How to set goals and figure out your desired lifestyle, Financial security, independence, and freedom.

What do you want from life?

How do you want to live it?

What are your purpose and basic philosophy?

What is your desired lifestyle?

What are your goals?

What car do you want to drive?

What is your dream house?

How many hours weekly you want to work?

What work, role, industry, and hobby give you the most satisfaction?

Write down answers to these questions in a notebook. Take at most 2 minutes for every question. But keep in mind one thing, no goal is too big. If it is a big goal, it may take some more time and commitment, but you will ultimately achieve it. Also, answers should be based on your own desires.  To know your desires, ask questions like these: What I really want? What will give me true satisfaction? Is it a real desire or marketing influence? Does it have real value to me and my family or Is it just to show off (or based on jealousy). Write down now; taking immediate actions on your projects and goals create momentum. So do not postpone this exercise, write it down now.

Now, I want you to think about all the things about money, you learned in childhood. What your parents, teachers, friends and media told you about money, investors, and wealthy people. You can also write down all the memories in a journal. This simple process will make you aware of your belief systems and thinking process. Be aware of the bad childhood programming that may be creating a false scarcity in your life and preventing you from enjoying riches. This bad programming may be caused by what you heard, saw, thought, felt, experienced, or did in past. Once you are aware of these bad influences, you can eliminate them or at least reduce their power over you. After all this, you can use advice and techniques described in wealth mindset post to reprogram your mind to attract and sustain riches.

                Now it is time to break your journey towards financial freedom into 3 stages: Secure Independent, and Freedom. And In upcoming paragraphs, you will know, what each stage means to you? And how much money, investments you need.

Financially Secure:

To know your target numbers for this stage, you must first calculate your monthly expenses. You can start by adding all monthly bills and payments on a sheet of paper. After that divide all yearly expenses by 12 and add the resultant numbers to your monthly expenses total. If you have done your expenses calculations right, the sum total of your monthly expenses and savings should be approximately equal to your monthly income. If sum total is greater than your monthly income, you are most probably piling up debt, and it is very bad for your financial health. You should first identify and get rid of bad debts. For this, you should curtail unnecessary expenses, and pay the high interest (Credit cards) bad debt first.

If the sum total of expenses and savings is less than your monthly income, you have not added all expenses. Go through your expenses again, for reference I am giving a chart of general expenses. You can use it to find out, your monthly expenses.

*In rows after Miscellaneous, you can write expenses not mentioned in the chart.

Now, you have to fulfill following conditions to qualify as a financially secure person-

You have no bad debt i.e. Debt to buy luxury or depreciating items.  (In most cases, credit card and auto loans)

You should have emergency liquid money = 6* Total Monthly Expenses.  (Cash or saving accounts)

You have investments = 8 * Total Yearly Expenses. (Stocks, businesses, patents, real estates you own)

You have basic insurances. (Accidental, auto and medical)

You are investing in a retirement plan.

So calculate these numbers: emergency liquid money, investments, basic insurances, and a retirement plan etc. based on your monthly expenses and other factors. Now, convert these numbers into goal statements, and write these goal statements in a diary. These are your personal goals for financial security.

Financially Independent:

Now, you have to fulfill following conditions to qualify as a financially independent person-

You have no bad debt i.e. Debt to buy luxury or depreciating items, and mortgage on your house (Loans to invest in businesses or rental property is okay if you have calculated the risks and have covered the downside.)

You should have emergency liquid money = 12* Total Monthly Expenses.  (Cash or saving accounts)

You have investments = 20 * Total Yearly Expenses. (Stocks, businesses, patents, real estates you own)

You have additional insurances. (LTC, Disability, and Home Insurance)

You have increased your contributions to the retirement fund so that you can live comfortably after 60-65 years of age.

You have set up a college fund for your children.

You have the monthly cash flow to cover 30% of your expenses. (From Dividends, profits, rental income, royalties etc., but not from property or stocks appreciation)

Now, convert these numbers into goal statements as you did in the previous section, and write these goal statements in a diary. These are your personal financial independence goals.

Financial Freedom:

Hardest stage to attain is financial security, but once you have attained that level; it is easy to become financial independent. But it takes a lot of work, passion, and commitment to attain financial freedom.

You have to fulfill following conditions to attain this level.

This is the stage where you can comfortably fulfill all your goals and afford your hobbies. Same goals you write down in the starting of this blog.