A 12 Step Program To Financial Freedom (Part 1)

We’ve all heard of 12-step programs and how they can turn a person’s life around. Most of these have to do with liberation from negative habits, and the one we’re going to discuss also deals with liberation….from your 9-5 job. And debt. That’s right, we’re talking about financial freedom, and how you can build passive income through real estate investments to eliminate debt and replace your regular job. Presented in a two-part format, here are the first steps of our financial freedom 12-step program:

Step 1 – Put together a good support group. Your first order of business in breaking your employment bonds is getting your family and friends on board. Every beginner investor needs a good network of supportive family members and close friends who will be there for you throughout the process. You may think you can manage everything on your own, but there will be times when you need the support of those around you.

Step 2 – Figure out your freedom number. Ask yourself what amount of money you need to earn to live comfortably. This is your freedom number. You can ballpark this at first, but you’ll need to narrow it down into something a bit more precise to truly become free. Steps 3 and 4 will help you do this.

Step 3 – Track your spending. Take a look at how much you’re spending each month. This includes everything from utility bills to dining out to prescription medications. Where is your income going each month? Once you’ve tracked about a month’s worth of spending, you’ll have a pretty good idea – and you’ll probably be surprised at how much you spend unnecessarily.

Step 4 – Reevaluate your expenses. Now it’s time to make some spending cuts. Can you cut back on dining out? Probably so. What about your monthly bills? Are there any you can reduce or even eliminate? Probably so. Decide which expenses are necessary and which aren’t, and make any adjustments needed. There will be some sacrificing here, but remember, your financial freedom is at stake. This is also a good time to see if you’re missing out on any discounts or savings with some of your suppliers. Can you get less expensive insurance through another company? Can your cell carrier or cable company reduce your bill? You may be surprised at the answers to these questions.

Step 5 – Create a budget. Once your expenses have been streamlined, you can create a livable budget for yourself. Plan for each expenditure, and remember the most important part of this – sticking with it! You’ll encounter temptations and setbacks, but stay focused and keep the final prize in mind.

Step 6 – Eliminate debt. True financial freedom can only be found when your debt balance stands at zero. The exception here is mortgage debt, which is, in our opinion, the only acceptable debt to have. All other debts should cease to exist, however, and it’s up to you to make it happen. Make a list of all your debts, and tackle them one at a time. You can sort them by balance or interest rate, focusing your efforts on either the lowest balance or the highest interest rate item before moving on to the next one. Throw all the extra money you can at that one debt, while continuing to make minimum payments on the others. Once the first debt is paid off, take that money and add it to the minimum of the next bill, until it’s paid off. Keep at it until all the debt is gone. Will this take some time? Absolutely. It took you awhile to accrue the debt, and it’s going to take you awhile to pay it off too. But with enough motivation, you’ll do exactly this.

And that, friends, is Part 1 of the 12-step plan to financial freedom. These steps set the foundation that is necessary to attain liberation. Part 2 will go into more detail about what actions to take once you have total control of your finances, including taking advantage of investment opportunities.