Your path to long-term financial freedom

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Your path to long-term financial freedom

Almost everyone wants financial freedom, but few people actually achieve this goal. No wonder, because it sounds almost too good to be true. However, with a smart approach and the right mindset, financial freedom doesn't have to remain an unattainable pipe dream.

In the following article, you will learn what exactly is meant by financial freedom and what ways there are to achieve it in the long run.

Man at liberty enjoys sunrise

What is financial freedom?

Many people confuse financial freedom with great wealth. This may or may not be true. Financial freedom simply means that you are not financially dependent on anyone - not your spouse, not your employer and not the state. You have enough liquid assets to finance your living without outside help. How much money you need is up to you.

Financial freedom makes you more flexible in your life choices. The Feeling of freedom usually comes when unforeseen events no longer throw you off track financially. For example, you are able to bridge the loss of your job.

There are two different ways to achieve financial freedom:

  • One, you make more than you can ever spend.
  • 2. you build financial reserves by saving wisely.

The first variant is rather unlikely, though not impossible. This is clear from numerous prominent examples. However, it is wiser to concentrate on saving.

Many people tend to spend more as their income increases. In most cases, this happens almost automatically. Of course, it is not possible to build up reserves in this way. It is therefore advisable to set up a savings plan and stick to it. The 50-30-20 rule is a good example.

50 % of your income is used for your basic expenses (rent, food, car), 30 % is used to meet personal Needs (hobbies, travel) and 20 % you save.

The different stages on the way to financial freedom

The path to financial freedom is a long process with several steps. You have to go through the following seven levels to reach your goal.

1. you are completely dependent

In childhood and adolescence, you do not yet have the opportunity to earn your own money - apart from student jobs. For this reason, you are dependent on the financial support of your parents.

2. you experience your first independence

You have started an apprenticeship and are now receiving your first salary. For the first time, you have a "larger" sum at your free disposal. At the beginning of your professional life, however, the income of most people is only sufficient to cover the basic costs. At this stage you are dependent on your employer. If your apprenticeship salary is very low, your parents might have to support you additionally.

Maybe you are studying and finance your studies through part-time jobs and BAföG. In this case, there is a (temporary) dependence on the state.

3. Financial independence

You've had both feet on the ground in your professional life for some time now. Your income no longer only covers your basic costs, you can now also treat yourself to small or larger extras. These can be cost-intensive purchases or an annual holiday trip. Beware: Many employees remain at this comfortable level until they retire. If you dream of financial freedom, you need to move on.

4. provision (financial security)

At this stage you have become aware of the importance of building up financial reserves. Unforeseen expenses or the loss of a job can now be bridged in the short term by savings, without having to change your standard of living.

5. capital formation

You intensively deal with how to best deal with your finances. The topics of investment and asset accumulation now play an important role. You remain employed by your employer, but in the background your private assets are growing. This should enable you to achieve financial freedom in the near future.

6. short-term financial freedom

Your assets have grown so much that you could easily go half a year without income. This makes you a bit more independent from your employer, even if you can't completely give up dependent employment yet. Should you, however, in your present occupation unhappy you have the freedom to quit in order to relax and look for something new.

To achieve complete financial freedom, you must not neglect your built up chapter now. Inform yourself about the possibility of high-yield forms of investment. This can be, for example, real estate or stocks.

7. complete financial freedom

At this stage, you are able to generate income from your existing assets (rental income, returns). If this income is high enough, you are no longer dependent on dependent employment in any way. If you like your job, you can continue to do it, but you don't have to.

Important: Remember that as a high earner you will also have to pay higher taxes. Be sure to set aside reserves for this as well. The best thing to do is to consult a tax advisor.

Difference financial security vs. financial freedom

Based on the levels just presented, it is easy to deduce: Financial security and financial freedom are not the same thing. Financial security is a preliminary stage on the way to complete independence. It forms the basis, so to speak. If you are financially secure, you have enough saved to get you through times of crisis. However, you still need to look for a salaried job.

If, on the other hand, you are financially free, you can manage without an employer and the state in the long term. You earn your income from your assets.

How do I achieve financial freedom? What do I have to do for it?

Financial freedom means something different to each person. It is hard to define in fixed amounts. How much money you need to feel free is an individual question. The answer depends not least on your desired standard of living: Do you want to live simply or luxuriously? Do you live in an area with high or low living costs?

However, the concept is always the same, regardless of your personal requirements: in order not to be financially dependent on third parties, you must develop your own sources of income.

Define your Life goals specifically: What do you want to achieve with your financial freedom? Some examples would be:

  • retire early
  • tour the world
  • live independently
  • turn your hobby into a profession
  • keep your children safe
  • live in your own property

The three pillars of financial freedom

So you see that financial freedom is not the actual goal, but only paves the way to your life goal. It's important that you set realistic goals that you can achieve with concrete planning. It's not about becoming filthy rich, it's about fulfilling your personal dreams.

Financial freedom is based on the following three pillars:

  • 1. earn
  • 2. saving
  • 3. invest

In order to even begin the path to financial freedom, you need to earn money in a self-explanatory way. Optimally, more than before. You can achieve an increase in income through promotion, job change, side job or through passive income.

Save at least 20 % of your total income. Keyword: 50-30-20 rule. On a low income, 20 % can be a lot. Therefore, think about how you can reduce unnecessary expenses.

Investments are the most effective way to increase capital. However, investing always involves a certain amount of risk. Therefore, inform yourself thoroughly before you invest. As a general rule, the higher the risk, the greater the potential gain.

How can I implement the first steps directly and easily?

To start on your path to financial freedom, the first step is to clearly define your starting position and your goal. Where are you now? Where do you want to go? What does financial freedom mean to you personally (in numbers)? How much money do you need to cover your monthly expenses? Which unnecessary expenses can you avoid (cancel unused subscriptions etc.)?

Tip: Start with the Keeping a budget book.

Once you know your parameters, you need to find ways to increase your income. Maybe a raise or promotion is long overdue? Talk to your manager about these options. If that's not an option, consider working a part-time job. Granted, this will mean less free time at first. But you should think in the long term.

In addition, look into savings options and determine your monthly savings rate. If you're undisciplined, choose a savings option where you can't access the money for a while. This reduces the risk that you will spend the money you have saved on unnecessary things.

Business woman does her budgeting

How can I calculate financial freedom?

The best way to determine the path to financial freedom is to use an online calculator. In this way, you can find out how much capital you need to have in order to reach a desired monthly net amount at a certain point in time. Any capital you already have is taken into account. You can therefore calculate how much capital you still lack and how high your monthly savings rate should be.

To do this, you must state your current age and determine the age at which you would like to have achieved absolute financial freedom. Example: You are 25 today and would like to be able to live exclusively from your investment income by the time you are 45 at the latest. In order to obtain the most accurate result of the calculation, the expected monthly return and the tax rate must be taken into account.

Why don't you play with the numbers a little bit? What are the options? How long would it take you to increase your income? What would be the impact of financial constraints?

What impact do beliefs have on financial freedom?

Beliefs affect everyone's life in both positive and negative ways. Most beliefs are so deeply ingrained that your thoughts and actions are completely unconsciously controlled by them. If you are convinced deep down that you won't achieve financial freedom anyway, then this will most likely prove to be true.

It starts with the little things: Let's say you're convinced that saving money is hard. Then it will probably be hard for you, too. Or you believe you're always unlucky anyway. These or similar beliefs often turn out to be a self-fulfilling prophecy, because you unconsciously align your actions according to your inner (negative) beliefs.

The good news is that it is possible to break free of negative beliefs that are hindering your path. Bestselling author Bodo Schäfer has done a lot of research on the topic and has written a helpful guidebook called "The Road to Financial Freedom." The book is available free of charge.

Keep your pecker up!

A good way to combat negative beliefs is to study the biographies of successful people. If person X or Y has achieved the seemingly impossible, you can too.

When people try to convince you that you will never make it to financial freedom, differentiate who is talking to you. Are they trusted people who are worried? Then convince them otherwise. Are they despondent envious people who don't want you to succeed? Then ignore them.

How to break free from negative beliefs

In our nine-month Greator coach training we place great emphasis on your personal development. The questioning of beliefs plays a big role in this. Where do they come from? Do the beliefs really make sense? In order to free yourself from obstructive beliefs, you must first find out the causes. Often these lie in childhood.

In the first part of the training, the three-month Greator Coaching Practitioner, you deal with your own issues. You learn to deal with your emotions in a productive way and to work with your inner child. You apply all the tools to yourself that you will later work with as a trained coach. You learn, negative beliefs in a positive way.

In the second part of the training, the six-month Greator Coach, you will dive deeper into the subject matter of coaching and learn the method of the horizontal eight know. Your personal development will continue to play an important role. Speaking of financial freedom: As an established coach, you have the best conditions to maximize your income and save money in a targeted manner.

If you want to know more about the training, then take a look at here over.


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Reviewed by Dr. med. Stefan Frädrich

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