Full In-depth Guide to Financial Freedom For You

Looking for the Guide to Financial Freedom?

You’ve come to the right page! 

Are you hoping to live the exact lifestyle you wish to? Spending your time on traveling, unique projects or maybe a start-up business?

Or how to become financially independent?

If you want to understand the different parts of your journey, this page is a guide to financial freedom. 

What is Financial Freedom?

Financial freedom is reaching the stage where you no longer are dependant on your steady income day job.

And at the same time can sustain your current living situation.

Total freedom! Wouldn’t that be amazing? 

You have created an income system that is passive, steady and consistent large enough to cover your yearly expenses.

This allows you to focus on the things you’re passionate about, take job opportunities and challenges you wish to take rather than needing to.

Basically, spending time on what you find is worth doing with fewer strings attached allows you to enjoy the process more and increasing your motivation.  

That’s a goal that interests me! 

See also the post: Your Road Map to Financial Freedom. 7 Simple stages

Why Do People Wish to Achieve Financial Independence?

There are different reasons for wishing to reach financial independence.

But the most common reasons all have the benefit of giving you more freedom as the main focus.

You may have family and kids you want to spend more time with at home.

You may be the creative type that hasn’t taken the chance and pursue their passion.

Some might have an entrepreneurial dream of starting a start-up that could be a big success or a failure. 

Financial independence doesn’t necessarily mean you don’t work.

But it gives you the option of choosing exactly the lifestyle or work you find meaningful and giving. 

Click to read fellow FIRE blogger MoneyMow‘s post on 3 reasons ‘Why Financial Independence Should Be A Goal For Everyone’ . 

What Strategies Are There to Reach Financial freedom?

The most fundamental part of all strategies working towards financial independence is living below your means.

In other words, spending less money than what is coming into your bank account.

Once you’ve started having more money left over at the end of the month it’s time to invest the difference. 

This is to yield the power of compound interest so your hard-earned money can grow rather than lose its value on a bank account due to inflation. 

There are different investment strategies for reaching financial independence.

And which method you choose comes down to where your interest lies.

• Real estate. Buying, renovating, renting out, selling. All aspects of owning property and creating homes for families.

• Stocks. Owning a part of a company and sharing the profit and growth of a business.

• Bonds. Loaning your money to companies or governments and earning interest. 

• Crowdlending. Offering your money to other companies or individuals needing money to start businesses or other projects.

I myself am into owning stocks in the form of indexes.

My investment strategy isn’t trying to find the specific companies that are going to grow the most this year.

Rather, investing and following the average growth of the market it performs every year. 

This has become a popular strategy in the FIRE community (financial independence retire early) and the general population as you reduce the overall risk of investing.

This is due to you owning a small part of many companies rather than a larger part of a few companies.  

This method is an automatic way of investing, requires no previous experience and only needs as a minimum a few hours of work every year to maintain.

How Long Does It Take to Reach Financial Independence?

The speed at which you can work your way towards becoming financially independent depends on a few factors: 

• Income Size

There is no getting around this. The more money you make the faster it is to reach FI but this ONLY applies if your extra income goes towards savings and investments. 

Do you make 10.000€ and spend 9500€ a month? 

A person earning 3.000€ and spending 2.000€ would reach FI faster!

Income size, therefore, has less importance until you compare this number with your expenses.

• Yearly Expenses

Financial independence is also determined by the size of your expenses.

Do you have an expensive lifestyle? 

Then the monthly income needed from your investments equally increases. 

A simple frugal lifestyle, maybe in a tiny house, appeal to you?

This would mean reduced yearly expenses and a shorter path to FI. 

• Savings Rate 

Your savings rate is the percentage of your net income that goes towards investments.

Do you make 5.000 € a month and manage to save and invest 500€?

Your savings rate would be 10%. 

Are you up to investing 2000€ on that salary? Your savings rate would be 40%.

The reason why the savings rate is an important factor is that takes both your income size and overall expenses into account.

The higher the savings rate ~ the sooner you are able to reach FI! 

Tracking this figure is also a great motivation booster.

My monthly updates definitely help me out a lot with keeping myself on track towards goals and milestones. 

• The Level of Financial Independence You Wish to Achieve

Financial independence isn’t one day to the other a number you hit and voila your FI unless you have set a very specific goal. 

There are different levels of FI based on the amount of income you would like to live on per year. 

Would you like just enough income from your investments to have the safety of knowing that your home and food on the table are guaranteed?

And you therefor can spend much more time with your family or passions in life?

Or is it important to you that your investments give you the possibility of traveling 6 months a year, inviting your family and friends to come along?

Living in a large house and having a luxury yacht ready for when you get back. 

These two very simplified lifestyle examples that require two different amounts of income from your investments.

What level of FI are you working towards?

Wannabewalden is ‘‘Retiring in Less Than 5 years’ and shows how you can too!

What Does It Take to Reach FI?

Reaching financial independence isn’t for most people an easy task. It is a learning process and definitely possible for some individuals who are willing to embrace the following aspects.  

• Belief

A journey of this sort takes commitment and a confident belief that it can be done.

If you don’t truly believe it is achievable how is your mind going to subconsciously act and work towards it?

“If you can dream it, you can do it”. Walt Disney

• Mindset

FI also requires a specific mindset.

A way of living, thinking and understanding how to change and optimize your lifestyle so you are on a path to FI.

You may have a few habits that are pulling you further away from your financial goals. We all have these! 

They may require adjusting and optimizing but this is definitely possible. 

This doesn’t mean removing and cutting about important parts of your life that give meaning. 

But it may require tweaking them to work in your financial favour. 

• Priorities 

Which leads to the importance of prioritizing. Being able to see the benefits of delaying gratification. 

In our modern world, we can find entertainment, delicious food, all kinds of shopping and thrilling adventures with a few clicks on our phone. 

All these temptations are that are hard to ignore and it’s hard to avoid being influenced by them. 

It’s important to be able to prioritize and decide which adventures and parts of all these options give you value and hereafter cutting out the rest.

This crucial and can be quite fulfilling to experience on your journey to FI. 

Read more on how to start your debt-free journey today. 

‘I know nothing about finances. Can I become financially independent?’

One thing to remember if financial independence is your ultimate goal is that the whole adventure is a journey.

You are not going to be an expert from day one.

Can you become financially independent not knowing anything beforehand?

Yes.

Everyone is a beginner at first. 

It will take seeking knowledge, learning, persistence but yes it is manageable. 

You have already found this guide to financial freedom which means you have an interest in simplifying your life and becoming financially savvy. 

Great step! Others have too in the ‘Tiny House Europe Financial Free” group.

Join fellow thinkers for inspiration. 


Read more on TotalBalance‘s post on ‘Why Consistency (and time) Is The Only Thing You Need to Become a Decent Investor’

Why Doesn’t Everyone Wish to Become FI?

Asking people whether they would like to achieve FI.

The majority would probably say that, yes, they would love to.

But as soon as it comes down to understanding what it takes, setting up the systems to leads you to FI and being persistent for many years, this turns out to be a whole different matter. 

Not everyone can wrap their head around this mindset as reaching FI is also developing the skill of delayed gratification.

Anyone can work like crazy for a month and afterward purchase luxuries, trips, gadgets for this amount.

But the next month this would mean needing to go to work again to sustain this lifestyle. 

Investing in any shape or size is truly believing that the money you put aside now, you will be able to enjoy later in life.

Hopefully growing into a larger amount for more adventures and experiences in the future.

Enjoying this guide to financial freedom?

You may also like: ‘How to live a Mortgage-Free Life’

Does It Require a Large Salary to Reach FI?

Financial freedom IS possible to achieve without having a huge paycheck coming in every month.

If you live with a frugal lifestyle below your means.

In simple terms spending less than what hits your bank account every month. 

Understanding this is an important aspect of your journey.

Your savings-rate is the most important factor when on the path to financial independence.

Now yes, having a large salary of course, when you look at the maths increases the speed at which you can reach financial independence.

But as a general rule, if you live below your means, have a steady income, and excess every month to invest it is possible to reach financial independence.

The speed at which you reach financial independence varies from person to person as yearly expenses vary as much as everyone is different. 

Read more on the term savings rate from Money Mow. 

As you read above reaching FI is dependent on the size of your yearly expenses.

If you can keep your yearly expenses very low this means a reduction in the amount of money you need to have invested working for you. 

Therefore even people with low incomes have a chance of reaching financial independence as long as their expenses also are low. 

What If I Have Debt? 

First of all, having debt is very normal for most people owning a house.

Can financial independence be reached with debt?

Yes, it can. 

But it’s important to know that there is good debt and there is bad debt.

Having a loan in your house which can be at a reasonable interest rate can be quite fine as your house should on the average increase in value over a long period.

And any extra income could be invested in other ways earning you more income than the interest on your loan. 

On the other hand, credit card debt and other loans with high-interest rates are considered bad debt.

One of the first points of focus when trying to reach financial independence is getting rid of these bad debts as they are dragging your financial situation in the wrong direction. 

As much as the power of compound interest helps us on the way to financial independence.

 The same power of compound interest can with a great force pull your finances in a negative direction. 

Which can lead you to even more debt! No thanks. 

Click for a 5 Step Guide to Start Your Debt-FREE Journey 

And you’ll be loaded and ready for this guide to financial freedom!

Do I Need a Budget? 

Reaching financial independence requires an understanding of where your money comes in and where it is flowing to.

Having more in your bank account at the end of the month gives the option of investing more and therefore reaching FI faster.

When starting out on a journey towards financial independence it makes great sense to follow a budget and have a guide to financial freedom.

Getting into the habit of observing your bank account, taking notes on which purchases are nice to have and which ones I need to have is crucial.

Millionaires know exactly where every penny from their bank account ends up. 

They, therefore, have observed and have the knowledge of what habits to change for them to be able to invest more.

Once you’re in the habit of understanding your money flow a budget slowly becomes second nature.

After a while, you’ll become so experienced at following a budget that you will be able to follow a more flexible budget from month to month. 

Will I Have to Invest? 

Making your money work for you and having it grow by itself is one of the key elements to FI. 

Without investing you would have to accumulate a large amount of wealth to reach financial independence. 

This amount of money would at some point be enough for you to live off for the rest of your life.

But this would take a substantial amount of time.

Using the power of compound interest changes your growth from linear to exponential. 

Planting a seed will not only become one tree but exponentially grow and become a whole forest over time. 

This significantly decreases the time needed to reach FI.

So, yes, you will have to invest in some sort of way to be able to accelerate your journey towards FI. 

And it’s therefore great that you are reading a guide to financial freedom.
That’s the perfect beginning! 

The power of compound interest has been described by Albert Einstein as:

‘The eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” 

This has all to do with the math.

I will save the mathematical specifics for an in-depth blog post but for now, the power of compound interest is a way of making your money grow at an exponential rate instead of linear. 

When Have You Reached Financial Independence?

Reaching financial independence is achieved by having more income from your investments than the size of your yearly expenses.

You will at this point be able to maintain your chosen lifestyle without the need for income from your day to day job. 

Is this a goal you wish to achieve?

Read more on the topic ‘guide to financial freedom’: Reach independence with FIRE. You’re missing out!

Interested in learning more about Tiny House living and understanding more about the guide to financial independence? 

Take a look and join the group on Facebook for inspiration! : ‘Tiny House Europe Financially Free’ 

Thriving Willow