A lot of people are looking for a financial freedom formula. Most of us would want to know how to get out of debt. Not only that, one common goal for everyone is to be rich.
To live a life without worries and financial problems is something every person aims for. This is when this formula comes in.
It is a pretty simple rule which effectively helps you become richer. It will lead the way to a debt free and bountiful life when used.
Are you getting curious? Well, the answer to all your financial worries is simplified in this equation:
INCOME – SAVINGS = EXPENSES
It is really that simple. However, despite its simplicity, a lot of people find it hard to follow. To break it down further, here are a few guidelines:
1. INCOME. Sit down and make a list of your sources of income. This can be from your salary, bonuses, business ventures, and whatnot.
Both earned and passive income should be listed down. Earned income is money which you have to consciously work hard for. This includes your monthly wages.
Passive income, on the other hand, is something that creates a flow of money even without your active participation. Investing in mutual funds is one example of a source for passive income.
If you own a building, say an apartment, and rent it out to other people, the money you get from it is also a source of passive income.
2. SAVINGS. Now, this is where it gets tricky. You have to recalibrate your savings mindset. Let me put it this way.
Not everyone thinks to set aside money as savings before paying bills and taxes or whatever. More often than not, savings are made after expenses are dealt with.
Nevertheless, to gain financial freedom, one must be willing to be determined to save before spending. Practice setting aside a specific amount every payday before all the money has been used up.
3. EXPENSES. Needless to say expenses are what drain ones pockets. Day to day bills, education cost, food, shelter, and your wants are expenses that are incurred throughout a lifetime.
The trick in gaining financial freedom is to minimize these expenses while setting aside for retirement. You may wish to divide your income into several sections to further guide you.
Do you wish to allot 15% of your income to savings and 85% on expenses? Take a pen and paper and calculate how much that would be.
If you want, you can also subdivide your expenses further. Most financial gurus will agree that setting your goals on paper make it more concrete.
Make a realistic projection of managing your money. It is good to think big but sometimes it pays to start with baby steps.
Think in detail. This way it will be easier to stick to and will seem more doable. After all, in the near future, your dream of having financial freedom will become a reality.
All of this is achieved by living below your means and employing the formula above. It may seem hard to utilize the formula on the get go.
However, with steely determination and mind conditioning, you will eventually be able to do it. The tools in accomplishing financial freedom are anchored in financial literacy.
Make more informed decisions when making use of this financial freedom formula.