What would you do for financial freedom?

Financial freedom: what you need to know

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Never have to worry about money again! No money problems! "Financial freedom“- that sounds too good to be true. With the concept of financial freedom There are many images of millionaires who relax on their yacht while others earn their money for them. But do you have to have a million in your account first to gain financial freedom? Or can average earners do that too? And if so: how? The findings at a glance ...

➠ Content: This is what awaits you

➠ Content: This is what awaits you

Financial freedom: what is it?

Financial freedom is often associated with wealth. But this does not have to be synonymous. freedom rather means here that you financially from no one anymore dependent are. So not from the employer, the state, the partner or the parents.

You have to do that first. Plus there is different ways:

  • The first - and also the one that most people think of - is, simple enough money in the account to have. More than you can ever spend. But of course only a few manage that.
  • The second way is more long-term, but all the more likely: save. They educate enough (over time) Reservesto bridge any financial drought. Or enough financial cushion to retire earlier.

Financial freedom does not necessarily have to be linked to above-average capital. Often the feeling of freedom arises when there are enough reserves to either to compensate for short-term loss of income (for example because of a termination). Or in order to be able to make more free career decisions (for example in the event of a professional reorientation).

However, this requires a certain risk management - the aforementioned Risks to prevent.

Unfortunately, many people do not or make these risks unaware displace you. They either spend everything they earn (per month) or even more. If the income grows, so do the expenses. In this way, however, it is hardly possible to build up reserves in order to gain financial freedom.

This is usually only possible by reducing your costs and saving part of your income. One way to do this is the so-called 50-30-20 rule.

The 7 steps to financial freedom

Now, of course, the question arises for many: How do I get financial freedom? Good question! In fact, according to experts, this path usually takes place in seven classic stages (also Levels called) how people come from addiction to financial freedom. These:

  1. Complete dependence

    In childhood and adolescence, everyone is dependent on their parents (or in individual cases on the state).

  2. First independence

    Often with the first salary, the first, delicate independence arises. You have an income and can freely dispose of it. However, this is usually still low and just covers all costs. And of course you are still very dependent on your employer. Perhaps even to a lesser extent from the parents.

  3. Financial independence

    At this level, it is already possible for you to finance your livelihood, but also your first freedoms (vacation, purchases, leisure activities) completely through your own work. For many people this is a pleasant phase, so it seems necessary for them to change something. But right now it is important to protect yourself.

  4. Financial security

    At this stage, the precautionary measures begin. It is now a matter of building up reserves that are at least sufficient to bridge six months without an income. Ideally, without having to profoundly restrict your own lifestyle. It is crucial to be prepared for unforeseen events and to be able to react accordingly.

  5. First financial leeway

    In the fifth stage you have to deal intensively with how you deal with your finances. It is now imperative to become familiar with the issues Wealth accumulation and Investment too busy. In this way, the livelihood is still financed by the workforce, but assets are also growing steadily in the background.

  6. Temporary financial freedom

    You already have enough reserves to cover any loss of earnings. At this stage you could - if necessary - live for half a year or a full year from the wealth you have built up. This immediately makes you independent of your current employer (but of course not yet from all employers). But that immediately gives you a feeling of (short-term) financial freedom. It is now important to take care of the capital that has been built up even more intensively and to find high-yield forms of investment. For example stocks (dividends) or real estate.

  7. Absolute financial freedom

    In the meantime, you can even generate income from your wealth. This could be, for example, returns from blocks of shares or rental income from real estate. Either way: If these are high enough that you can use them to finance your lifestyle, then you have achieved absolute financial freedom. That means: You can continue to work - but you don't have to. You are absolutely free from any source of income from dependent employment. Please note, however, that the tax payments should be taken into account.

How can you get financial freedom?

Financial freedom cannot be defined in terms of fixed numbers. It is different for everyone. Some don't need a lot of money to run to feel free. Others are only happy when they can jet around the world in first class or drive an expensive car.

The question also plays a role here, WHERE You want to live. You will likely have a lower cost of living in Thailand than in Munich.

Still, in all of these cases, that is concept Identical behind it: It's about developing your own sources of income that are independent of third parties.

Therefore, you should first be aware of what your specific goal in life is. Financial freedom is not an end in itself, just medium for the purpose. The actual goal towers above it. For example, would you like to ...

  • live in your own property?
  • Turn your hobby into a job?
  • live independent of location?
  • travel the world?
  • Give your children better opportunities to start?
  • retire earlier?

Just as concrete as realistic goals as well as thorough planning of how you will achieve them are the basis for it, one day that Hamster wheel of financial dependence to be able to leave. The money you need for it becomes a necessity, with no emotional attachment.

Financial freedom shouldn't be in one Money fetish but ultimately enable you to gain security, provide comfort and increase the quality of life.

To get to financial freedom there is three areasto consider in this order:

  1. To earn

    Most people try to increase their income first. Be it through a raise, a promotion or a job change. In this context, however, it can also make sense to create a so-called passive income. This still leaves you dependent on third parties. The levels of independence can be passed through more quickly this way.

  2. Save up

    Without it, it usually does not work. All financial freedom begins with financial discipline. Most financial experts recommend a savings rate of at least 20 percent here. Sure, this is difficult to do with low incomes. On the other hand, the same applies here: If you want to get out of the dependency, you have to reduce costs in order to be able to save more. As difficult as it is sometimes to do without. Ultimately, it's about a carefree future.

  3. Invest

    Investing is a useful way of increasing capital. Of course, every investment involves a certain risk. It is therefore all the more important that you deal carefully with the respective business models and forms of investment beforehand. For example, startups too. The rule of thumb: the higher the risk, the higher the chances of winning.

Earn - Save - Invest: This order is the only thing that makes sense in the long term Success model to financial freedom.

What you need to consider on the way to financial freedom

Of course, there are a few lurking on the road to financial freedom Stumbling blocks. So here are a few more tips that you should definitely pay attention to ...

  • Get to grips with the topic of finance at an early stage.

    One cannot deal intensively enough with the possibilities of capital investment and trading. Do you want to be financially free? Then it is essential that you (can) make free and informed decisions about your money yourself. Realize that only you are responsible for profits and losses. Hence, it is necessary that you understand the background. Otherwise, you will remain dependent on the advice of outside financial advisors who may take risks you would not take.

  • Don't raise your expectations too much.

    If you ever want to afford something special - go ahead! But be aware that financial discipline is essential to achieve financial freedom. If you are increasing your income, you should only increase your regular expenses minimally, if at all. It would be better if you even lower this over time. In this way, a secure financial cushion can be achieved in the long term, even with a lower income.

  • Educate yourself.

    Educate yourself continuously and invest time in yourself and your (specialist) knowledge. Nobody can take that away from you - not even a crash on the stock market. The more subject areas you open up, the more your market value increases. This will make it easier for you to earn more money in the future or to open up new sources of income for yourself.

  • Think positive about money.

    There is nothing wrong with having money. That’s why you’re not a long time bonze or capitalist. Don't be ashamed if you gradually build your fortune with financial discipline. After all, you didn't steal the money from anyone, you honestly earned it.

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