Many people aim for financial freedom. It is a concept about having enough cash, savings, and investments to live the lifestyle people want for themselves and their families. It also includes a growing nest egg that will allow them to pursue a career they want or retire without being forced to work and earn a certain amount each year.
The road to financial independence may not be easy for everyone. In fact, a lot of people fail to reach their goals. From increasing debt, profligate spending, and financial emergencies, one can be burdened with issues that thwart them from achieving their dream. Here are common obstacles to financial freedom and ways to conquer them.
1. Lack of direction and clear financial goal
Without a clear vision or financial goal, you can easily get lost in your journey to financial success. “Become rich” is too vague of a goal. What does it mean to you? Imagine being in a railway station. If you don’t know the exact place you want to go to, how will you know which train to board? Make your goals clear and set a realistic time frame for it. Be specific and establish financial mileposts. From there, you can work on ways to reach them.
For example, you are a trainer who wants to own your own coaching business five years from now. Writing down your goal with a set time frame helps you make that commitment and plan your course of action accordingly.
2. Wrong notions
Most people think that you can only become wealthy by inheriting or marrying the rich. However, you can find many examples of rags to riches stories like Larry Ellison who came from the slums of the Lower East Side of New York during World War II. He then educated himself and later co-founded Oracle., a company that brings in $38 billion every year.
Oprah Winfrey is another example of a billionaire whose origin is steeped in poverty. Like them, you don’t need to start out with all the advantages in life. These are people who came from nothing and made it to the top. Start anew by believing you deserve to be financially free and have the hunger to manage the path before you. Think about your area of expertise and acquire skills that will help you increase your cash flow.
Inaction is the enemy of success. Mindlessly scrolling on Facebook, not getting up from your couch just watching Netflix, and browsing endlessly on Reddit are the source of many failed goals and shattered dreams. Before you know it, another day, week, or month had passed, and you’d wonder why you haven’t reached your goals yet.
When it comes to investments, the earlier the better. It may take years to build wealth from investments. Whatever small way you can, start right away. Small is easy, doable, and non-threatening. Break your goal down into workable steps.
4. Pseudo status or peer pressure
There may be moments when you feel the need to spend on expensive things and activities just to keep up with your friends. Lavish gifting, throwing parties, and buying whatever branded stuff is in season fall under this category. These habits can slowly kill your finances. The money you spend on these things, if you save them, could build you a sizable wealth over the years. Luxurious items need expensive upkeep and recurring expenditure that can create a huge dent in your savings.
False status symbols will not contribute anything to your goals. If you prioritize your plan to be financially free, think that you’ll be able to afford what you want and still have enough cash flow and savings eventually. But until you get there, control your spending with reasoning and a mature mindset. Choose your friends wisely. Find people who add value to your life and avoid those who pressure you to keep up with their spending.
5. No reserve funds
You must allocate a small percentage of your monthly income to your savings. This comes in handy when an unexpected expense happens, like an accident or ill health. If nothing happens, it can accumulate to a significant amount that you can use for your other long-term plans like a house, higher education, or vacation.
Loans can be used as a leverage to start or grow your business. In some cases, it can result in lifelong indebtedness. Interest rates can become high and charges and penalties for delayed payments can add up. Most credit card users also end up buying more than they require. These are obstacles that prevent you from saving. Keep your credit card spending to a minimum if you envision financial freedom. Warren Buffet, one of the world’s richest people, advise the youth to invest in themselves and live a simple life to save up.
7. Sticking to one source of income
If your debt is a lot more than your salary, how can you pay it off? If you’re serious about financial freedom, be prepared to sacrifice tears, sweat, and blood. If your nine to five job doesn’t cut it, you need to step it up and look for money elsewhere. Some financial advisers recommend having seven streams of income. If you’ve got one job, then you only need to find six more.
There are two ways to generate income: active income (trading time for money) and passive income (money that can keep coming in even as you sleep). Examples of sources of active income include being a freelance writer, picking up an odd, occasional job, or becoming an Uber driver. Meanwhile, passive income can come from a drop shipping online store, renting out properties, and stock investments.
The main obstacle to financial independence is the mindset. Lack of resources only limits you, but it shouldn’t stop you from reaching your goals. Take ownership of your finances and live within your means. Make sure that your hard-earned money is spent on important things. Pay down that debt, build additional streams of income, and before you know it, you’ll be free.