The following 4 points will give you an idea of how to achieve financial freedom, no matter your current circumstances.
This will allow you the possibility to choose where, when and with whom you want to work.
For as long as you live, you will always do some work or creative expression. There is no retirement.
Even spending time with your family is only for recreation. Offering them a future is hard work.
Having not to worry about money allows you to do only the things you care about; so at least, it doesn’t feel like work.
1. Live Below Your Means
So make it a point to be frugal, but not at the expense of actual living.
Save the amount that is necessary to reach your financial goals and with the rest live, party, travel. Do whatever your heart desires.
Don’t make the mistake of saving for saving’s sake.
2. Start Your Own Business
The more value you create for other people, the more money you will make. Starting your own business allows you to maximize the value that you create and the number of individuals who benefit from that value.
You don’t have to learn a new skill as you are already doing it.
The problem is that you don’t have much control about this, other than making yourself more valuable. (i.e. climbing the cooperate ladder)
However, you will always be tied up with your time, and the work that you do will be defined within certain boundaries. This will actually hinder your full expression.
If you want to achieve financial freedom and don’t rely on luck or the goodwill of others, you have to start your own business. By that you can choose, which niche to go into (i.e. what fits best your inclinations) and how to spend your time.
The downside is that your are always responsible. You cannot just work nine to five and then forget about it.
So if you want to start a business, but have no idea of how to create value, let us first understand what value is.
Value means different thing to different people. It is what they need and want. It comes in physical shapes like food and iPhones, or in emotional forms, like love and entertainment. Even the far-fetched hope that one day you will win the lottery is value.
In my opinion, the best businesses are those that solve a problem for a customer. If you really can do this, you will get repeat customers and a lot of referrals.
So if you ever solved a problem in your life, you might have a business idea at your disposal. You are already an expert at it, and your solution might be helpful to a lot of other people. With the internet, you can find them all over the world.
If you have a day job, it is best to try your idea part-time and see if there is a market for it, without spending too much money.
It also allows you to test your entrepreneurial and self-organizing abilities. Can you still work on the idea, even after the first excitement has faded?
Growing a business is time-consuming, but you will build something of your own, and it is the best chance for you to achieve financial freedom.
For further information on the main skill needed to successfully start any business, I recommend you read Ready, Fire, Aim by Michael Masterson.
3. Live From Rent, Rent To Live
This method is cheaper and less stressful than the “Buy your House” approach because you are not tempted to spend so much money.
When renting your home, you only choose the size best suited for you current conditions, which results in a lower rent payment. You also put less money in appliances and furniture.
Same holds true for the apartment you rent out. You only spend that amount on refurbishment that is necessary for acquiring a tenant.
When owning your home you usually buy bigger in case of eventualities, want better and more quality furnishing and refurbishment (i.e. high-quality floor tiles, an expensive kitchen)
When renting, you are also independent of your current place. You can live anywhere you want while having your apartment in an area that has a healthy rental market. If you want to move or travel, you can do this anytime, without having to sell or to wait for the right market conditions.
In 2013, I quit my job and travelled around Australia and South-East Asia for a year while still earning a small income from my apartment.
The strategy is easy to implement, however, to make it profitable; you got to learn the fundamentals. I highly recommend the Rich Dad Advisors book series, especially The ABC of Real Estate Investing.
A real estate investment has hundreds of lever that can be adjusted and needs a lot of knowledge and work beforehand. If you set it up correctly, it will pay for more than just itself and requires only a little management on your part.
Stay away from turn-key investments. They will take longer to be profitable, and you might have to live with negative cashflow for a while.
Learning about real-estate investments is a big part of how to achieve financial freedom, and once you have the knowledge, you quickly can add more apartments.
4. Invent The Future – Patent Royalties
If you have a useful and valuable idea, and you can license it to a company that integrates it in an existing product line, you can have a truly passive income stream for up to 20 years.
Maybe you are in a place of your life, where you want the security of a day job (i.e. because of your family), or you haven’t found that exciting business idea, yet.
Why not still use the time to work on your financial freedom. Your day job pays you already to be creative and solve problems. This is especially true if you are an electrical or a mechanical engineer.
In your day to day activities, look out for simple, problem-solving ideas that you might be able to patent. Maybe you have developed a hardware circuit with a particular method of operating, or the a new version of an industrial norm comes with some requirements that you can solve creatively.
Your idea does not need to change the world; it just has to have a unique twist to it.
Next, get updated with your countries and companies rules and regulations for patents. In Germany, for example, you have to offer your invention to your employer. If it is useful to the company, he will license it from you and take care of the patent application. You will then get a license fee for every product sold with your invention.
That’s why it is best if your can integrate your idea into a new product line. But even if your job is just to maintain an established series, you might be able to improve it with your invention.
For the success of your patent, it is also important to split the profits with whoever might be necessary for its successful integration. Everybody, who stands in the way or who will eventually maintain it long into the future. You do this by putting them as inventors on the patent application.
Again there is a lot of work that goes into your invention upfront. You have to come up with the idea. It has to be technologically feasible. And you have to present the idea in the correct way.
But once it is setup, you will have a genuinely passive and fully automated income stream for up to 20 years (the duration of the patent). All the marketing, selling and customer service will be taken care off by your licensee.
This strategy on how to achieve financial freedom works best in companies that develop products for industrial applications. Other than consumer goods, those have a period of use for up to 20 years. Once established, they have a longer product lifecycle, as the B2B-focus lies on time-tested availability and not newness.
There is one alternative way on how to achieve financial freedom. By opting out of the game and living the life of a hermit, you would be entirely independent.