The following is a step by step guide that will show the way to achieve wealth and financial freedom, based on how most millionaires today have managed to amass their own fortunes:
Generate enough income
The first step to wealth and financial freedom is to generate enough income to save money and start investing.
Note that to start investing is not necessary to have a big business, as, for example, money could make us need to borrow, or we could get by partnering with someone.
So in this first step is not necessary to generate high revenues but generate just enough to save money that allows us to start investing.
It is possible to generate enough income through employment, however, it is advisable to do so through their own business.
One of the pillars to wealth and financial freedom is having your own business, so it is best to start our business now than later.
In addition, most millionaires today began their road to wealth and financial freedom through business ownership.
By creating our business, a council is to ensure that it does not depend on our physical presence in order to function, so we have time to learn how to invest, and then to invest.
Maybe at first we have to work hard, but we must ensure that as soon as possible our business running even when we absent for a time, and for this we must learn to use the work of others.
Spend as little as possible
The next step to achieve wealth and financial freedom is to spend as little as possible.
Spend as little as possible does not mean we have to live an austere life or become stingy, but it means avoiding unnecessary expenses, eating little, always look for offers and discounts, compare prices before you buy it, and so on.
Moreover, it is advisable to live a life below our means, but from time to time give to get some treats to encourage a mindset that wealth and financial freedom.
For example, occasionally go to the best restaurant and do not hesitate to ask anything, better stay at the hotel, or do anything else would we do if we had already achieved wealth or financial freedom.
A tip here is that when we are beginning to generate more revenue, avoiding Parkinson’s Law says that expenses always increase in direct proportion to income.
That is, try to keep under our level of spending, even though our revenues begin to increase.
3. Saving for future investments
The next step is to allocate a portion of our earnings to a stock savings, which will consist of never spend money, but only use it to invest.
Ideally, a minimum percentage of 10% of our total revenue savings this bag, but we want to achieve wealth and financial freedom as soon as possible, we must ensure that this percentage is the highest possible.
This bag of savings for investment, should be in a savings account at the bank, so we do not feel tempted to use the money.
We must also always observe to deposit the agreed percentage of our revenues in that savings account, before making any payment, it is more urgent or even when it seems that then could not meet with him.
That is, they must pay us first and not do what most people do, which is paid first to the whole world (whether suppliers, creditors or government), and then, if there is anything, just save.
And to pay us to ourselves and not be tempted to use the money before a council is to automate the payment, ie, ensuring that this payment is made automatically without us having to worry about it.
To do this, we can ask the company where we work to deposit a portion of our salary savings in our bag, or in any case, ask you to deposit all our paychecks into a checking account and then ask the bank to take a portion every month of that account and allocated to our stock of savings.
At this point it is worth noting that in addition to the stock savings for investments, it is advisable to have a bag of savings to be used in emergencies, for example, if you lose your job, break our business, lose our investments, or to any financial disaster.
Ideally, this emergency bag or cover security costs at least enough to live about six months, that is, if our costs tend to be 1000, it is advisable to have a bag with a minimum of 6000.
This bag will allow us to get money in an emergency, without having to touch our investments, but above all, give us the security to continue our plans of wealth.
Also, this bag emergency savings should also be in a bank account, preferably in an account that we generate some interest, for example, a conservative mutual fund account.
4. Start investing
Once you have saved enough money in our pocket savings for investments, or as we detect a good opportunity, the next step is to invest, ie, acquire any assets that allow us to grow our money.
There are basically two types of assets: assets that generate passive income, and assets that generate income from capital, consider the concept of each one of them:
passive income generating assets: are assets that we generate a steady income of money (cash flow) without us having to work actively in them examples of passive income generating assets include stocks that generate dividends, rental properties, business where we are not personally get involved to work, copyrights, books, music or software, franchise rights, and so on.
assets that generate income from capital: are assets that will eventually increase its value, and we sell that generate a profit; examples of assets that generate income from capital are: stocks, bonds, treasury bills, currencies, properties for sale businesses for sale, investment funds, etc..
To start creating wealth and achieving financial freedom, we have to acquiring assets that we generate so much passive income as capital income (especially assets that we generate passive income) and with the money, go to acquiring more assets, until to accumulate as many assets as possible.
At this point it is worth noting that not just choose an asset and invest in it, it is necessary to analyze before investing (although not to excess), always looking for assets that give us the best value, and allow us to recover our money and then earn money in the shortest time possible.
Another advice is to invest in an asset is not necessary that we have a lot of money, if we need more capital to purchase one, we know how to use money from other people, either borrowing money or partnering with other people you trust and that know well.
5. Create an investment portfolio
Once acquired our first asset, the profit made by them, must be reinvested or used to purchase new assets.
For example, if we invested in a financial asset that we generate interest, earning money must be reinvested and obtain the effect of compound interest (interest on principal plus profit).
Or, for example, if we invested in a business, money earned can be reinvested in the business and grow it well, or be used to acquire new assets, for example, to be invested in stocks.
The idea is to acquire as many assets as possible; the more active the more we possess our wealth and achieve faster financial freedom.
But as you acquire our assets, we must learn to diversify, ie not putting “all eggs in one basket,” not put all our money in one asset or asset class only, but distribute it among several.
By diversifying, we avoid the risk of losing our money in the event that any assets not get good results, for example, if we invest all our money in a business and it breaks, we could lose all our money, something that would not happen if in addition to our business , we also invested in other assets.
We should diversify into asset classes, for example, invest a portion of our money in business, other real estate, and another in mutual funds, but also diversify within the same asset class, for example, do not invest all our money on actions of a single industry or company, but different.
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