How do I achieve financial freedom

Financial Freedom - How Do I Escape the Hamster Wheel?

Johanna Bandow, April 30th, 2021

Financial freedom and independence - these colorful terms mean something different for everyone. Some feel comfortable with a minimalist way of life, others need fast sports cars and pompous real estate in order to feel “financially free”. However, the basic concept of financial freedom is always the same: Everyone who strives for financial freedom must have their finances and those associated with them Take the risks into your own hands and decide how him independent of institutions, which the state and companies can build up their own sources of income.

So far, only a few private individuals have followed a strategy that slowly leads them to financial freedom. Most people spend what they deserve and thus do not create any leeway for it growing passive income streams. A decade-long modest lifestyle, which in the end may not be profitable, is also not necessarily desirable for many. But what can you do to become financially free without severely restricting consumption?

Basically there are different ways to escape the “hamster wheel” and to build up your financial freedom. Are there 3 components are decisive:

  1. It is based on making money
  2. Part of what you earn must then be saved
  3. The money saved must then be invested profitably

aim is to be able to live from passive flows of money from investments. Once you've done that, the world is open to you. For example, you can explore the world, pursue your hobbies or, of course, continue your professional activity. The latter, of course, without tormenting yourself to work, but having fun at work and the freedom to go when it no longer suits you.

You ask how that works exactly? Just read on!

1 | earn money

The escape from the “financial hamster wheel” basically begins with generating money. Active work usually plays a major role - but you have to invest time here every day and, above all, if you work as an employee, this goes hand in hand with an enormously limited room for maneuver. You also need constant sources of income, but as an employee you run the risk of being dismissed. Since employees only have limited room for maneuver, the employment relationship in particular is referred to as "unfree".

One way out of this “financial hamster wheel” is passive income. Passive income describes cash flows that are not generated from active work, but are earned independently of your own time investment. Such cash flows can be built up, for example, by publishing a book and steadily making money through sales. “Affiliate Marketing” is often mentioned in this context. You run a blog or a website, then place advertising and generate income (commission) by referring website visitors to companies. Overall, there are more and more opportunities to earn money through videos or blogs, but also as a freelancer through the Internet. The problem here is that these online jobs also require a lot of time and regularly.

Another and probably better type of passive income is that Portfolio income. A fortune can be built up through investments, for example in real estate, index funds or stocks. In the increasingly digitized world, the various financial service providers are also constantly adapting their offers for private investors. There are numerous ways to invest your money online today. Self-determined investment methods are becoming more and more popular. Investors can obtain information online and, after their own deliberation, generate different passive cash flows, i.e. positive cash flows, for example from interest.

Passive Income Opportunities:

The fact that you never have to work again because passive income replaces active work forever is unrealistic, especially at the beginning, and sounds like absurd Internet advertising - but with strategic investment and increasing investment amounts it is possible to achieve your own financial freedom through passive income. So it makes perfect sense to deal with passive sources of income, because the countless possible combinations to generate passive income offer every investor the first step towards financial freedom.

2 | save money

In the second step towards financial freedom, you have to save part of the money you have earned. To do this, it is advisable to deal with your expenses and between necessary expenses and consumer spending. Those who cut expenses can invest more in their income streams and get better results faster. You should also be clear about all of your assets. Assets are - roughly explained - all possessions that generate a positive cash flow or at least do not generate a negative cash flow.

The following questions should be asked in this context:

What assets are there? Are these assets generating positive cash flow? If so: can it be increased? What money is not firmly planned? What can I save to invest in assets? What (big) issues are you going to have in the near future? How high should my buffer for the unexpected be? Where can costs simply be saved without impairing the quality of life? ...

Saving money also means getting rid of objects that keep you stuck in the financial hamster wheel. In particular, leasing cars, home loans for owner-occupied property or other consumer transactions can massively restrict financial freedom. You should always carefully consider whether the individual benefit justifies the restrictions.

Of course, it is up to you to decide at which end you save, and it should not be overdone. Nevertheless, a phase of self-discipline and minimalism can then massively increase the quality of life through the passive flow of money gained.

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3 | invest money

After you have determined your financial possibilities and have been able to save money, it is important to invest. To do this, you should read about the Possible combinations of the various investments to inform. Interest on cash deposits or dividends that are generated through the use of money contribute significantly to financial freedom. As already shown a little earlier, there are different ways to generate passive income. Nowadays, a visit to a bank is no longer necessary. Nowadays, private investors invest in stocks, funds, ETFs or real estate projects using crowd investing via the Internet. The opportunities to make investment decisions freely and without being influenced have increased massively over the past two decades.

In addition there is less classic investment opportunities. They relate, for example, to training and further education to improve personal skills "Human Capital". Investments in these areas can be valuable for the future and make a valuable contribution to financial independence. Without financial education the path to financial freedom becomes a mistake with an uncertain outcome. On the other hand, you don't have to be a finance professional to achieve your financial goals in the long term.

Your own is also the same health a factor that is seldom considered. Mental health has been shown to influence physical health and promote effective workforce. It is therefore evident that long-term financial freedom is difficult or impossible to achieve without physical and mental health. You don't have to invest large sums of money to stay healthy. It is important to incorporate regular physical activity into your daily routine: walking or jogging in the fresh air, cycling to work or doing a round of morning yoga can help keep your body and mind busy. Nutrition also has a large share in this context. Small steps can lead to constant change. You just have to start!

With a Savings plan can be saved simply and easily. Flexibly defined savings amounts are debited from your account on a monthly basis - without any action on your part. So it is easy to discipline yourself and save money in the long term. With the savings plan on BERGFÜRST you can also save on real estate offers on BERGFÜRST.

Financial freedom - a conclusion

Overall, the first thing you should think about is what financial freedom means for your own life and how important it is to you. It is also important to yourself clear targets to set so you know where to go.

There are countless ways to gradually free yourself from the financial hamster wheel and to establish additional pillars in addition to active daily work. Good planning and realistic goals are prerequisites for one day to feel financially free and to end high-risk relationships of dependency.

Financial freedom is desirable because it is one safe and comfortable attitude to life can be won. Imagine no longer having to work for money. It is the freedom to do what you want without fear of the consequences that makes financial freedom so desirable.

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