How to Gain Your Financial Freedom

by KNS Financial on January 10, 2011


When trying to attain financial freedom, we are usually advised to closely examine our budget and find ways to cut expenses. This is great advice, considering that the average American has serious holes in their household finances. Unfortunately, most of the common advice stops right there, ignoring the option to make extra money and increase your income.

When evaluating the flow of money in a household, it’s really quite simple. You take your income and subtract out any expenses that you have, and you are left with the amount that you can save or spend. If you are left with a negative number, or if the number isn’t large enough, you really only have two options.

1. Reduce Your Expenses

Take a look at where your money is going each month and decide where you can cut back. Once you have food, shelter, and clothing covered, don’t be afraid to reduce your expenses that are just keeping you back from your goal.

However, the problem with that approach is that you can only go so far. You will ultimately come to a point where it is not possible to cut any more expenses. Once you are down to only paying for the basic necessities of life, there is little room left for cutting expenses. This is where that second option comes into play.

2. Make Extra Money 

In order to fill a gap in your finances, or even just meet your goal faster, you may have to look for ways to make extra money.

I have to admit that this is something that I rarely considered until this last year. I just kept looking for ways to squeeze a few more dollars out of my budget each month! Many people that I consult with have the same mindset. They are willing to put water in their ketchup and soap bottles (and other frugal activities) in order to save a few pennies, but are reluctant to look for ways to increase their income.

When looking for ways to make extra money, there are a few guidelines that you should keep in mind.

Make Good Use of Your Time

The easiest way to ensure that you are being efficient with your time is to assign yourself an hourly wage. It is nice to think of doing a task for $100, but if it takes you 10 hours, then you are only making $10/hr; is that acceptable for you? If not, then you need to request more money, do the job faster (without sacrificing precision), or pass on the offer.

At one time I considered delivering newspapers in the early mornings. However, after discussing the idea with several people, I realized that it wouldn’t be worth it for me. The weekly and monthly paycheck seemed really nice at first, but then I had to consider all of the hours assembling and delivering the papers, and then collecting the subscriptions from the customers. Not to mention all of the wear and tear on my car (new shocks and struts aren’t cheap) from the stop & go driving and the heavy load!

Stick With What You Know

The easiest way to bring in extra income may be to work more hours at your current job. If that isn’t an option, then look for consulting work in the same field. It should be much easier for you to convince someone of your worth, if you already have experience in that particular area.

You may also find it easier to get started with a new job (much less of a learning curve) if you stay in your current field. You also will be able to ensure that you are being paid a fair wage for your labor, since you are familiar with the industry and how much a particular job is worth.

Don’t Neglect Your Family

It can become very easy to try and work day and night in order to bring in more money. However, doing that for an extended period of time can cause a strain on your family relationships. I’ve seen a number of husbands/fathers work 80-100 hours a week trying to chase after money.

They often convince themselves that their absence from the home is the best thing for their family, because it means more money in the bank. However, no amount of money can make up for not being around.

When you are looking for ways to make extra money, be sure to avoid this trap.

Your Thoughts?

  1. Have you cut your expenses as far as you can?
  2. Have you looked for ways to bring in additional income?
  3. If so, what guidelines/rules have you followed?

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{ 9 comments… read them below or add one }

N.W. Journey January 10, 2011 at 4:22 pm

Great read! Unfortunately, one thing that I did to bring in extra money was sign up to do different surveys online and quickly realized that the amount of time I was spending on the surveys was not worth the scraps that I was bringing in. I also agree that sometimes being frugal in certain ways isn’t adding much to your bottom line.

I honestly don’t have it figured out yet (as far as guidelines/rules). I just try not to be wasteful on bigger things – for us that are expenses like cable tv, eating out and other pricey entertainment. And I am still trying to find a way to bring in income that won’t take away too much time from my family.

Anonymous January 10, 2011 at 6:23 pm

It’s very hard to figure out ways to make extra cash without sacrificing too much time from family. At some point you have to weigh the opportunity cost of sacrificed time for family and remember a proper balance is key.

Tdagen January 10, 2011 at 7:07 pm

Very good read Khaleef. Like so many others I had great difficulty balancing these two platforms- cutting expences and raising income. I found away to put in a little extra time now and earn passive income for a long time. I was never comfortable with direct selling but this one allows me to create long term passive income by helping others, giving them a unique web application that provides them away to save on what they are already purchasing. o this actually helps with both avenues that Khaleef talks about here. a great way to save http://www.clickNsaveBIG.com and a terfic way to add income with little time http://www.incomesolution.org
Thanks,
Tim

Money Smarts January 10, 2011 at 10:31 pm

I think so many people focus on the cutting expenses side of the equation, that many never even consider that they can add income to their bottom line. While it’s not for everyone, adding income can almost be crucial if you’re trying to get out of debt, save up an emergency fund or just save enough for retirement. While you do need to toe that line between giving up all your free time and still having time for family – it is possible, and it can be done! While I wasn’t able to get more income from my day job, I was able to create a significant amount of incremental income elsewhere – and it helped out immensely!

Anonymous January 12, 2011 at 6:48 pm

I think that is the realization that we came to this year. We have a ton of debt, but not many expenses. So the only way we can make a dent in our debt is to increase our income.

Debt Management January 13, 2011 at 3:02 am

This is a great point, and one that I think gets ignored all too often in the personal finance blog world. With all the time you spend cutting coupons, you might be able to build a website or some other small business that brings in thousands of dollars each month. I think the issue is that most people don’t think entrepreneurially and so they don’t imagine all the ways it’s possible to make some extra money.

Anonymous January 13, 2011 at 5:10 pm

You’re right. I think we tend to focus on being frugal in minor issues so much, that we can miss the big picture.

Anonymous January 19, 2011 at 3:19 am

That, and it takes a lot of work to make extra money.

Ashleyjezz January 27, 2011 at 7:26 am

Over 90% of the American population and the world needs to work in order to be able to afford the three basic necessities of life: Food, Shelter and Good Health. This is what keeps us all in the workforce.

http://www.articlesbase.com/wellness-articles/south-beach-java-review-its-right-time-to-get-toned-and-sexy-this-summer-4082987.html

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