HOW TO ACHIEVE FINANCIAL FREEDOM
When people hear financial freedom they think, They must be a millionaire or I need to be a millionaire to be financial free. Well you don't have to be a millionaire to be achieve financial freedom, but you do need to start acting like one in order to "retire early" and be "financial free".
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A few Millionaire Habits:
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Use coupons or shop for deals (save your money)
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Spend less than $200 a month on eating out
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Have credit card balance you can pay off each month
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Use a financial planner or investment professional
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Create multiple streams of income
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They avoid debt
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Stage 1 Financial Freedom- You don't need a day job and can live comfortably.
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Stage 2 Financial Freedom- cover stage 1 expense, plus you are able to spend money on more luxury items (nicer car, nicer vacations, etc.)
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Whats your why?
First things first, why do you want to achieve financial freedom or retire early? I know that sounds like a crazy question, but before you start you need to know the why behind it.
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Read more on this in my post "What's Your Why?" This post talks more about what's your why for investing in real estate, but you get the idea.
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For me my why is time. I want the time and freedom to do what I want, when I want to do it. I want the freedom to travel, to make more memories with my kids, to serve others, and to pursue new hobbies or passions.
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Whats your number?
So like I said earlier you don't need to be a millionaire to achieve financial freedom. You might be saying but how is that possible?
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Well Whats you number? What is the number that will allow you to quit your day job and still cover you expenses?
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Read my post on "What Is Your Rat Race Number?"
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Basically what does it cost for you to live each month? Remember retirement isn't an age, it is a financial number. The sooner you achieve that number the sooner you achieve retirement.
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Let's say you live on $60,000 a year with no savings. If you were going to retire tomorrow and live the same way you are living, you would need to draw from your portfolio or make $5,000 each month.
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So if you want to retire in say 25 years and we are starting out with $0 invested. You would need to start investing about $1,049 a month. You are probably thinking man that is a lot of money each month.
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Lets break that down, How much is your car payment? The average American's car payment is between $500-600 a month. How much do you spend on eating out? How much is your credit card payment?
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So step 1 is to focus on debt and get that paid off. Then it is to focus on your retirement strategy.
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You can also cut down debt quicker and contribute to your investment portfolio by making more money, check out these different online and part time jobs or passive income ideas.
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A lot of these concepts have come from Chris Hogan's book "Everyday Millionaire".
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His suggestion and recommendation is taking you $1,049 a month and putting it in Index Investing.
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My Plan and what I am doing:
Honestly, for me I don't want wait 25 more years. I am focusing on a few different things to help me get there sooner.
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Focus #1: Multiple Streams of Income:
Having multiple streams of income provides peace of mind and security.
Stream 1:Long Term Rental Properties
My primary goal for income in early retirement is through real estate. My focus is on long term holds (rental properties),
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example:
Let's say I needed to make $5,000 a month to quite my job and achieve stage 1 financial freedom. How many rental units would I need?
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Each rental unit cash flow's (this is the money after all expenses including mortgage) $250 a month.
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$5,000/ $250= 20 units
This doesn't mean I need 20 houses, I know some of you were thinking how am I going to buy 20 houses. This can mean 10 duplex's, or 5 fourplex's, or one 20 unit complex.
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I mean if you bought 1 fourplex a year that generated these numbers. In 5 years you hit your $5,000 a month.
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Stream 2: Fix and Flips
I like to flip houses when I can. The average gross profit on a flip in the US is around $65,000. So think, if you have your 20 units making you $5,000 a month and then on top of that you flipped 1 house a year and got $65,000 bonus, How great would that be?
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Stream 3: Real Estate Crowdfunding
I have started to look into investing with Fundrise. You only need $1,000 to start investing in real estate projects, and you average between 8-12% annually on your returns.
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Stream 4: Index Investing and 401k
Trying to follow Chris Hogan's advice
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Stream 5: Blogging
Over the last little while I have really come to enjoy blogging. I like to share my experiences as well as the resources and tools I come across.
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Check out my post How to Make Money Blogging
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Focus #2: Eliminating Debt:
I am working on getting rid of all debt (except for my mortgages on my house and current rental properties). This includes car loans, student loans, credit cards, etc.
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Somethings that have helped us do this:
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Sign up for a budgeting app/ expenses tracker like Mint
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Track and monitor everything (mint can help you do this).
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Cut back on expenses- for example you don't have cable anymore (with streaming companies who needs it), we also meal prep/ plan more. That way we don't eat out as much
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Take bonus and extra savings and putting them towards our debt.
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So how long until I reach my "Financial Freedom Number"?
Honestly, I don't know. Life takes you down some different roads sometimes. What I do know is I am going to work towards it everyday, and who knows it might be here before I know it. To be completely honest if I retired early I would still be investing in real estate or finding a house to flip. It is just something I enjoy doing.
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Know Let's Recap What Is You Need To Do To Become Financial Free:
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Focus on paying of debt
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Earn more than you spend (if you need to get a part time job to pay off debt so you can do this, then do it for a short period of time).
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Start creating multiple streams of income/ Increase your income
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invest early
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Cut out unnecessary expenses
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Live a frugal life style (this doesn't always mean you have to go without, it just means be smart with your money)
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Tools and Recourse That Might Help:
17 best online and part time jobs
Personal Development and Education Resources
Personal Finance and Investing Resources
Getting Started In Real Estate
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