Financial freedom, the notion that you don’t have to work for money if you so choose, means putting money to work for you. My partner and I reached partial financial freedom (one of us still chooses to work) after about 5 years of real estate investing. We have far more control over our time and we take great pride and satisfaction in earning our own money, while reaping the great tax benefits of renting out our properties. Are you looking to get started on your own path to financial freedom?
Here are 5 strategies to jump start your path to financial freedom:
- Take inventory of your finances– It’s impossible to have a goal or a plan to reach financial freedom if you don’t have a starting point. For me, it started with building tools in excel to track our household income and net worth. This allowed me to see my assets and debts all in one place and come up with a strategy to accelerate savings and debt pay down. Just seeing the numbers on paper has been incredibly motivating. Over time, I’ve created more sophisticated tools to track my net worth, including building dynamic projections. This allows me to toggle rates of income growth, asset appreciation, and savings to forecast my net worth over the coming years!
- Take advantage of refinance opportunities– Interest rates remain historically low and it’s important to keep an eye on opportunities to reduce monthly debt payments and increase incoming cash flow. Creative refinancing also allows you to pull equity out of well performing properties to leverage additional investment opportunities. Refinancing allowed us to grow our portfolio to $2.5mm in assets in just about 5 years time because it funded new projects!
- When it Comes to Spending, Pick your Priorities– While it’s quite on trend to achieve financial freedom through extreme frugality, this does not work for everybody. My partner and I were both high income earners, and we had certain baseline expenses that were nonnegotiable to support our busy family life. Rather than cut out all major expenses, we found ways to cut back in categories that weren’t as important to us. For example, we ate fewer meals outside the house, but continued to utilize a cleaning service and pay for conveniences that helped us work like a nanny and dry cleaning services. The secret is to determine what expenses enrich your life and make your happy versus those that are less important to your current situation. Since I love to cook, dining out became less important so we cut expenses in that area to help us accelerate debt pay down.
- Automate Where You Can– If you are fortunate enough to have a rising income, it’s important to automate your savings to increase automatically so you don’t end up spending your additional income. For us, this means accelerating our annual 401k maximum contributions, overpaying mortgage debt, and automating savings for our emergency fund and kids’ college. If the money never hits your checking account, you won’t feel the need to spend it!
- Pay it Forward– I’ll admit it’s tempting to focus only on the numbers but when we have the rich blessings of financial stability and money in our lives, it’s really important to help those in need. Regardless of how aggressive our plan is to reach financial freedom, giving back reaps incredible rewards and brings great satisfaction. One of the easiest ways we’ve been able to give back is by helping out our tenants, many of whom are young professionals just starting out in the working world.
Financial freedom is an ongoing journey, and these are just a few of the strategies we’ve used. What steps are you taking to secure your financial future?
EARN. GROW. PROSPER. 