Sunday, 19 January 2014
Four steps to financial freedom.
The first step is to gain control of our own mind. This means that we should buy and do things that are useful to us and that progress our plans.
The poor are very poor at financial decision making as they often have little concept of the future. This manifests itself in unwise decisions such as buying lottery tickets or fast food. If fact it is very difficult to see far into the future when you have creditors breathing down your neck. In situations such as this all we all seek relief- just a moment of not feeling poor. It is this that results in the short term focus and not some moral deficiency. Having been desperately poor myself I am inclined to give poor people the benefit of the doubt and blame them less for their short term thinking.
I have done quite a bit of blogging about the evil tricks of the advertisers. At the time I did not even know why I had become so obsessed by the topic! In reality it was simply a reflection of my own desire to become a more rational in my choices. Fortunately I need not have bothered as all impulse purchases subsided once I had £3000 in the bank.
The second step is to gain control of our budget. We should examine each and every purchase we make and consider how it benefits us. It is quite possible for a working family to save £400 a month in this way.
One example. It is possible to save approximately 40% of ones food shopping bill by switching to Aldi or Lidl. In addition it is possible to reduce food waste by planning ones meals. It is also possible to make better choices by using a shopping list. Once all of these factors are calculated the savings are nearer 70% than 40%.
The third step is to develop a positive cash flow. This will occur naturally once the first two steps are completed. This will be your investment fund for the final step which is wealth building. I am talking here about share purchases, real estate and other income producing assets.