Intentional Spending is Step One
That’s right, this is the first step toward financial freedom. Begin by looking at your day to day spending. You need to have a clear picture of where your money is going before you can change anything.
Most people think that at this point you would cut out all unnecessary spending, but that is not the direction to take. You don’t want to only make and spend money to survive. You need a plan that will allow you to grow, not just financially but into a place of financial freedom. Financial freedom means having the money to spend on the things that are important to you.
Money Should Never Be Your Master
Money is your servant. You need to direct it to the things that move you forward, the things that allow you to live the kind of life you envision for yourself. You need to determine where your money goes, you need to take control.
- Find out what you LOVE to spend money on
- Cut drastically everywhere else
That is what I call: Intentional Spending
Part of What You Make is Yours to Keep
I found the road to wealth when I decided that part of all I earned was mine to keep. And so will you.
The Richest Man in Babylon
Determine Your Goal
Begin by looking at your monthly spending, where does your money currently go? There are some apps and tools to help you with this if you need some help getting a clear picture of this.
Look at every expense category and ask a couple of questions.
Is this a necessary expense? Does it keep you alive? Sheltered? Facilitate your ability to earn a living? Legally required?
Is this something that I LOVE? If rock climbing keeps you sane or going to the opera feeds your soul in crucial ways, that is something to consider when cutting expenses. Season tickets to watch your favorite NBA team, taking pottery classes, fishing with your kids, things like that are worth spending money on if you love them. Remember, the money you make is your servant, do you get what really matters out of it?
Can I cut this expense entirely? Partially? Are you paying for a movie streaming service you never use? Insurance on a boat you take out once a year?
How Much Cash Flow Do You Need To Live On? This Becomes Your Goal
Answering the above questions will help you determine how much money you will need to meet your expenses and lifestyle each month. Your goal will be to have that amount in cash flow each month from your investments.
How you will obtain that cash flow is actually step 6 of this plan, and we discuss it more on my post on Cash-Flow Investments and then much more in-depth throughout the blog and podcast. In this step, you are just determining how much you need to for your monthly expenses.
Now that you know the amount you need to bring in each month you need to move to the next step, making sure you have the emergency funds in place to see you through the unexpected events that can disrupt your plans.
Want to learn more?
Join Ryan on our next webinar to learn how you can start real estate investing with The Investor's Edge.
COMMENTS