Practical Ideas to Achieve Financial Freedom – Part 2

December 21st, 2007 | Stacey | Residual Income, Passive Income, Financial Independence, Financial Freedom Opportunities, Financial Freedom

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Our last entry was the first part of our new series of ideas to achieve financial freedom and we discussed the need to get started right away because you cannot depend on your employer or the government for future security. Today we will discuss the first practical step in the direction to become financially free – setting up a spending plan.

You need to first determine how much money you earn and how much money you spend every month. Then you subtract your total expenditures from the total amount of income you have. What you have left is the amount of money you can save after everything is paid for. An ideal amount to save every month is at least 10 percent of what your take home pay is. If you have a negative number or nothing left when you figure out earnings versus expenditures, you need to change your spending habits so you can save more. Try to cut back in certain areas so you can save additional money right away. Using coupons, bringing lunch from home and walking instead of driving locally are all good ways to save.

When you figure out how much money you can reasonably save, put it on your list of necessary monthly expenditures. Save as part of your monthly requirements and put the money in separate account so there is no confusion. Savings the money in an interest bearing account is a wise idea so your money will earn additional income for you – this is passive residual income at work.

If you need to get into your savings for an emergency, don’t panic or lose hope. Just get back on track with saving the next month. Saving $1 every day equals $365 at the end of the year so you see how quickly a little savings can make a big difference.

Once your savings start to build, your goal is to save enough to live for three to six months without additional earnings. Put the money into a savings account or short term CD so you earn the most interest but still have emergency access to your funds.

The next entry in our series of practical ideas to achieve financial freedom will discuss your long and show term goals and making it happen.