Ownership and Its Role in Financial Freedom

Posted by CapWay in MindsetNovember 18, 2019(Last Updated November 22, 2022)4 min read
Key Takeaways
  • The ultimate goal is to take ownership of property and become financially independent. 
  • Financial independence calls for healthy money habits involving your spending, saving, investing goals. 
  • When you are saving and investing, you are creating a form of ownership for yourself.
Are you ready to make some real money moves?

"Own your stuff, own your business, own your way.”

- Tyler Perry

(2019 BET Awards)

 

The purpose of ownership is to provide the owner with having the possibility of becoming financially independent and free. By reaching your financial goals, you have the ability to achieve financial freedom. 

 

MarketWatch conducted a survey to assess the financial situation of everyday Americans. Once the study was completed, it was determined that more than half, or 56% of Americans, are living paycheck-to-paycheck.

 

Though some people live paycheck-to-paycheck due to reasons beyond their control, others live paycheck to paycheck due to their poor spending habits. When a person has poor spending habits, it can become difficult to get out of debt and build wealth. When these monthly expenses exceed their monthly income, they become involved in a vicious cycle that can be very difficult to get out of. 

 

Recommended Read: If you are on the path to financial freedom learn about these four types of assets here. 

 

Furthermore, the survey displays how many people struggle with becoming an owner of a financial asset to become financially free. Thus, it is vital to determine your current level of wealth and how you can take it to the next level to become financially independent. 

 

How to Determine Your Networth

 

Before deciding what next steps to take to help you grow your wealth, it is essential to determine your current level of wealth (net worth).

 

It is crucial to determine whether you are currently in debt, living paycheck to paycheck, or have a decent amount of wealth to your name. Regardless of your current level of wealth, there are steps you can take to help you achieve financial independence in the future. 

 

How to Grow Your Wealth

 

To grow your wealth, three main things need to be done: saving, investing, and spending money when necessary. It becomes increasingly difficult to build your wealth when unnecessary money is spent.  

 

Setting up an Emergency Fund Account

The first and most important thing to do when you get a paycheck is to put a portion of it aside in an emergency fund. The emergency fund is a savings account that plans for unexpected expenses. 

 

There will always be obstacles thrown in a person’s life, and it is vital to have the financial capabilities to deal with them when they come. Therefore, the amount of money in this account should be the equivalent of three to six months’ worth of expenses. 

 

Image Credit: Natalliaskn / Shutterstock.com

 

Open an IRA Account

To increase your chances of living comfortably and reduce your chances of working over the age of 65, put money aside now for when you do decide to retire. There are many different IRA accounts, all with various benefits tailored to what type of retirement account you wish to possess. 

 

Invest in the Stock Market

Over the past year, the inflation rate reached its highest since 1990. The increased inflation rate displayed the message that the money saved in a bank account over a prolonged period will not have the same purchasing power as today. 

 

Thus, it is essential to invest any disposable income not being used in the stock market. On average, the stock market provides a 10% return on investments. With consistent investments and the power of compounding interest, your money grows in value exponentially. 

 

Once you retire, the investment money, along with the sum of funds set aside in the IRA account, can be used as income. If you wish to invest in the stock market, advise a financial advisor to determine what types of investments would be best for you.

 

Make a List of All Expenses

Most of the time, small purchases over a short period can make it difficult to build wealth and leave a person in a difficult position financially. Therefore, whenever you make a purchase, regardless of its use, record it, and determine which items are wants and needs at the end of the month. Then, by differentiating your monthly expenses and removing unnecessary costs, you can use the money saved and put it towards your financial freedom goals. 

 

Using Debt

When you take out debt, it does not mean that you are not moving towards ownership. On the contrary, a healthy amount of debt can sometimes be a route for building wealth in the future. 

 

For example, you may need to take out a reasonable amount of student loans to further your education so that you can make a high enough income to build your savings over time. Or, many people take out a mortgage loan to buy a home that will increase in value over time and add to their wealth. 

 

Image Credit: Gearstd / Shutterstock.com

 

However, it is essential to note that you should only take on debt if you have the financial means. Unfortunately, some people become stuck in the paycheck to paycheck cycle as they take on too much debt and cannot pay back the high-interest rates. Instead, they must pay the interest and principal amounts in installments, hurting their credit score and making it more challenging to save money. 

 

Recommended Read: Tips on Improving Your Credit Score

 

The ultimate goal is to become debt-free and have one, if not many, real estate investments. However, as these investments require a large sum of money as a down payment, it will take years to accumulate this level of funds. Thus, using the methods listed above, growing your wealth will become more manageable, and ownership of property will become an achievable goal. 

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