The word “passive” in “passive investor” has some negative connotations.
6 Tactics to Achieve Financial Freedom and the Life you Want
Financial Freedom 101
As if FF needs any introduction, “Financial Freedom” suggests a life in which the bearer has dependable, passive cash flow that allows them to live the life they want. A financially-free individual has no debt and isn’t left scrambling to pay for unexpected expenses, medical, vehicular, or otherwise. I personally know dozens of people who have achieved financial freedom.
Is this lifestyle as wonderful as it sounds? In one word: yes.
Take Robert, for instance. Robert is 55 years old and lives a life of financial freedom. It wasn’t always the case. He racked up $225,000 in student loans out of school to earn his MD providing care as a gastroenterologist. Although his career earned him sizeable paychecks, he prioritized paying down his student debt. He also knew he wanted to eventually be financially free, so he lived a frugal lifestyle and earned money as a passive investor, honing in on opportunities that yielded a high return on investment and positive cashflow.
Today he is financially free and does what he wants. He spends time with his family and volunteers on various missions all over the world serving underserved communities.
How did my friend Robert, and many others achieve financial freedom? There are a slew of different ways, but here are six of the most powerful and effective tactics to get you there.
Tactic 1: What do you Want?
In order to achieve financial freedom, you must be able to envision the lifestyle you want for your future self - Image by Canva.
You want to get out of debt and perhaps quit your 9-5 job, sure. But what do you want, really? How do you envision spending your time if you didn’t have commitments to work or school? Do you want to be an accredited investor and go chin-deep in investing or do you simply want to be financially-free. What does that look like?
This question is a biggie. Ask just about anybody what they’re eating for dinner and they’ll fire back a reply, but ask them how they envision a financially-free future and watch the squirming begin!
Perhaps it’s because most people simply can’t envision a future in which they are truly and utterly free. I find that kind of depressing, because it doesn’t have to be that way!
This limitation of thinking is a problem, because in order to achieve financial freedom, you must be able to envision the lifestyle you want for your future self. Do you want a log cabin in rural Washington or an apartment at NYC’s Waldorf Astoria? Is it to travel the world and visit any country you like for weeks at a time?
What do YOU want?
Only when you know what will make you happy can you determine what a life of financial freedom means for you.
Here are some tips to get you started:
- What do you love about your life now?
- What about your current lifestyle can be changed or needs to change?
- What elements of your life can you simply live-with?
Now, combine all the best parts of your life in one big financially-free ball of bliss. What does it look like? That’s the lifestyle you’re shooting for… build from that foundation.
Tactic 2: Face your Facts
If you come up a tad short, then you know it’s time to pick up a side hustle to make up the difference. Photo by Canva
This step is as much facing your facts as it is facing your fears. It’s impossible to achieve financial freedom without knowing your present situation. If you’re in debt, by how much are you in debt? If you don’t have any savings, how much should you have? Only after you get a grip on your current financial reality (which can be scary), can you lay the foundation upon which you build financial freedom.
For starters, put all your debts in a pile. Calculate your mortgage, student loans, car loans, credit cards, and any other accumulated debt such as loans from friends and family. Add those numbers up to get your total debt figure.
Is it more than you thought? Don’t stress. What’s important is that you meet this number head-on.
Next, gather all your savings together. This includes savings accounts, stocks, company stock-matching and retirement-matching programs, and your other retirement accounts.
Finally, add in your monthly earnings based on your salary or any side hustles.
Jot these numbers down and keep them close to your heart.
Tactic 3: Track your Spending
How much do you spend each month? If you haven’t already calculated this number, when you finally get down to doing it you may be surprised. There are various financial tracker programs out there, such as YNAB and Mint, or you can use a simple excel sheet noting money in and money out.
I love to eat, and before I started tracking my spending I had no idea just how much money was slipping through my fingers and onto my plate. Eating out adds up. Only until I saw just how much my daily habits added up to could I curb my spending.
When you track your spending, you’ll get some clarity on where you overspend, and can then compensate for that by eating out less, purchasing fewer lattes, or cutting back on monthly VOD subscriptions. Whatever your poison may be, know how much you’re spending and then devise a plan on how you can cut back.
Tactic 4: Pay Yourself First
Pay yourself first - Photo by Pixabay
You are not beholden to anyone but yourself and the wellbeing of your family. Someone who is on the road to financial freedom understands this, and it’s time you understand this too!
Determine how much you want to save each month, whether that be $50 bucks per pay period or $500 per month. Don’t even think about bills, pay yourself right off the top.
Because once you set that money aside in a savings or investment account, you know what you have to work with leftover. This leftover is for bills, such as the mortgage, debt, and all the rest. If you come up a tad short, then you know it’s time to pick up a side hustle to make up the difference.
If you are going to achieve financial freedom, then you must pay yourself before you pay the other guys. This sets in motion a powerful thought process in yourself, in which you embrace that your future self and the lifestyle you envision is worth it.
Tactic 5: Establish a Side Hustle
You can find work as a writer, voice over artist, graphic designer, and much more. Photo by Canva
At this point, now that you have your debt figure, savings figure, and have tracked your spending… you may be wondering how the heck you’ll ever be financially free, especially if your debts and spending is more than your salary!
If you already have a 9-5 job, this is where your active income comes in.
Your side hustle can be another stream of active income, that is where you trade your time-in for money. Or, the side hustle can be a passive stream of income, where you earn bucks through a passive process that requires no active time from you.
For example, an active side hustle may include the following:
Freelance on Upwork. You can find work as a writer, voice over artist, graphic designer, and much more.
Become a driver for a car share company like Lyft or Uber.
Find gig jobs on Craigslist.
Help your community while earning money picking up tasks on TaskRabbit.
Sell homemade products on Etsy.
Passive hustles may be investing in a real estate syndication or other passive investments that require an initial financial investment but no time commitment from you. I love real estate because there’s nothing more satisfying than seeing property appreciation and equity grow as the months or years go on.
Here are a few other ideas for passive income streams:
Sell content, podcasts, and subscriptions (enrich your offerings with a value add to justify a higher price than your competition).
Passive real estate investing.
Invest in commercial real estate.
Purchase a rental property.
Stocks or other promising investments.
The bottom line with side hustles – it’s important to have several income streams. Your 9-5 job is one stream. Add a mix of other streams to achieve financial freedom faster.
Tactic 6: Find your Bottom-Line Number
I suggest finding your "bottom line" number, that is the income you'll need each month to cover your fixed monthly expenses. Once you know this number and create a passive income that matches or exceeds it, you are in effect financially free and can choose how you spend your time. You can quit your day job like my friend Robert did and focus your energy and passion on something meaningful.
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Delphine Nguyen, Investor
Delphine Nguyen is a real estate investor and a licensed real estate broker in Illinois. She learned to be successful from a variety teachers, including her own mistakes. Real estate investing is her passion. Helping others to achieve their goals is another passion that she has. She does what she knows best, therefore, her focus is solely on multifamily and co-living investment types.
Active vs Passive Investing in real estate has become a common dinner discussion topic in our household.