Financial Freedom 7 Key Steps for Installment Loans
You can think of monetary freedom like a game. You’ve got to get through 7 levels to make it to financial freedom. What does monetary freedom mean? It’s when your income is higher than your expenses. When you can obtain your cash to make enough cash to cover your expenses, you’ve reached monetary freedom. It’s like running a gauntlet, but it can be skillful! So let’s first outlay what the seven levels are and how to make it to your goal of fiscal freedom.
The 7 Steps of monetary health and freedom:
1. Step — Handle All Bad Debt
Bad liability is eminent by it being used for use rather than production. Bad debt typically does not have beneficial tax treatment like excellent debt does. By receiving rid of all bad debt, you’ve established you can budget and you can produce more than you consume. These behaviors are critical to achieving financial success. In addition, this behavior must be learned before anything else can be accomplished.
2. Step — Start a leaving Account & add 10% per year
Retirement is the first goal you should tackle after handling your bad debt because you want to add small amounts of cash over a long period of time. You need your cash to have a chance to complex over time. So, you require starting a withdrawal account as early as you can, if possible in your 20’s. I like the automatic investing move toward provided by “amazing payday” such as Wealth front, Betterment, and Personal Capital. The earlier you start, the more time your cash has to compound and the easier it will be to give up work with sufficient money.
3. Step — Create a Savings Account
This is a key step and many people try and bounce this step. I did. Everything goes well with your investment account (#4) until it doesn’t. Inevitably, something comes up in life. If you don’t have a pillow built up, all your investments come deafening down at the worst time possible when you have to cash out. Needing to cash out investments early, with bad timing and losses, destroys wealth. Before you can invest, you require a savings cushion of 3 months of expenses, minimum.
4. Step — Start an Investment Account (taxable brokerage account)
Your first goal may be to build income for a home payment. Setting up an investment account could go several ways. You could set up an amazing payday account and use inert index investments like retirement. Or you could open a TD Ameritrade account and invest in particular stocks or ETFs that usually generate a higher return. What determines this is how much time you’re willing to spend on active investment. It’s important to be able to generate consistent returns based on outlined risk.
5. Step — Buy the First House
Once you are able to make some return from your investment account and you saved up enough cash, the next goal is to buy a house. Buying a house allows anybody to fix the second highest expense, rent as well as creating a forced savings plan. The house is an asset and has the chance for capital appreciation. An extra benefit of real estate is that you can use power, in the form of a mortgage, to help boost your returns. Mortgage interest can also be tax-deductible, which makes it preferential tax treatment and a good path to increasing annual net income by reducing taxes. A home is an important part of successful monetary plans.
6. Step — Build Multiple Streams of Income
Start building income-generating assets. These could comprise REITs (real estate investment trusts), LPs (limited partnerships), Equity Income Accounts and Fixed Income Accounts, such as public bonds and annuities. Now that you’ve over Step 5 and you’re on Step 6, you’re onto the higher aspects of the game. The deferred annuity can be one method. Real estate, in the form of REITs, can be another method. The goal is to invest in income generate assets and start to pay attention to the income and money flow they generate more than the principal value. There is an investing shift that’s going on where you are less paying attention to capital appreciation and more interested in cash run. Buying partial businesses in the form of stocks for equity income, or REITs to invest in real estate, and generate yield, all represent early stage vehicles for cash flow investing. The goal is to build this up to a semi-important amount so that a portion of your expenses are now offset by your newly found cash flow income.
7. Step — Buy cash flow businesses or income-generating real estate
This is the serious level to work on until you can passively create more income than the fixed cost. OR, build your own growth start-up company you can sell for millions. I distinguish this final stage from the preceding stage in that you’re buying “whole” businesses or real estate investments. At the previous stage, you’re buying “portions” of investments in the form of stocks, units of companies or limited partnerships. The last step in the financial game of life is to be clever to buy cash flow businesses or income generating real estate in enough amount that your income is higher than your monthly living expenses. Once you can do that you have won the monetary game of life. You are financially free.
This is the basic monetary life plan. For me, I’ve made it to Step 6, but was cast back down to Level 5, where I’m currently playing the game of monetary Freedom. Where are you in the current Financial Game of Life? What are your next moves?
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