goes.
Although it may sound like these techniques prevent you from living a relaxed, lavish lifestyle — if that's what you want — they actually accelerate you toward a financial destination where you can be flexible.
Rewarding yourself by using passive income is much more fulfilling. Remember: People become poor by trying to look rich.