Setup Financial Goals

Step#1

The first step towards financial freedom is setting up financial goals. The goals needs to be properly defined and should be realistic and big enough to persue over few years.

The most common goals are:
1. Retirement fund
2. Kids Education
3. House construction / purchase

You can have some other goals as well like purchasing a car or going for an exotic holiday etc.




Plan to achieve the goals

Step#2

Once the goals are set, plan to achieve it. The best way to achieve a financial goal is to invest.

Invest whatever you can and whenever you can.
Even if yoou have little saving, INVEST! Trust me, with time the investment will grow and very soon you will be proud of your decission.




Flow of Money

Step#3

In order too invest, you need money.
And to save money too invest, you must check the flow of money.
Money is like water, and if not checked all money flowing in will flow out.

If yoo just store the money, it will evaporate or the value will decrease over time due to infaltion.
The only solution is investment where you get good retruns and your money start growing.
If yoo just store the money, it will evaporate or the value will decrease over time due to infaltion.
The only solution is investment where you get good retruns and your money start growing.




Create a matrix to see how much you earn, how much is spent on mecessities or needs and how much is spent on want and how much is invested.
Over time, this matrix will give yoou fair idea on where you are overspending and how much more fund you can divert towards investments.




Cash Flow Quadrant

Step#4

To achieve financial freedom, it is very important to understand Cash Flow Quadrant.

And the goal should be to move to I (Investor) quadrant. Once you are in the I quadrant, you will not be required to work or give your time to someone.

Lets understand this better.

E (Employee) quadrant:
In this quadrant, the source of income is generally a job. You are an employee and you work in order to get paid.
In ths quadrant Time is Money (TIME = $$$) as you get paid for the time you give.



S (Self Employed) quadrant:
In this quadrant, the source of income is self employement. You own a business and you need to go for work in oder to run the business.
In ths quadrant also Time is Money (TIME = $$$) as you get paid for the time you give.

B (Business owner) quadrant:
In this quadrant, the source of income is Business. You own a business and you have employee who works for you. Still you need to give some time in order to run the business.
In ths quadrant TIME (People work for you) = $$$$$$) as you get paid for the time your employee gives you.

I (Investor) quadrant:
In this quadrant, the source of income is Investment. You invest in business and the business owner manages the people, business etc and you share the profit.
In ths quadrant MONEY = $$$$$$$$$$$) your money works for you.




How to manage

Manage

Here is a simple tool to help manage your finance.
It has ready made template for all the tools you require for effective personal finance management.
It is an excel sheet with built in tools. Just download it and start using.

Happy Money Making!

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About the Author

Warren Prasad

Warren is an Engineer and Program Manager by profession. Have worked closely with some of the biggest names on this planet. He is a thinker, traveller and consultant.

Know more about me!