7 Essential Steps to Building Wealth and Achieving Financial Freedom

1. Focus on eliminating credit card debt.

The first step to learning how to become financially independent is relieving yourself of consumer debt. To achieve this, creating a solid plan and sticking to it is key. With many methods available, start by determining which strategy works best for your situation, and take actionable steps toward your goal.

3 common methods used for paying off credit cards & achieving financial independence:

A) The Snowball Method: This is a popular debt repayment strategy that can be effective for those looking for a sense of momentum and motivation as they work towards becoming debt-free. By paying off the smallest balance first, the individual can experience a sense of accomplishment and feel like they are progressing toward their goal with enough money to spare. This method can benefit those who have multiple debts and feel overwhelmed by the amount they owe.

While the Snowball Method can effectively provide motivation, it may not be the most cost-efficient way to pay off credit cards. Because the method does not consider the interest rates of the debts, it can result in higher overall interest payments over time. The Debt Avalanche Method may be a better option for those who are more concerned with minimizing the amount of interest they pay.

B) The Avalanche Method: This is a powerful strategy for paying off debts that many financial experts recommend. By prioritizing the debt with the highest interest rate, you can minimize the amount of interest you pay over time and save yourself a significant amount of money.

Although this method may take longer to pay off the debts, it is important to note that it is the most cost-efficient way to pay off credit cards. As you pay off the high-interest debt first, you will reduce the total amount of interest that you have to pay, which means you can pay off your debts more quickly and save more money in the long run.

The Avalanche Method also helps individuals to prioritize their debts and focus on paying off the most expensive debts first. This can provide a sense of relief and peace of mind as you progress toward being debt-free.

This method can also help individuals develop good financial habits, such as budgeting and saving money. As you focus on paying off your debts systematically, you can begin to develop a strong financial foundation that can serve you well for years to come.

In summary, the Avalanche Method is a great way to pay off your debts efficiently and effectively. By focusing on paying off the highest-interest debt first, you can save money and achieve financial freedom more quickly.

C) Debt Consolidation: Debt consolidation is a method where an individual combines multiple credit card debts into a single loan with a lower interest percentage. This can make it easier to manage debts and save individual money in the long run by reducing the interest paid on the debts. However, it may require the individual to have good credit to qualify for a consolidation loan.

These are three common methods used for paying off credit cards and achieving financial independence. It's important to evaluate each method and consider your financial situation and goals to determine which approach will work best for you. Remember always to be mindful of the interest rate and consult a financial advisor if you need help.

2. Create a monthly budget

Creating a monthly budget is the first step toward financial independence. It's important to know where your money is going and to track your expenses to make informed decisions about your finances. Financial literacy is not something that we are born with, but it can be learned through practice and discipline. Having poor health maintenance concerning money is learned, but it can also be unlearned.

A monthly budget can help you achieve several goals. First, it gives you a better understanding of your living expenses and allows you to plan your spending accordingly. You can develop realistic financial targets and adjust your spending habits to meet those goals by tracking your expenses and income. Second, a budget can help you identify unnecessary expenses and save money by cutting back on things you don't need or reducing the cost of essential items. Third, a budget can help you avoid overspending and falling into debt.

To create a monthly budget, start by listing all your sources of income and expenses. Categorize your expenses into fixed expenses (rent/mortgage, utilities, etc.) and variable expenses (other living expenses, groceries, entertainment, etc.). Determine how much money you have left after paying your fixed expenses and allocate that money to your variable expenses.

Remember that creating a budget is just the first step towards financial independence. It's important to review and adjust your budget regularly to ensure that you are on track to meet your financial goals. By creating a healthy relationship with your finances and learning to manage your money effectively, you can achieve financial independence and build more secure financial prospects for yourself.

3. Become aware of your money blueprint

I first learned about understanding my money blueprint after reading the best-selling book Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth. The author discusses how our money mindset determines the level of wealth we create in this life; however, most people never take the time to assess their financial health or plan for their financial future.

We set financial goals based on the mentality we have about money. For example, if we were raised in an environment where money was scarce, we probably developed a poor money blueprint over time. Alternatively, if our parents taught us proper money management, then our money blueprint would be more favorable.

My favorite thing about reading T. Harv Eker's book is that he makes it very clear that our money blueprint can be adjusted to reflect how we want money to show up in our lives, and that is a beautiful thing. It makes the idea of financial freedom available to us all, and that is already part of the process: developing a wealthy money blueprint.

I highly recommend grabbing a copy of Secrets of the Millionaire Mind and learning more about creating financial freedom in your own life.

4. Start Investing Early

The thought of investing can sound terrifying, but once you get started, you will see just how easy it is and how the power of compound interest can help you achieve financial independence. In fact, one of the main contributors to early retirement is improving your financial health as early as possible. Investing is one way to do that.

Also, there are plenty of ways nowadays to build your investment portfolio that was once unachievable for your parents and grandparents.

Yes, you can invest in the stock market with things like EFTs or REITs, but it is also possible to invest in the Metaverse with things like digital real estate and cryptocurrency. Even investing in tax-advantaged retirement accounts is possible!

5. Put aside money each month into a high-interest savings account

A high-interest savings account is a type of bank account that typically offers a higher interest rate than a traditional savings bank A/C. The interest % on these accounts is usually higher because the financial institution considers the account to be a higher-risk investment.

These accounts are designed for customers who want to earn a higher rate of return on their savings but still have easy access to their money. High-interest savings A/Cs typically require a higher minimum deposit and may have higher fees than traditional accounts.

You can also create automatic savings by having the money go straight into your savings bank account from your checking account each month. This money saved can help cover unexpected expenses and build financial independence retire early.

I have been using PrizePool as my automatic savings A/C, and the experience has been enjoyable. The best thing is that they offer monthly cash prizes, so I have already acquired free money on top of what I invest each month.

I started small with $15 each month, which automatically is invested into my account. I never touch this account; it is quickly growing into my emergency fund.

6. Diversify your income

Having multiple streams of income is a key element in achieving financial freedom. Relying solely on a single source of income leaves you vulnerable to job loss or other unforeseen financial circumstances.

Focus on income-generating assets

There are many ways to create income-generating assets beyond your primary job. One option is to create a “side hustle” by leveraging your skills and talents. If you're a graphic designer or writer, consider offering your services on a freelance basis. This can help bring in extra income and build a client base for future opportunities.

Passive income streams are another option to supplement your primary income. This can come from various types of investments, such as real estate, stocks, and bonds. With passive income, you can earn money without actively working for it, making it an excellent way to build long-term wealth.

In addition to creating multiple income streams, diversifying your income can also help you build your emergency fund over time. With a more diverse income, you'll have a better chance of weathering unexpected financial storms.

Remember, diversifying your income is a long-term strategy that requires patience and persistence. Building up your additional income streams may take time, but the rewards can be significant. Increasing your income streams can boost your financial independence and help you achieve your long-term financial targets faster.

7. Get a Financial Advisor

Getting a financial advisor can be a great way to achieve financial independence. When you have reached a certain level of financial stability, it may be time to get professional help. An advisor can offer various services to help you maximize your assets, minimize risks, and achieve your fiscal targets.

However, finding the right Financial planner can be a daunting task. You want to make sure that you are working with someone who is trustworthy, knowledgeable, and has your best interests in mind. Take the time to research and interview potential advisors, and be sure to ask about their qualifications and experience.

A good financial guide can help you in many ways. They can help you create a personalized financial plan considering your goals, risk tolerance, and current financial situation. They can also help you make informed decisions about investing, managing debt, and planning for retirement.

Working with a financial advisor is not just about making money but creating a long-term strategy for financial independence. A good advisor will take the time to understand your unique situation and work with you to create a plan tailored to your needs. With the right advisor, you can feel confident that you are on the path to achieving your financial goals.