How to Live Financially Free

Living mortgage free is only one step to living financially free or secure.

You need to develop a strategy if you want to be financially free.

The ultimate strategy is earn more income. Sure, you can cut expenses, but, unless you’re making a lot to begin with, you still want to earn more income if you want to live a life of financial freedom.

If I could break down how to live financially free, I would break it into 6 steps:

1. Manage your expenses
2. Manage your income
3. Compare the above 2 and analyze
4. Create a target retirement income
5. Calculate how to get to your retirement income
6. Implement

Managing Your Expenses

The first step to managing expenses is to track your expenses over time. Use LibreOffice and create an expense breakdown over a certain period. One month is often used.

When you track expenses, you can see where and how you are spending your money.

That’s the first step in figuring out where your money goes and how to better manage it.

Don’t include savings and anything where you set money aside on a monthly basis for investment purposes.

Managing Your Income

The next step is to figure out all your income.

It should be your gross income, less taxes, unless you want to put taxes in your expenses above.

Compare & Analyze Your Income vs Expenses

Now, subtract your expenses from your income.

If your result is positive, you’re saving and creating wealth. If your result is negative, you’re losing wealth.

Create a Target Retirement Income

There are many ways to earn more income: Get a raise, promotion, new job, start a business, affiliate marketing, stock trading and so much more.

Starting a business has so many paths such as franchise, retail store, dropshipping, blogging, YouTube, Twitch, eBay, Amazon, Shopify, Etsy, and so many others.

You may have people tell you that one is better than the other. The fact is, there are very successful people in any of those spaces.

So, I think the key is to find what you love to do AND what you are actually good at.

My strategy is a combination of stock trading and investing. The difference is more or less the frequency you buy stocks. Stock trading implies frequent trading and investing is still stock trading, but, holding on to the stocks for the long term.

Until the pandemic, I mainly did investing, I buy dividend paying stocks that gave me an income in the form of dividends on a regular basis.

Now, before I talk about stocks, I need to post a disclaimer that I’m not a financial professional and I am NOT allowed to recommend investments. This article is only for educational purposes. You need to consult with a qualified investment professional when purchasing stocks and other investments.

For me, after the March 2020 crash that happened, stocks were a good buy.

When you think about it to earn about $1,000 a month in dividends, you can find an investment that pays a high dividend and invest the right amount.

So, for example, I bought Power Corp (symbol: POW on the TSX) when it was yielding about 8%. If you invested $150,000 in there when it was yielding 8%, you would get $12000 / year. And that would cover $1,000 / month of your expenses. That’s almost 1/3 of your expenses. (See my expense breakdown in my blog article: Is Living Mortgage Free, Financial Freedom?)

If you could invest $450,000 into high yielding stocks or ETFs, you’re practically living financially free.

You really need a bit more because finding a safe, 8% dividend yielding stocks is a bit difficult. But, still, the key is to find safe investments with a high yield.

Buying during a market crash is one way I have done that.

During a stock market crash, stocks can “go on sale” and they end up with a really high dividend yield. That’s the time to buy to help pay off your expenses.

For example, if you were able to buy a portfolio of stocks yielding 6%, you would need about $630,000 to invest to cover $3,150 in month expenses.

But, if you could buy a portfolio of stocks yielding 8%, you only need about $472,000.

One way to get a portfolio of high quality stocks at 8% is during a stock market crash.

Now, stocks indices have recovered their losses and moved on to new highs. This is more than what I expected and pretty much what most “experts” expected. And it’s because governments around the world have bought into the bond market, stock market, gold market, and just recently the bitcoin market. They are artifically propping up the markets to prevent a market collapse. This in itself is another article to discuss, but, I’ll leave it at that.

Although stock indices are higher than they have ever been, many stocks are still cheaper than what they used to be. That’s usually not good.

You can still get quality stocks at 4 to 6%, right now, but, the market looks very risky.

As I write this, the economy is starting to recover from the worst it’s ever been, yet stocks are at their highest.

Let me know your strategy is for living financially free.

If you want to see charts of stocks where I think there might be long or short term opportunities, check out my Trading Charts section of my blog.

>>>NOTE: I cannot recommend investments. This is for informational purposes only. Do not take anything in here as advice. You can lose all your money. You should only take investment advice from qualified individuals.<<<