“Financial freedom” is a skill, not an amount to be achieved.
The way that people build true wealth is they see money differently than everyone else. They don’t see it as something they “have.” They see it as something they deploy and use to build and grow from there.
For this reason, I am a true believer that it does not matter how much money you currently have, but what you are doing with it.
I know many people who earn more money than me, but they are full of debt; they cannot buy anything they want, they cannot save a single dollar every month, or even invest. However, I have been able to accomplish all of those things earning much less than them.
Because the correct mindset and knowing how to move your money wisely is much better than just earning a huge amount of money.
Knowledge is more valuable than money. Skill is more valuable than circumstance.
Anthony Moore, In his article These 5 Brutal Epiphanies About Money Could Make You Millions, explains why 10,000,000 dollars would probably destroy you right now:
One of the bitterest truths about money is that more money won’t solve your problems. Actually, more money only magnifies your current habits. And if you have bad money habits, a lot of money could actually destroy you.
You can’t expect you will have more money when you earn more if you don’t know how to manage properly what you have now. For that reason, here are 5 money moves you should make if you earn less than 60,000 per year.
1. Create your own financial perspective.
I am an expert at managing credit cards. However, my friend Sebastian cannot have one plastic that has more than a $100 limit. Do you know what we both have in common? We have the same amount of money saved.
Your ability to get financial freedom will not depend on a single piece of advice. Although there are common habits among millionaires, that does not mean that following the exact same steps will automatically make you rich.
This is because we do not all have the same ability to do the same things. Having a credit card works perfectly for me, while maybe not for you, and that doesn’t mean that neither of us can save $10,000.
If you want to start saving and earning extra income, start by creating your own perspective on finances that works perfectly for you, even if it is not what others are used to.
In the end, the result is what matters, not the process. If automatic payments work for you, start doing them, they don’t work for me, and that’s why I’m not doing it. But I know we will have the same results.
“Never choose a process because it feels good, choose the process because you can achieve the outcome at the end.”— David O.
For this, what I did is create a financial plan that works perfectly for me. In this way, I can save and invest my money without representing something “mandatory.”
For this, you can ask yourself the following questions:
- How much money can I save without omitting any of my payments? That includes dinner with friends and everything you enjoy doing.
- How much money can I invest and the type of risk I am willing to take? For example, many people are willing to take greater risks than others. Knowing it will allow you to know what types of investment it is convenient for you to make.
- What are the payments I will make with my credit card? If you are not good with them, don’t use them, even if they represent a benefit. No discount that a credit card offers you is worth paying interest when you don’t know how to use it.
As you set your goals, ensure that they are realistic. Unrealistic goals that set you up to fail can discourage you from making the right financial moves in the future.
2. Recognize and manage your lifestyle inflation.
Unless you have an unlimited amount of money, it’s important to truly understand the difference between “needs” and “wants” so you can make better spending choices.
The correct management of your lifestyle will allow you to save more without having to spend more money. The only thing you have to do is realize what are the phantom expenses that your salary has and make changes in your habits.
For example, in my article “5 Practical Ways to Save More Money Without a Salary Raise”, I explain ways to save without having to earn more money by making changes in your life:
- Finding a way to grow what you already have, in mutual funds, stocks, or any other type of investment that goes according to the type of risk you want to take.
- Cancel automatic subscriptions and memberships that you don’t usually use. For example, some people pay for more than one streaming service per month, but it is better to pay Netflix for 3 months, watch all the series you want, and then pay Disney+ to watch another series. In this way, you can save more than $100 monthly.
- Try annual subscriptions of services that you will actually use for a year. This includes work tools or things necessary that you use for personal health or well-being. If you pay the Disney + for one year, you will save 5% of that subscription. But if you only pay for 6 months to see only the series that interest you, you will save 50%.
- Reduce energy costs by changing wasteful habits and buying green alternatives.
- Try a cheaper alternative that is really worth it. That doesn’t include cheaper shoes or old phones because in some case it’s better something good that you can use for years than something cheaper that you have to replace it in three months.
Recognizing what those “ghost expenses” are will help you use that money for better things, such as changing the car, investing more, or having a better emergency fund.
3. Only say yes to opportunities that will move you closer to a life-changing scenario.
Not every opportunity is “life-changing.” I can tell you right now a hundred ways to make thousands of dollars, but if you don’t do your research correctly and put in the time and what is necessary to achieve it, you won’t even make a dollar.
That’s because not everybody has the same goals and the same mindset to do something. Many people are good with cryptocurrencies, but I do not have the patience and time to dedicate myself to it, so I will not be as successful as they are.
The first thing you need to do when you have an opportunity is to ask yourself if that opportunity will move you closer to what you want to achieve and if you have the correct mindset to do it.
Because “good opportunities” are only really good if they go according to what you want to achieve. If you don’t want to be a trader, that stock goes up would not be a good opportunity because it is not something you want to do, even if you took advantage of it.
You don’t need a special talent to be successful at something. All you need is a proven idea that has worked well for others and then executes it with your personal touch.
The secret to building a successful business is following directions. Not grit, not hustle, not passion. If you take one of the training programs about business, take it seriously and do every single step without skipping one, you’d be successful.
But you must have the mindset and the time to do it. The only life-changing scenario opportunity that will take you where you want to be is the one in which you are willing to work correctly.
4. Start taking high risks with small investments.
I know people who spend $150 a month on cups of coffee but are afraid to invest the same amount in Bitcoin or the stock market because “they can lose everything.”
The importance of knowing the amount of risk you are willing to take allows you to make small expenses in volatile investments without the fear of losing. You can pretend you spent $150 on a dinner party so you can forget about it.
You can buy a volatile asset such as Bitcoin when you know how much money you can lose. For example, you can choose to buy only $50 in Bitcoin. This means that you can take advantage of the benefits without exposing yourself to many risks if the price of Bitcoin decreases.
This advice has helped me invest just $100 on something I was not completely sure about, and then my money increased by 1000%. I was going to spend this money on food or some game anyway, but I decided to take a high-risk investment.
Sure, I could make more money, but I wasn’t willing to lose more money. Taking big risks with small investments allows me not to lose the opportunity to make the investments and to have the possibility of winning a good amount of money.
5. Use your budget to measure performance instead of control your expenses.
Many people prefer not to budget because they do not like to feel that money is only designated for specific things, and it does not give them the freedom they want to buy what they want.
But a budget is not only used to designate an amount of money for something and control your expenses. It also serves to measure your performance:
- It’s an indicator of the costs and revenues linked to each of your activities, so you can try different places. For example, knowing how much you can spend on a trip lets you know if you can go to another continent if you want.
- It’s a way of providing information and supporting management decisions throughout the year. Many people do not know that they have the ability to buy a car or a house because they do not know what their debt capacity is.
- It also serves to monitor and control your investment capacity. If you analyze your income and expense data, you can know if you can start a business or invest in something risky.
If you don’t take responsibility for your money habits, you will not save a single dollar no matter how much money you earn.
Money and “financial freedom” is a skill. Don’t wish for more money; first, focus on becoming someone who can handle the money you have.
It is more important to start saving your first $100 than having $10,000 to start making investments or saving because it’s about creating a habit, getting a start from what you can build.
If you can’t make anything with the money you currently earn, you probably can’t do it even if you find a job earning five times more because it’s about mindset, not quantity.