FOUR STEPS. HOW TO ACHIEVE FINANCIAL FREEDOM WITH LIMITED INCOME?

The very concept of "money" implies its constant scarcity. Unfortunately, this mindset comes from the subconscious and is common not only among people with limited income but even among multimillionaires.

The more money you have, the more expensive your "wants" becomeand the greater the gap between "what is" and "what you wish for". It's unlikely, that a moment will come when there will be "enough money" — in this sense, you shouldn't expect equilibrium or a perfect balance because it simply doesn’t exist.

At the same time it is possible to reduce the level of anxiety, associated with money and its lack. For those, whobarely make ends meet or struggle to get out of debt, achieving a stable financial level and meeting basic needs is possible. How can it be done? Here are a few recommendations.

The first step: take control of your monthly expenses

The first thing you need to do is to understand how much you are spending. To achieve this, take a notebook or install an app on your phone and start recording absolutely all your expenses. Everything counts: from big purchases to small items like ice cream or coffee. Even if it seems like a tram ticket can be skipped, it's better to record such things as well. It’s important to do this every day without skipping, at least for a month. And here’s a guarantee: when you total up your expenses, you’ll be very surprised — many people at this stage realize, that theyspend more than they earn.

For a complete picture it’s better to track your expenses for an entire year. After all, we don’t just have daily expenses — groceries, coffee, gym — but also seasonal or occasional ones: changing car tires, taking a vacation, buying furniture. All these expenses matter and to understand your "real outflow," you need to consider them as well. After a year of trackingyou can divide the total amount by 12 to get your true average monthly expenses.

It’s important to emphasize: tracking expenses isn’t about saving . It’s about understanding

If, for example, you spend 100 units per month, it’s obvious, that you need to earn at least a little more than that amount.

A lack of understanding of one’s expenses is not unique for people with limited income — it’s common among millionaires too. Let me give an example.Once I had a conversation with a business acquaintance, a very wealthy person. Before the warwe both traveled a lotand in this conversation, we were sharing impressions from our recent trips. He admitted, that he loved vacations in the Maldives and skiing in Switzerland every winter.

The conversation gradually shifted to business — he asked me about my approaches to managing money. I explained, that my principle of controlling financial results is based on dividends: I try to organize my business to generate stable income.

In response he shared, that he and his business partner take only a small amount from the business to avoid hindering its growth. When I asked him exactly how much he takes, the entrepreneur said, that ten thousand dollars a month is enough for him.

At this point I couldn’t hold back. Just moments earlier, he was talking about skiing and the Maldives, where a single trip to the Maldives costs at least twenty thousand dollars. Initially, he reacted with disbelief, but then admitted, that he really didn’t know how much he was spending — and therefore, how much he was actually “taking out” of his business.

This situation isn’t uncommon — it’s widespread among entrepreneurs. Many think they live on modest amounts but a detailed analysis often reveals, that their real expenses are significantly higher. I’ve been through this too. When I decided to take control of my expenses, I meticulously tracked every single expense for seven years. Now it’s become a habit — it’s very disciplining.

Many people give up on expense tracking quickly because of the guilt they feel at the end of the month when they total everything up. Usually it turns out they spent much more than they had planned. However, the purpose of tracking expenses isn’t to create guilt but to reveal the full picture and gradually change it over time.

The second step towards financial freedom — making a financial safety cushion

There’s a simple rule — I didn’t invent it, but it truly works: save 10% of your income. This habit will help you gradually build what’s called a financial safety cushion. A cushion is an amount of money, that covers your monthly expenses for six months. To calculate it, take your “outflow” for a month and multiply it by six. That’s the amount you need to save and keep in quick access.

Where to keep this money is up to you. The key is that it must be easily accessible in case of necessity. A financial cushion is your safety net. If you lose your income, it will allow you to live stress-free for half a year and give you time to find a new source of earnings.

The third step — creating a personal financial plan

This is a document, that details your goals and the key steps for achieving them. Such goals might include educating your children, buying property or a car, traveling and much more — in short, anything that requires money.

A financial plan makes goals tangible and helps to structure the path to achieve them. For example, if you want to buy a house someday — that’s no more than a dream. Keep dreaming! But if you want to buy a house worth half a million dollars in ten years, that’s already part of a financial plan. Simply put, it’s a working document that shows you exactly how much you need to earn and spend to achieve your goal within a specific timeframe.

For many people having a clear plan becomes an effective tool to stay focused on their goals.

The fourth step — start investing

Once your financial cushion is established, you can begin investing gradually. Where and how to invest is a separate topic, that requires specialized knowledge. There are different methods and types of investments and it’s essential to choose those , that suit you best. The key is to ensure your money starts working for you and generating additional passive income. Investments are an excellent complement to your financial plan.

Wouldn’t it be wonderful if we had been taught to manage money properly from childhood? Just imagine how many problems in adult life could have been avoided with simple skills: tracking expenses, making savings and creating clear plans. Many of us had to learn these lessons getting bruised. However, we can correct our parents’ gaps by teaching our children the basics of financial literacy on time. The earlier, the better.

Today it’s easy to open a bank account or a card for a child, allowing them to learn gradually how to manage money under parental supervision.

The key is to approach this process without pressure. It shouldn’t feel like a handout or involve strict rules. Instead, present it as a game or a shared project. This approach fosters trust and makes the child feel mature and engaged.

Parents can transfer a small monthly allowance on the child’s card, giving them the freedom to make decisions: what to buy, where to save, and what to set aside for the future. For some kids it will be exciting while others may show less interest. Regardless, you’re initiating the process of teaching and preparing them for adult life.

Ideally, this should begin between the ages of 12 and 14, though it can be started earlier. By the time the child turns 18, they will already have a basic level of financial literacy. If it is done consistently, there’s a good chance that by adulthood, they will not only understand the value of money and expenses but also have a grasp of investments. Many teenagers start small investment projects at the age of 16 or 17 — kids pick up these processes faster than we expect.

To conclude, I recommend the excellent book “The Road to Financial Freedom” by Bodo Schafer. It’s a simple and easy-to-understand guide, that can serve as a starting point for anyone just beginning their journey to financial literacy.