First step to Financial Freedom
What is money for you? Hey guys, I am Atharva just a normal guy like everyone else who is trying to make a small change in this world by helping people understand money, and make their perspective about money fall in place, and make my audience “financially literate”. Before you go any further I want you to ask yourself “What is money for you..?” is it an escape, satisfaction, a guarantee, an excuse. Whatever your answer maybe it is going to be your reason to work for it, so it is better if you choose a wise answer justifying your efforts to work for the piece of paper. After realizing this, you might be in a dilemma about the system and how it all works; you got to put in all your time earning money, sad isn’t it, well this is how we are taught in schools by our parents and other people we meet. Now you might be wondering how to get out of this situation, that’s what this blog is about, making my audience financially literate is the motive behind me writing blogs, now this is the change that i want to make in the society, it a small one but yet it could make a very big difference.
What is financial literacy?
This term is very ambiguous and can have many meanings, you have to choose what it is supposed to mean for you and also how you are willing to use this knowledge in your life to be achieve financial freedom. Achieving financial freedom is a step by step process, which will require more or less focus depending on your financial goal. For starters, let’s learn how to manage your personal finances.
“The number one problem in today’s generation and economy is the lack of financial literacy.” Alan Greenspan, economist.
What is financial freedom?
Financial freedom is having enough assets to be able to afford the lifestyle we want to live, financial freedom comes after taking small steps in managing your finances, building assets, managing buying patterns, indulging yourself in learning to invest, cutting down credits and a lot of steps that you will learn ahead.
Steps to Financial freedom –
Step 1 – Start of by paying your debts. The first thing to do if you want to have a financial freedom, then you should start by paying off your debts, and in debts you should rank your debts by certain criteria which includes - 1. Good Debts- debts which will eventually grow in value and provide a return in the future. These include student loans, home loans, the loans or debts taken for purchase of assets.
2. Bad Debts- debts which will not grow or provide or provide a return in the future. These include purchase of depreciating assets (cars, bikes), purchase of liabilities.
Always start by paying off the debt with the highest interest rate, as it will grow faster creating a fatter hole in your pockets and making you fall deeper into the debt you already are, so it is logical to pay off the debts with the highest interest rates. Also be careful that you don’t take any loans unless it is very important.
“The man who never has money enough to pay his debts has too much of something else.” James Lendall Basford
Step 2- Start prioritizing things and make a budget.
No one else better than you will understand what you want, so you should have your priorities straight about what you want to spend money on or how you want to spend money. Majority of us sacrifice our long term goals to enjoy the weekend getting drunk and this one weekend becomes a habit. Prioritizing things will make you think twice before you go all in on a plan, as you will have a sense of self control keeping you from spending your bucks on these stupid short term satisfaction. Cut off all the unwanted things that you tend to consume, like the 5$ bucks coffee at Starbucks, or the cab you ride instead of taking the public transport, the phone you just financed and many other things. The problem with today’s world is we buy stuff to impress people we hate and even they don’t give a shit about you, because even they are busy doing this. Prioritizing things will lead you to cutting of unnecessary stuff, as spending on useless stuff will burn a hole in your pocket.
“If you buy things you don't need, you will soon sell things you need.”
Warren Buffet, Billionaire investor
Step 3- Save and invest.
Yes, there is no better way to be financially free than save and invest, if you have successfully followed the above steps, it is no longer going to be hard for you to save your money, by cutting down unnecessary expenses and saving money for the stuff you really need.
Investing is also easy for everyone, as there are many instruments and applications made available to you for investing money. This should not be a concern, but the real concern is “How greedy are you?”, the more greedy you get, the more you are bound to loose, this statement is very sad but also very much true.
“Money is usually attracted not pursued”
Jim Rohn
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