How Your Freedom Number Can Get You Out of Paycheck Prison
The following is adapted from Down Home Money.
Do you feel out of control with your personal finances? Even worse, are you a prisoner to your paycheck? If the daily grind is making you miserable, it’s only going to get worse.
Living paycheck to paycheck is no way to live, but the majority of Americans have trapped themselves in this vicious cycle. We all have to work to make a living, but it doesn’t have to be a life sentence with no freedom in sight.
If you’re looking for a way out and a way to get control of your money, you need to know your freedom number and how to use it. Your freedom number is the amount of money you need to earn from passive income to cover all of your monthly expenses without having to work. It’s the number that will set you free from paycheck prison. As you set out to find and use that number on your journey to financial freedom, remember the following factors along the way.
Financial Freedom is Different for Everyone
Everyone has their own freedom number, based on their necessary expenses, their lifestyle choices, and their purpose in life. Some people can get by with $2,000 a month; others need $10,000. The great news is that you get to decide while understanding that the higher your number, the longer it will take to cover it through passive income.
For some people, financial freedom is about living debt-free; it’s not about quitting their job. They love what they do and want to keep working. For others, financial freedom means not working at all. They want the freedom to sit at home, watch TV, sleep late, and eat bonbons all day. Because financial freedom is so personal, you must figure out what you want out of life.
When you know that, you can set your freedom number and start working to fund it.
Find Your Freedom Number
Now that you understand the context, your first goal is to identify your first freedom number. This number is the sum of all your current monthly expenses before you make any attempts to lower that number by paying off debt or cutting back on expenses.
This number will most likely fluctuate over time for a variety of reasons. You may pay off some loans, downsize your house, or start eating more at home. You may also decide to quit a job that you hate, experience a family illness, or welcome a new child into the world.
The good news is that you are not a tree; you are not planted. You can move your financial freedom number up and down as needed. Just keep in mind that the bigger the freedom number, the more you will need to work to build passive income streams to cover that number. You can build a passive income portfolio to throw off $3,000 worth of monthly expenses faster than you can cover $5,000 in expenses.
How badly do you want financial freedom? How badly do you want to quit that job? That’s what will determine how quickly you reach your freedom number. Your pursuit of financial freedom is largely based on your commitment to being frugal and delaying gratification.
Fund Your Freedom Number
The next question in reaching your freedom number is, how are you going to get there? You have three options: reduce spending, make more money, do both.
Cutting back on spending and paying down debt is a good start, but to have the freedom to not work, you need a passive income stream to replace your current salary. Which path you start with partly depends in large part on your current financial situation.
Do a little self-evaluation. If you have paid down debt and are saving a little each month, you’re ready to take on investments that can bring a passive income, whether that’s side hustle, real estate, starting your own business, or buying a franchise. What you decide to do will be based on your talents, interests, and funding available to pursue these opportunities.
If you are still in debt and living paycheck to paycheck, your first step is to make more money. Side hustles and small businesses are great ways to increase your earnings.
Before you start investing, you need to earn enough money to cover your expenses and have a little extra. After you’ve increased your income and have some savings, it’s time to start investing and building your passive income streams.
Set Yourself Free
No matter where you begin, you deserve a pat on the back for embarking on the journey to financial freedom. Only you can set yourself free from paycheck prison.
Once you identify your freedom number, it’s time to get serious. Use that number to frame all of the choices you make to plan and fund your future. Don’t let debt and consumerism control your life. Take back your life and start building a passive income. You got this!
For more advice on getting out of paycheck prison, you can find Down Home Money on Amazon.