Friday, February 10, 2012

The 5 Steps to Financial Freedom

In order to build Real Wealth, a person must first free themselves of the everyday financial burden of living and paying the bills.There are 5 distinct steps (or goals) that every person can take to shake off the chains that are holding them down.

Step 1

 Solidify Your Main Income Stream - What this means is that you must provide yourself and your family with a good, solid level of steady income that you can count on. This income must be of sufficient amount to pay all of your everyday bills with money left over. For most of us, this income stream will be your job or your career of choice.

It should be your first goal to do whatever it takes to ensure a strong steady stream of income flowing into your bank account. Without this steady flow of income, it will be near impossible to ever be truly Financially Free.

Step 2

Pay Down All Consumer Debt - In order to be Financially Free, you must pay down all consumer debt. This includes all credit card balances, student loans, lines of credit, car loans, etc. The only exception here would be the mortgage on the home you own ( if any ) .

Start with the debt that you pay the highest interest rate on. Most commonly, this would be Credit Card debt.
Once first debt is paid, go on to the next one, etc. Your goal here is to reduce your costs of borrowing as quickly as possible.

Step 3

Protect Yourself from Financial Ruin  - Get protection for the many things that could destroy your future financial plan. Basically, this is buying the proper forms of insurance that will protect your future wealth.

Examples are Life insurance ( if needed ) , property insurance to guard against fire, theft and vandalism, liability insurance to protect against any future personal law suits, health insurance to protect from future injury or disease, disability insurance to protect against loss of income due to a disability or injury.

Step 4

Own the Home you live In - Stop paying a landlord for the place you live. Buy yourself an affordable home in the area you wish to live. Put your monthly rent payments towards paying your mortgage and build equity in your home. Make it a goal to pay off your mortgage completely.

Once your mortgage is paid off completely, your cost of living will become much lower. Extra funds can then be used to accelerate your building of True Wealth.

Step 5

Start Saving Regularly - Start saving a portion of your income every pay period. Get in the habit of saving as soon as possible. Savings can be used to pay down debt at first, if necessary, and then eventually to start a regular investment plan for building future wealth.

By learning this habit early in life, it will become much easier to continue without interruption in the future. It will also make it much easier to ride out the many financial bumps that will always be in the road ahead.

These 5 steps will become your foundation upon which to build your future Real Wealth. As in all good buildings, a solid foundation is a must before construction on the rest can begin.

As always, I welcome your comments and suggestions for future topics.

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