Your Income Is Your Best Tool To Achieve Financial Freedom
Do you want to achieve financial independence?
All too often, people rely on unrealistic means to free themselves financially. Their hope lies more along the lines of wishful thinking than true strategy.
A solid plan for the proper use of your existing income is the best way to reach financial freedom.
Where many go wrong in their pursuit of financial freedom
I believe most people would say they desire financial independence. However, if you asked them how they plan to get there, very few would have a worthy strategy.
Many hope for a big break. They wish for one or more of the following:
- To win the sweepstakes or lottery
- To inherit money from a rich relative
- To hit it big in a multi-level marketing business
- To get lucky at a casino or race track
- To make a quick fortune trading individual stocks
- To stumble onto the next great get-rich-quick opportunity
Any of these would be great, but riches rarely fall into people’s laps this way. The fact is that most wealthy individuals get there the old-fashion way. They earn it!
It is amazing to me how so many can go their entire lives essentially hanging their hat on one or more of these fantasies.
Well, I’m sending out a wake-up call. These wishful dreams rarely, if ever, work!
I know it is rare, but don’t some people get-rich-quick?
Yes and, despite the odds, some people would rather hang onto this fantasy than face reality. They believe that someone has to win so, “Why not me?”
Well, even for that ever so small minority that do see a gigantic windfall come their way, it rarely lasts.
For those that come into a large sum of money by having it handed to them, they generally wind up broke. In fact, they typically blow the money frivolously and end up worse off than before!
People that fail to learn the discipline of good money management, don’t know how to handle wealth when they get it. This has been proven over and over again.
More tried and true methods for accumulating wealth
Okay, so if the old fantasies for achieving wealth don’t work, then how can I become financially independent?
Well, becoming financially healthy is a lot like becoming physically healthy. It takes time, discipline and consistency.
For proper physical health, study after study shows that you have to eat right and exercise. It isn’t glamorous or exciting, but it works. The fact that it works more often than not, makes it a viable strategy to choose. It is no longer just wishful thinking, it is a plan.
In the same way, the true methods for accumulating wealth are not usually popular or exciting, but they work.
To become wealthy, you need to apply these steps consistently over a long period of time. You need to make them the habits you live by.
If you do, then chances are very good that you will become wealthy. This is the plan to follow. It is a tried and true strategy.
Using your income to achieve financial freedom
So, what are the steps? Here they come in all their splendid glory:
1. Generate a decent income by working
You don’t have to make six figures to get rich. People of all income levels have done it. You just need a decent income to use as your tool for building wealth. You can generate this income by working for someone else or by working for yourself. It doesn’t really matter.
2. Budget your money to live below your earnings
A budget is simply a method for planning and tracking your income. It converts the money you make into a tool for building wealth. It does this by giving every dollar a purpose. You have to be very intentional to become wealthy. That’s the role of a budget!
3. Keep your lifestyle very modest
It is much easier to spend less than you earn if you keep your lifestyle modest. Stop trying to keep up with the Joneses who are living well above their means! Sell what you don’t enjoy, be thrifty and pay cash. Simpler is better!
4. Live without debt
Most wealthy people who remain rich pay cash for everything they buy. They do not use credit. Debt is risky and it is a more expensive way to buy things. Millionaires are much too smart to fall for this trap. Live debt-free!
5. Save what you don’t spend
Rat-hole away every dollar that you can! The more you save, the faster your net worth will rise and the sooner you will become financially independent. Accumulating money is what being wealthy is all about. Save, save, save!
6. Make your money work for you
The rich understand the magic of compound interest and wise investing. They diversify their investments and they watch their money grow. They only invest in things they understand and they never leave their investment decisions to someone else!
Financial independence will not take as long as you think
I guess most people balk at this simple, but effective plan because they think it will take too long. They want to be rich today!
Well, it does take some time, but it doesn’t take forever. In fact, once you start and especially after you pay off all your debt, your wealth will accumulate much faster than you think.
The key is to get started. The sooner you do, the quicker you will realize your dream for financial independence!
What are you doing to build wealth? How well has it worked for you?
Photo by Dazzie D
This is a great post. I like how you equated ‘hoping’ to get rich with ‘hoping’ to lose weight. There’s a clear way to be physically healthy and financially healthy but they both take Patience and Hard Work, two things that people aren’t very committed to anymore.
Thanks!
Good thoughts! You said two things I really liked…1) although your income is your most powerful wealth building tool, people of all incomes can become wealthy. There is not a certain income requirement in order to qualify! And 2) you have to start now. Stop waiting until the economy is just right…start today!
Read Grant Baldwin´s latest article – In Case You’re Bored This Weekend…
Good discussion topic Jeff. I know I didn’t believe the notion that my puny salary was my greatest wealth-building tool when I first heard it. But as I learned how to regain control over my finances and pay down debt, the idea started to click and made infinitely more sense.
Thanks for keeping this idea on the top of our minds and for helping us connect the mental dots.
Dave
Read Do You Dave Ramsey?´s latest article – Job Search – The Series (part 2)
I really like this post. I have so many friends who don’t even bother having anything remotely close to a goal of financial freedom, because they think “they would need at least double their salary, so why bother”. And, it’s just not true.
We have always been pretty frugal, but we certainly don’t sacrifice what we feel is important. We just prioritize. We know we can’t have everything we want right now and that’s okay. We have a plan and we are on our way. And on only one income! It can be done.
Read MB´s latest article – Would You Sacrifice Privacy for Income?
@Nicki – We obviously look at this the same way. I was hoping the ‘physically healthy’ mental picture would help!
@Grant – Today, in this economy, may be the best time of all to start!
@Dave – Your income is really your only wealth-building tool. You have to get going with what you’ve got or you’ll never get out of the starting blocks.
@MB – Great testimony! Getting over the mental obstacles is often the greatest hurdle to becoming wealthy.
Thanks so much for adding your thoughts!
Jeff-Finally, someone besides myself telling people to look at their income! Everyone focuses on saving money. While this is critical it is only part of the equation. This is something I wrote about in my posts Three paths to financial abundance and How to Save Your Family from the Economic Meltdown.
I agree that your income (job) is important. What most people miss is that you need to maximize it. Do everything in your power to earn that raise or that promotion. You alson need to make yourself indispensable. That means you need to contribute in one of three areas: sales/marketing, product creation (development), or bottom line realization. Anyone else can be shown the door. It may hurt but they will survive.
Another important thing to do is start a side business. Even if it only brings in a few hundred a month it is a great place to start. It brings in extra income, give you confidence that you have a backup plan (in case of job loss), and sets you up to go out on your own. The best part is that it is low risk due to its bootstrap nature and since you still have you day job income.
Read B Smith @ Wealth and Wisdom´s latest article – Increase Velocity to Increase Profits
Amazingly simple to list but incredibly hard for many to follow. Some people have to hit rock bottom before they change their habits. At least in this bad economy, they will see how they can change their lifestyle.
Since I plan to retire or achieve financial independence (in that I don’t need to work a 9-5) at the age of 25, I’ve working on creating residual income streams. It’s coming along well and my goals are looking very attainable.
Read Chiko777´s latest article – MyBarnabas.com Stock Stimulus Bill
@B Smith – Multiple streams of income can certainly help one achieve financial independence!
@Ace – True! Many are being forced to face their financial reality and to wise up.
@Chiko777 – I applaud your wisdom at such a young age! I wish you much favor in your pursuit.
Thanks for your great comments!
I like the connection to losing weight and being healthy, it does seem like a good analogy.
I am not sure that most people are hoping to get lucky, I think most of us just have short term vision. Vision which robs us from really achieving the things we want in life.
Read The Happy Rock´s latest article – Community In Action – Daylight Savings Edition
Nothing wrong with this, at all, people should get it more.
I just wanted to say that I love this site
it is everyones dream to have Financial Freedom but it takes hard work to achieve it. i am blogging and making websites in the hopes that it could lead me to financial freedom someday.
everyones goal in life is to have Financial Freedom that is why i am doing affiliate marketing and blog monetizing. i hope i could earn more money online.
my goal in life is to achieve Financial Freedom through making money online. I monetize my websites and blogs using Adsense and Adbrite. Hopefully, with more work and time i might just achieve financial freedom.
[...] Your Income Is Your Best Tool To Achieve Financial Freedom [...]
My ultimate goal in life is to have Financial Freedom where i also have lots of extra time for leisure. Financial freedom does not come easily without lots of hard work and positive thinking.
i would love to have Financial Freedom by owning a real estate related business. my dream business is to own several units of apartment for rental.
we can have Financial Freedom as long as we work very hard and become focused on making money. nowadays we can also make money online and it is a good deal to earn money.
` “