Financial Freedom 2: Beginning Steps

First, you need to know where you are financially. What is all your income, and what are all your expenses, including debt repayment. This should be your first plan of action, to compile your financial statement. It may take a little while but gather up all your information and write it down.

Make a list of expenses as they are right now. Then make a list of your income. Include any assets that bring you money such as interest from a savings or IRA, etc. The definition of an asset is something that puts money in your pocket.

Some surprising and possibly depressing news for most people, is that your home that you own for personal use is not an asset. It costs you money to live there each month. It is not putting money in your pocket today that you can live off of. It may appreciate in value and at some point you can sell and possibly make back all the money you put into it with some left over, but at this moment it costs you money and is an expense.

In contrast, if you own property that you rent to others and the rental income from that property exceeds the expenses, then that property is an asset. It is putting money in your pocket each month. Also, your mortgage on the rental property is considered "good debt" because it is making you money.

Your second step, now that you know your financial picture, is to pay down debt. You want to eliminate "bad" debt, debt that doesn't make you any money but rather costs you money in interest.

Your third step is to start a plan for saving and investing money. You may have heard the term "pay yourself first" and this is what you need to do. Start saving at least 10% of the money you make. Do it automatically. It should be one of your expenses on your expense list from above.

The final step for this part of your financial freedom plan is to start educating yourself on money and investment strategies. Read, listen, watch, see what others who have successfully achieved financial freedom have done. Always remember, it is your hard-earned money. You need to remain an active participant in what happens to your money.

It is okay to consult others, but look at what success they have had personally. Financial planners may be "qualified" but they are also selling services and products. There is a wealth of information available that will help to educate you. Ultimately, you need to make a plan and find investments that you are comfortable with and are consistent with who you are as a person.

While the above actions are listed as steps, they are not ones that you finish and then are done. These should be ongoing activities that you update throughout the year. You need a dynamic financial plan that changes as you and your circumstances change.

There are many web sources for budgeting information. There are some great personal budgeting tips and resources at personal budgeting works.com (opens in a new window). Karen will provide you with everything you need for effective personal budgeting. She has a step-by-step guide to planning and implementing a personal or household budget, eliminating debt, and making smart money management a way of life. She also offers free budgeting worksheets, extra income ideas, and money-saving tips.

You also need to have a clear picture of what financial freedom is to you, a vision for your future, and know what your life goals are.

And yes, teachers can achieve financial freedom. Many of us have grown up with the idea that wanting money, or having a lot of it, is bad. It isn't money that is bad, it's what some people do with it that's bad.

In the 21st century what is really "bad" is relying on someone else, such as your employer or the government, to meet your future financial needs. As chief financial officer of your life it is up to you.

This is just the tip of the financial freedom ice-burg! Follow the links below for more great information.

Creating Passive Income

Financial Leverage: Use Your Teaching Knowledge to Make More Money

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