The key to becoming financially free (meaning no debts, just your living expenses) resides in living a stable life. You cannot achieve financial freedom if you keep eating away your savings. You can build up a margin in your finance by just maintaining a stable lifestyle while removing unnecessary expenditures over time.
The issue I've noticed from new financial freedom chasers, as soon as they start getting a little breather in their finance once they start practicing cost savings tips, they get into the trap of thinking that they can now afford more things (which correlates to more debts). You need to maintain a stable lifestyle for at least five years as you track your income and expenses. A five-year stable lifestyle can assure you to gain not only a positive margin in your finance but also a discipline in your spending. You will learn to tame your wants and encourage only your needs to be part of your lean lifestyle.
I've been tracking my finances since my first career job right off college when I was just twenty-five years old. It's humbling to see the struggles and then the breakthroughs after putting these principles into work.
So, quick summary for Financial freeedom:
- Track all your spending and income, no matter how bad it looks.
- Start building margin to your finance. Your Income needs to be more than your expense. The difference between the two is your margin.
- Maintain a stable lifestyle no matter what for at least 5 years. That means, do not add unnecessary expenses (new car, new home, any type of new debts...). Stick with the same lifestyle while you still work on streamlining your spending.
- Utilize your margin to build more margin. Meaning, as you start having more extra cash remaining at the end of the month, use it to pay off higher credit cards and other loans.
- Live it daily. The same way you check yourself in the mirror before you go out, you ought to yourself to check your finance DAILY before you get out of your house. It will help you stick to the plan.
