How to Create True Financial Freedom

For many, financial freedom is the ability to maintain a comfortable lifestyle while saving for the future and staying out of debt. Achieving it requires restraint and careful planning. The reward is stability and peace of mind, and the ability to take a break and have fun when you want and eventually enjoy a comfortable retirement.

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Consolidate Your Income

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Diversify your income. If you have several sources of income, you won't suffer as much financially when you lose one of them. As long as you have some income, 

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Diversify your income.  If you have several sources of income, you won't suffer as much financially when you lose one of them. As long as you have some income, you have more time to come to replace what is lost without worrying about how to pay your bills. Some possible ways to diversify are:

you have more time to come to replace what is lost without worrying about how to pay your bills. Some possible ways to diversify are:

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Start a part-time business that you can do on nights and weekends. You might consider turning a hobby into a business.

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Create a passive income stream by setting up blogs or websites that offer useful information and carry ads that pay you a small commission for every visitor who clicks on the ad. You can also sell e-books or other information products on your blog or website.

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Teach. If you have a master's degree you can get an adjunct professor position at a local college. Or you can teach online classes or in the community.

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   Create multiple steams of income. Sell your old stuff, books, toys, technology, anything that you basically do not use within a year. Use Craigslist to sell furniture and/or to buy things discounted. Learn to look for bargains and learn to negotiate too.

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   Reduce your taxable income. Unless you believe the government knows how to best spend your money, keep more of it for yourself legally. Learn which deductions your qualify for and make sure to research others you can qualify for legally. For example, open a Roth IRA if you meet the income contribution limits and participate in your employer tax deductible 401k plan. Learn the benefits of doing a blending of both types of accounts tax deferred and taxable.

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   Save more than 40 percent of your income and consistently raise it each year. When you get a raise automatically deposit/invest it in an index fund like Vanguard's Total Stock Market Index Fund (VTSAX). It tracks all 3000+ US publicly traded companies.

Method2

Rack Up Your Savings

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Create an emergency fund. Set aside part of your income each month until you have a balance equal to 6 months of income. If you lose a source of income, you 

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Create an emergency fund. Set aside part of your income each month until you have a balance equal to 6 months of income. If you lose a source of income, you can make up for it by drawing from your emergency fund while you find a new income source. You can also use your emergency fund for unexpected expenses that aren't covered by insurance.

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Take advantage of compound interest. Save a part of your income each month in an account that pays interest not only on what you've contributed to the account, but on the interest you earn. Compound interest adds up quickly, and you may find that your account balance is large enough that you can afford to withdraw the interest each month as a source of income.

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Make maximum the contributions to your retirement plan. This is particularly important if your employer contributes to it. Your employer's contributions are basically free money for you, and the tax rules for retirement plans make them a good financial bargain.

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Pay Off Your Debts

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   Get rid of credit card debt. When you buy things on credit, you pay much

    1  Get rid of credit card debt. When you buy things on credit, you pay much more for them than if you bought them with cash. Many consumers get into a vicious cycle when they buy on credit, because the monthly payments to the creditor make it impossible to pay cash for future purchases, and they end up buying on credit again and again until they can't afford to make the monthly payments.

   2 Cut back on spending so you can make larger payments to your creditors. You may do without cable TV, stop eating at restaurants or even move in with relatives so you can devote more of your income to paying your creditors. The larger your payments are, the less you will pay in finance charges.
   

   
   

   3. Get a second job and devote your salary to your credit payments.

   4.Consolidate your debt into the account that charges the lowest interest rate. If you don't have sufficient room on your account, you can call the creditor, explain that you want to consolidate, and ask for more credit. Most creditors won't mind if you pay them interest instead of their competitors.

   5Ask to settle your debt. Your creditors may be willing to accept far less than your statements show you owe on your account. If you have been paying on the debt for a while, the finance charges may make up for the apparent loss by the creditor.

   6Continue to buy on credit, but make sure you can afford to pay the balance in full at the end of the month, before the creditor starts adding finance charges to your balance.

1.      Invest Your Money

2. 1 Buy a home you can afford. You should not spend more than 25 percent of your total monthly income in mortgage payments. Make a substantial down payment and choose the 15-year mortgage. You will buy a more modest home than your lender will allow, but you will be able to afford to save money.

   

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   Always dedicate time to learn a little bit more about finances. No one will ever care more about your money than yourself. That said, read books like Early Retirement Extreme, Your Money or Your Life, and the Millionaire Next Door. Read blogs like Bogleheads, ZenHabits and Mr. Money Mustache.

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Method5

Insure Your Assets

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2. Invest in insurance. Ask your insurance agent how you can best protect your assets against any unexpected occurrences.
   

3. Liability insurance protects you from someone who might sue you. If there is a judgment against you, the court won't take your home and your hard-earned savings to pay the other person.

4. Health insurance, homeowner's insurance and supplemental insurance help pay for unexpected expenses such as home repairs after a natural disaster or long-term medical care so you don't have to use your savings. A lifetime of savings can be depleted in just a few months.

5. Life insurance is strictly only necessary if you have people who depend on your income to meet their living expenses. However, it's easier and cheaper to buy insurance while you're young.