If you want your financial freedom dream to turn into a reality, you must adopt the habit of money management. Like a hobby requires focus and attention regularly to remain impactful, the same can be applied to money management. You should carry out a check and balance on your finances and incorporate it into your schedule.
If you stay in the loop with your financial situation, you will be able to track down your expenditures and sort them if required. It will help you allocate money accordingly. Keeping up with your finances will also help you become motivated to earn more money.
If financial freedom is your ultimate goal, then it is recommended to manage your finances every week. If you fail to do that, you might lose track of your earning and spending ratio. Other expenses come into play, like taxes, etc. If you don’t keep up with all of these financial elements, you might end up going in completely the wrong direction. o, track your finances you can use an excel spreadsheet. It is the simplest thing that can save you a lot of trouble. There are other websites and software available with specific capabilities for finance tracking, but simpler is the way to go.
The next step after settling for a spreadsheet that works best for you is customizing the said format according to your preferences.
It is important to get into the habit of dedicating some time each week to update your documented spreadsheet. You need to calculate the expenses and income and input them into the document. Review and analyze the document to get an idea of the financial situation and plan accordingly.
Allocate Your Money Wisely
There is one principle that you should follow regarding money allocation:
“Pay yourself first”
All the famous books on finance will tell you that you need to pay yourself 10% of your income and then reinvest it. The cold hard fact is that if you are not either saving your money or reinvesting it, you are not making financial progress in life, money-wise at least. The goal of financial freedom is all about accumulating and bolstering your net worth. If you are living from paycheck to paycheck, you can’t expect your financial situation to get any better.
You have to manage your money to accumulate assets. You can then utilize those assets in ways that pay you back more.
A cash flow
In his book “Secrets of the Millionaire Mind”, T.Harv Eker outlined a model to allocate your money that will help you succeed in achieving financial freedom. Here is how the model divides your income: (Wealth & Eker, 2019) Necessities (Food, rent, etc.) – 55%
Here is how you can get closer to your financial goal if your bare necessities take up a majority of your paycheck.
The first step you can take is to decrease the cost of living. It means to downgrade your lifestyle. You can find other money-making sources that focus on saving. If you are serious about financial freedom, you can move to a country where the dollar or euro currency is strong and will help you get by with much less income than back home.