Achieving Financial Independence (FI) means having enough income to pay for your expenses throughout your life without relying on a job. Financially independent people generally live off the income they generate from investments.
If you search on internet “How to Achieve Financial Freedom in 5 Years” you will get many answers but let me make you clear Financial freedom is typically hard to achieve and you must do proper planning and early investing. You must be patient, persistent, gritted, and determined to succeed. But trying to do it in such a short period is like climbing a steep mountain but still five years is a concise amount of time to achieve financial independence if you follow complete steps mentioned in this article. As this article cover 11 basic but important steps for becoming financially independent within five years.
What is Financial Freedom?
Being financially free means taking charge of your finances. Your dependable cash flow allows you to live the life you want. When you’re in a financial position like this, you don’t worry about paying your bills or unexpected expenses. A pile of debt doesn’t burden you either. It means having enough savings, investments, and cash to afford the lifestyle you want for yourself and your family. It also means building a nest egg that will enable you to retire or pursue any career you want without earning a certain amount.
9 steps to Achieve Financial Freedom in 5 Years
1. Check your Current Financial Status
To begin any journey, you must first understand where you are. This is an essential step to achieving any goal.
Understanding your current financial situation is the first step toward financial freedom.
Even if you have a mess of finances and aren’t keeping an eye on them, it’s never too late to make things better.
Next month, document your income and expenses to find out where you stand.
There’s nothing wrong with being disorganized. Even the most organized people started out at some point in their lives.
You can use a smartphone app to keep track of your income and expenses.
2. Credit Management
The key to being financially independent is controlling one’s income and not relying on others, whereas debt places liability on one’s shoulders. In an ideal world, a person’s debt should be paid before income. When you have debt, you have less discretionary income, fewer savings and investments, and you risk losing your financial health. All current obligations must be paid off within five years without additional loans.
Even though there are ways to make extra money through loans, most people do not have enough cash or a high financial IQ to make extra money through these methods.
3. Spend Only On Essentials
Individuals’ average amount of purchases has increased dramatically over the years due to consumption. It is common for us to shop a lot, sometimes more than we can afford. This causes havoc on your finances and leaves you with items you’ll never use.
It is important to ask yourself whether you need something before buying it, or whether you are buying something because you find it attractive, you need it, or for any other reason.
The money is not worth it if you don’t need it since more of that money can be used to secure your future.
4. Pay Yourself First
You’ve probably heard the phrase “pay yourself first,” but if you haven’t, it means putting a specific amount of money into your savings account before paying anything else, like bills. Numerous people have reached financial freedom by paying themselves first.
Paying yourself first ensures that you’re always investing in yourself. The opposite usually doesn’t help you experience financial freedom since you only get what’s left over.
There are other ways to pay yourself first. For example, in a retirement savings program offered by your company, you can request that money be withdrawn for retirement. As the money is deducted from your pay, what’s left over is for your bills and expenses. In this way, you’re investing in your future and yourself.
5. Buy Experiences, Not Things
The life we live is short. The goal isn’t to hoard all your cash until you’re 65. It’s okay to enjoy life while you’re still alive.
Ultimately it isn’t the products you own that will help you live a more fulfilled life; it’s the experiences you have. Create more beautiful and happy memories.
Moments are what makeup life. Those that come from quality time with friends and family are the best. Some products can help you get closer to your family (like weekly family video game nights), but most aren’t that valuable.
Don’t pretend to have money by spending money you don’t have.
6. Learn What Must be Learned
The best defense against those who exploit unsophisticated consumers is knowledge. Make sure you are up-to-date on financial news and events in the stock exchange, and don’t be afraid to adjust your financial investment portfolio. If you have a credit card, ensure you know your credit limit to avoid overspending. Staying informed about such details is your responsibility.
7. Increase Your Earnings
Living only a modest lifestyle and cutting back on expenses are unlikely to result in financial independence.
You can open account in Satsh and start your earning in 2 ways:
- By Investing
- By Stash sign up Bonus
- By Stash referral Bonus
To achieve financial freedom, you should consider how to increase your salary over the next five years.
Consider taking on a second job, starting a side business, or requesting an increase at work.
This would be the definition if we were to give it:
Financial independence is the ability to make decisions about the course of your life without considering money.
8. Invest According To Your Objectives
Everyone makes investments, but not everyone maximizes their return on investment due to a lack of strategy and inadequate goal setting. Investing should be done strategically based on your financial goals. Determine your goals and how much money you’ll need to achieve them over the next five years, then invest in suitable assets based on your risk tolerance and timeframe.
Feeling helpless when you need your money most when you invest in any asset without proper planning is possible.
Planning your investments is essential. Make sure you study all types of acceptable assets and invest wisely. Your savings rate will significantly affect your ability to achieve financial freedom over a specific period. The more you save, the more money you will have to invest, resulting in more income sources. Getting your financial IQ up to speed is the key to achieving financial freedom.
9. Generate Other Income Streams
You must be prepared to shed some blood, sweat, and tears if you want financial freedom.
Having a 9 to 5 job may not be enough. As a result, you will need to intensify your efforts and seek employment outside your current position.
According to some experts, you should have seven different income sources. You’re down to six if you work from 9 a.m. to 5 p.m.
Your sources of income can now be divided into two categories: active income (trading time for money) and passive income (money that comes in while you sleep).
Your time is limited by the hours of the day when you turn it into money. To supplement your income, you can do the following:
- Provide virtual assistance to a business owner seeking employment at Upwork as a freelance writer.
- Take online courses for entrepreneurs to learn new skills and monetize them.
- Take on domestic chores as an Uber driver on Task Rabbit
- Try Craigslist for occasional, sporadic jobs, etc.
You can boost your revenue streams with passive income if you don’t have much time to work on making money, such as:
- Create profitable content (blogs, e-books, courses, webinars, audiobooks, podcasts, apps)
- Make money by becoming an affiliate marketer.
- Rent and buy a house
- Invest in stocks.
You can generate all six sources of income from one source. A master of eCommerce, for example, may be able to generate cash from seven different stores. Remember, in the beginning, you don’t have to have seven streams. Over time, you can work your way up to this level.
Financial freedom vs Financial independence
Financial freedom formula
By becoming financially independent, you can gain control over your finances and your life more generally.
The point is to live within your means, be frugal, and spend money on food, shelter, and vacations (relaxation is also essential).
Make adjustments to your budget, create other income sources, and pay off that debt, and you’ll be debt-free in no time. You will be one step closer to achieving financial freedom if you follow this article’s advice. Also read our 10 steps to financial freedom guide for any age.
How to achieve financial freedom before 30
Start investing early to get advantage of compounding.
how to be financially stable with low income
More than income, how you save money is matter to become financial stable.