Fed up with working yourself to the bone just to get debt free? Feel like financial freedom is just a distant dream that you have no idea of how to reach? Have you fallen for get-rich-quick schemes in your quest for a rich life? Are you ready to build a foundation for a rich life that will lead to financial freedom and an end to the daily grind? It’s simpler than most people think: the secret to financial freedom is sound wealth creation strategies: maximizing your assets, decreasing your liabilities, and making your main priority to get debt free.
The key for a rich life and financial freedom is understanding the Net Worth Formula. Your Net Worth is calculated by subtracting your liabilities from your assets. You achieve financial freedom by increasing your assets and decreasing your liabilities. It’s as simple as it sounds. The reason that people can’t maximize this formula for a rich life is because they don’t understand how to maximize assets and decrease liabilities.
How to Obtain Financial Freedom by Maximizing Your Assets
A solid plan for a rich life starts with an Assets Appraisal. Make a list of your assets. An asset is any property that you own that will help you obtain financial freedom by increasing in value over time. Assets include your home or any other real estate, stocks, interest earning savings accounts and other investments. People with financial freedom own several assets that will help them increase their personal net worth over time.
Non-wealth building assets are those that do not contribute to your financial freedom, and decrease in value over time. These are items that may be purchased out of necessity or desire, like cars and other vehicles, televisions and other entertainment purchases, and the like. The less of these items that you own, the closer you will come to financial freedom.
Your list should consist of two columns: Wealth-building Assets and Non-wealth building assets. Next to each asset, include the amount of money invested into each. If you have not already obtained financial freedom, chances are, the non-wealth building assets column is sucking in a large portion of your income. Your next step in your plan for a rich life is to change the balance of these columns. Wealthy people obtain financial freedom by funneling their investments into wealth-building assets which are key for a rich life: investing in property, stocks, IRAs, mutual funds and the like.
Building your portfolio of wealth-building assets is such an important step toward financial freedom that it is forgivable to accrue debt while building it. The ultimate goal for a rich life is to get debt free. And, if possible, you should avoid debt in possible. However, not all debt is created equal and there is such a thing as Good Debt that will help you obtain financial freedom. Good Debt, by definition is any debt that you have accumulated while building wealth-building assets. A loan to purchase a home or other property that will increase in value is good debt. The investment in the wealth-building asset is taking two steps toward financial freedom while the debt accumulated in the mean time is one step back. The key is progress. Accumulating debt to buy, say, a new television is an investment in a non wealth-building asset and not only a step away from financial freedom, but does not help you get debt free which is a primary goal.
Get Debt Free
For those seeking financial freedom, this goal should be a primary step in their plan for a rich life. In fact, you should get debt free or at least be well on your way before you think of accumulating any good debt.
However, many people seeking financial freedom find that their plan for a rich life is being blocked by piling debt. Eradicating that debt is a crucial first step to financial freedom and a solid foundation for a rich life. You cannot accrue wealth-building assets when a significant portion of your income is going toward your goal to get debt free.
The first step to get debt free is to acknowledge the debt that you owe. Leaving bills unpaid and ignoring debt collectors will only increase the amount of principal that you owe. The smartest step that you can take next to get debt free is to seek professional help. Debt consolidation companies can help you obtain lower interest rates and consolidate your bills into a single monthly payment. A professional can also help you to get debt free by helping you get debt settlement which can significantly reduce the amount of debt you have to pay.
There are lots of debt consolidation and debt settling companies that offer free debt counseling sessions to help those seeking financial freedom get debt free. Counselors will analyze your financial situation and prepare a monthly budget designed to put you on the road to financial freedom as efficiently as possible. After the counseling session, you will make a single monthly debt payment to the consolidation or settlement company which will be distributed to your creditors.
Once you are on your way to financial freedom and feel comfortable with your plan to get debt free, the key final step is to avoid accumulating any new debt (even good debt) until you have paid off the creditors that you owe. Any discretionary income not spent helping you get debt free can then go toward your plan for financial freedom: accumulating wealth-building assets. Follow these steps to get debt free and build assets and your plan for a rich life will be well under way and you will begin to see your daily grind as a key (and temporary) step on your road to financial freedom.
Successful investing is all about how much you know. There are lots of investment options out there, but not all of them will be right for you. It is important to get good advice on managing your investments and to have the right tools at your disposal. Here are the five options for investing your money that consistently offer the best value:
Stocks are risky and the older you are, the less time you have to bounce back if you lose a lot of money. However, they can be very lucrative. A simple formula that can use to determine how much to invest is to subtract your age from 100, the remainder is the percentage of your portfolio that you should put into the stock market. To lower your risk, you can opt for a mutual fund that has a focus on the stock market or try bonds instead.
If you have too little tolerance for risk to invest in the stock market, you can invest in corporate and government bonds. These bonds provide lower returns than stocks, but there is less of a chance that you will lose money. You can buy both stocks and bonds to avail yourself of their respective advantages.
3. Real Estate
During periods of inflation, property values go down. The main principle of all investing is to buy low and sell high so this is the perfect opportunity to invest your money in real estate. It is important to make sure that you have an adequate sum set aside for this so that you do not have to dip into your retirement savings.? Of course, you should also find out as much as you can about investing in real estate before venturing into these waters.
4. 401k – Personal Pension Plan
A 401k allows you to set money aside over the course of your working years until you get to retirement age. It is recommended that you place 10 percent of your salary into your 401k. You will want to start doing this as early as possible so that you have more money once you stop working. One of the big benefits of a 401k is that your employer may match the first five percent of your contribution.
5. Exchange Traded Funds (ETF)
These are like mutual funds but they offer more variety and are traded in a similar way to stocks. The benefit of this investment type is that an ETF portfolio has various smaller investments; this means that you are spreading your risk among different securities. ETFs are also less expensive than buying the individual stocks.?
The world of investment offers many ways to lose your money and very few that provide consistent gains. The methods listed above are not the only ways to invest, but they are among the most reliable.
Smart Investing During a Recession
The current condition of the economy has had an impact on everyone, and many people have asked themselves if it is a safe time to invest, with many people withdrawing their funds entirely. The answer is yes, now is just as safe a time as any to invest, but you must be smart and be savvy enough to plan ahead a little. Withdrawing your funds certainly won’t make you richer, and it actually worsens the burden on the economy.
However, while you should still invest, it is also a good idea to play it safe. If you normally engage in high-risk investments, it is a good idea to pull back a little bit. Instead focus your efforts on stocks, bonds and any money markets that seem the most stable. Also, now is a better time than any to pay close attention to your stocks. Monitoring your stocks daily is a good idea, as fluctuations in prices are more than twice what they normally are in this economy.
That said, there are some businesses that have been booming since the recession. Obviously, these are types of businesses you want to invest in, such as discount stores and grocery stores.
The reason these companies are doing so well is obvious: In tough economic times, people have less money to spare, and thus have to go to the places where they can stretch their dollar.
So the smart investor will capitalize on this by paying attention to these businesses, and investing in the most stable. By planning ahead and playing it smart, you will be able to thrive in this recession as well.