There are many things that we have to do in order to achieve financial  freedom. In other words, there are many steps involved. Obviously some of the  steps will involve complex and complicated strategies. These will require much  time, energy and perhaps some deft maneuvering for us to pull it off. So, I can  understand if not too many of us can do them.

At the same time, there are also simpler solutions – ones that do not require  much out of us. In other words, there are also easy steps. So now I’d like to  share some of these easy steps with you. I need to add that the steps may be  simple and easy but I can vouch that they bring tremendous results.

Here they come (in no particular order):

1. Make and use a budget

One of the easiest steps is to create and then use a budget to plan your  monthly cash flow. Yes, write the income and all the outflows down. If nothing  else, this move will make things clearer and therefore easier. This simple move  can make a huge difference in your life.

In my case, all I have to do is to alter one or two entries in the existing  budget in my PC, save it as a new file, print it out, and I’m good to go! Time  taken to do this is about 15 minutes. In short, I spent 15 minutes a month to  plan my cash flow, and my financial life is in order for the next 30 days!

As I’ve been doing this for the past 25 years or so, I can vouch that this  simple act goes a long long way to help you along the road to financial  freedom.

2. Pay yourself first

The next step is without a doubt the most important step of them all – pay  yourself first. So, pay yourself first, pay yourself first, pay yourself first.  This step is so critical that if you cannot or will not do this, then nothing  else will matter. All the other steps and strategies – both easy and complex –  will become moot. They will be as good as theories from a different planet!  After all, what’s the point of being able to tell everything about the stock  market if you cannot even save a dollar?

In my case, I started by paying myself 10 percent of my income, and then  living with the balance. As I got better at handling my finances, that figure  went up and up and up. Furthermore, when I received some additional income (such  as a bonus), I can often save 80 or 90 percent of that money.

3. Use insurance to cover risks, not as an  investment

One mistake that a lot of people make is by using insurance to build wealth.  Now insurance is a fine and excellent financial tool – to cover risks. However,  it is not so good when used as investments. The reason for this is because of  the low return they offer, oftentimes 5 percent per annum or even lower. As the  objective of investing is to accumulate a large amount as possible, insurance  would be the incorrect tool for investment.

So, use insurance to cover risks, i.e. by buying Term policies. To build  wealth, invest your money in traditional investments: shares, properties, mutual  funds, unit trust, gold, silver, etc.

4. Do your homework before investing your  money

This is critical. While you may want to listen to what they salesman have to  say but ensure that you do your homework also. This will mean, among other  things, reading a few books on the subject matter. Of course, you do all these  before parting with your money!

5. Live within your means

Living within your means may sound boring to a lot of people but it is  mandatory if you want to have a chance of achieving financial freedom. Firstly,  living within your means obviously spending less than what you earn. Secondly,  it means going without some of the things your heart may desire. Thirdly, it  also means developing financial discipline to stick with your budget despite the  many attractions and distractions out there.

6. Keep your debt below 40 percent of your  income

While you may want to borrow money so you can multiply your net worth faster,  to do so without regards to your income and financial situation is asking for  trouble. While you may sail on smoothly during good times, the reality is that  good times do not last forever. The sky does not remain blue or the water calm  all the time. They will turn dark and choppy sooner or later. This is why you  must limit your borrowings to a maximum of 40 percent of your monthly income.  This is so that you are able to repay your borrowings during both good and  not-so-good times.

By the way, the number of loans does not matter. As long as the total  repayment remain below 40 percent of your income, you are fine.

7. Do the basics right first

Before you get into heavy duty investments such as forex or commodities, do  the basics right first. Firstly, ensure that you have sufficient Reserve funds.  Next, own at least one property. If you are a Bumiputra in Malaysia, invest in  ASB first as it gives an excellent return (8.7% pa) with minimal risk and  work.

Once you have these basics covered, then you may want to consider dabbling in  other more exotic investments. And even then, you do so only after doing the 8th  step below!

8. Continue your financial education

You need to do this if you have dreams of achieving financial freedom. If  not, the journey will be too long, too hard, too difficult and worse of all,  heart-breaking as you will be making too many mistakes. You will also reduce  your dependency on others – and together with it, avoid their distorted views,  loaded pointers and wrong advice – which can only help you.

I know I’ve said this many times but it is the truth – the more books on  money matters that you read, the wealthier you will be.

So there you go, ladies and gentlemen, eights easy steps to financial  freedom. Remember that although they are simple steps, they bring excellent  results, which is why you should be doing them already!

May the sun remain bright in your life.

About Author: Azizi Ali is Malaysia’s premier writer, speaker and coach on money matters.  He is a Chartered Financial Consultant (ChFC) and holds an MBA from University of Bath, UK.