What if there is an easy way to achieve financial freedom and all your other financial goals
in a predictable way?
Today I'm going to show you the number 1 method to achieve your financial goals whether it's
financial freedom, retire earlier or something completely different and to be honest....
if you don’t do this, it will be almost impossible to achieve your vision in the future
and you will most likely still be exactly where you are today 5 years from now.
And in this video I'm going to show you exactly why this method works, how it works step by
step and how we do this so that you can use this exactly for you in the future to achieve
your financial goals and freedom in a predictable way.
So what is the number 1 method I talked about in the beginning to achieve financial freedom
or all other financial goals you might have?
It's about tracking your finances.
Your income, expenses, investments and most importantly your net worth.
Look at that!
I did a survey with a community post and that's exactly what came out.
Of course, it also says that many see the investment as a hurdle but to be honest, to
even think about investing, the foundation should stand!
Why is it the number 1 method?
Let me ask you a question…
How are you going to achieve your financial goals if you don't have a plan and track it
measurably?
When do you want to know when you have reached your financial goals?
And if we're being honest.... are you even taking them seriously enough if you don't
have a clear path and actually stick
to it?
I don't think so... and you've certainly heard it enough "focus on increasing your net worth",
"track your spending", "make a budget", "net worth is the best way to measure your wealth",
but most leave one thing completely out....
"why you do it".
They just keep telling you that it's a good habit and all rich people do it, but what
purpose it exactly serves for you they leave completely out.
But I can tell you one thing, if you know what you want to achieve, be it financial
freedom, retiring earlier or even just having your financial status in mind, if you use
this method to track your finances, you will 100% achieve your goal!
But how exactly do we track our finances so that we can plan for our financial goals,
preferably without much effort, and how can you make that happen for you?
Before we go into detail about our method, how we track our finances and how you can
use it for yourself, let's briefly explain what exactly we want to measure and what the
numbers actually mean and why they are important.
The first thing we want to track are our monthly expenses and income so our monthly cash flow.
Many people know it as a budget.
Expenses include all kinds of monthly expenses such as rent, internet, food and drink, clothing
and so on and income includes your monthly income, dividends and other sources of income
that you have.
Being in control of your monthly cash flow is the first step towards your financial success
and goals.
It is also the place where we plan our financial goals, meaning if you want to create an emergency
fund of $5000, for example, this is the place where you can set your monthly savings rate
to achieve this.
On the other hand, this is also the place to optimize your spending, for example, if
you notice that you are spending too much in certain areas and want to reduce there.
The next thing we want to track are our investments.
Why?
Our investments are the ones that allow us to either retire earlier, achieve financial
freedom or just have enough money for retirement.
So they are very important for us and we always want to track how much money we currently
have invested to reach our goal that we have set before.
In addition, investments make up a large part of our assets, which are part of our net worth,
where we are already at the next thing we want to track.
What exactly is our net worth and why does it matter so much?
Our net worth is our assets such as our cash balance, investments and savings minus our
liabilities such as mortgage, debt and student loans.
So in summary it is the sum of what you own minus your liabilities.
It is a simple way to measure your financial situation and if you do it over a longer period
of time, an indicator if you are going in the right direction with your finances.
So this is exactly what we need to track on our way to financial freedom and other financial
goals.
But how do you actually achieve financial freedom and other financial goals by tracking
your finances?
I'll show you step by step and then I'll show you the tool we use with which you can track
everything in one place.
For example, to achieve financial freedom and an early retirement, the FIRE principle,
which stands for "Financial Independence and Retire Early", is suitable.
retire in their thirties or forties.
But, of course, this is a bit extreme and for everyone financial freedom means something
completely different.
For some it means being able to reduce their working hours and for others it means being
able to lie on the beach all day.
But both can't get around one thing and that is to plan their financial freedom and then
to pursue it in a measurable way.
You need to know exactly how much money you need to have saved and invested and also know
exactly how much money you need to save and invest each month to reach exactly your goal.
To do this, of course, you need to determine how much money you have available each month,
what your expenses are, and whether or not you might need to cut your expenses somewhere
in order to reach your goal.
So how do you go about it?
The first step is actually the most important step and that is to define for you exactly
what, for example, financial freedom means to you and what your goals are in general.
What does financial freedom mean to you?
Is it lying on the beach drinking cocktails, traveling the world or maybe just reducing
your working hours?
Feel free to tell us what it means to you in the comments.
When do you want to achieve it and how much do you need?
There is no "magic" number that fits everyone.
This is really about setting a target that you are running towards.
Now you have your target, your finish line, but how do you reach it?
That's exactly what you need to find out now.
Create a plan that will get you to your “magic number” in your stated time.
For example, you want to get your investment portfolio to $30,000 in the next 5 years.
Now, of course, you have to figure out how you want to invest that money, because different
investment strategies require different approaches.
Let's say you decided to invest in 3 ETF's monthly, then your plan should be: "I invest
$500 every month".
Of course there is a return that you can add to that, but I use the return as a "bonus
payment" rather than including it in my calculation to reach my goal.
After you've set your goals and developed a plan for them, the next step is to look
at your current situation.
How much do you currently spend per month?
How much do you take in per month?
What is your current net worth with your assets and your liabilities?
How much debt do you have left?
This is really about putting the current status clearly on paper.
You may also discover "holes" in your financial situation, such as a lack of insurance or
that you have no emergency fund.
After you have set your goal and also planned the action with which you want to achieve
your goal, it is a matter of planning it into your budget so it is in your cash flow.
For example, you want to retire really early and you want to do the FIRE movement.
You have defined your age, the amount you need and also the time when it should be achieved.
Then you planned in your "Action" that you want to save 60% of your income and save 30%
of it and invest the other 30% every month.
This is exactly what you plan in your budget on a monthly basis.
After you've done the whole process, developed your goal and plan and even tried to budget
for it and looked closely at your current situation, you may find that your plan doesn't
work out and that's perfectly okay and also good that it happens.
Because now we can adjust your finances so that the plan still works out or we realize
that other things are more important and you need to look at your finances more closely.
Can it be that you first have to eliminate your debts?
Are you living above, within or below your means?
Do you have an emergency fund?
Are there expenses you can reduce or eliminate?
These are just a few examples that you might notice now and can work on.
The important thing now is to adapt your plan to your current situation.
Step 5 is relatively simple, after you have adjusted your plan it is now just a matter
of executing your plan month by month and also continuously tracking your finances on
a monthly basis.
Especially as I mentioned earlier your cash flow and net worth, because it is the sum
with which you can determine relatively quickly whether you are on the right track or not.
And what your financial situation currently looks like.
Now that the fundamentals are in place and you're tracking your finances regularly and
you eliminate the first hurdles and move further towards your goals, you'll start to notice
areas that you can optimize, such as areas where you can cut your expenses or compare
which investment strategy will give you the most return.
Now it's time to pick up where you left off and double down on what's working and moving
you forward, and eliminate what's holding you back.
Always ask yourself "what's going well?", "what's going poorly?" and "what can I improve
that will get me to my goal faster or easier?"
After you have overcome the first hurdles and reached the intermediate goals, it is
about reaching your real goal and for this the process remains the same.
But how can you create a plan for yourself smart and without much effort?
Remember this!For this we have created our own tracking sheet.
Our "All-In-One Personal Finance Tracking Sheet".
With this we track our finances and plan our financial goals.
Here we track our expenses, income, our cash flow, our net worth and also our entire investment
portfolio, so we have all the important financial data directly at a glance.
You can find this below in the video description to download.
Once you have clicked on the link, you just need to enter your email and we will send
you the link to the Google Sheet.
Make a copy of it and track your finances as well, to achieve your financial goals whether
it is financial freedom or to retire earlier!
And if you want to increase your net worth now, you need to avoid these budgeting mistakes!
If you enjoyed the video and now want to know more about how you can improve your finances
check out the video description.
There you will find more videos and resources to help you.
And remember to hit the like button and subscribe to the channel if you are new here.
We hope to see you in the next video.