Self Improvement: What is financial freedom and why is it important?

No, don't worry. I'm not going to try and sell you something, or make you sign up for anything this is meant to be a philosophical and practical reflection on why if you are serious about self improvement then you must take your financial health seriously.

What is financial health?
Financial health I would sum up as a collective reflection of what you own in terms of assets and what you owe. If you owe more than you own, and more than you make then you are in financial trouble, if you make more than you own and are able to save, then you are financially stable, and if you have enough to not have to work and live off of your investments then you are by definition wealthy.
Ok Kilgore, we all know this, so why is it important to say? Because common sense isn't all that common, and sometimes the simplest of facts need reminding. Also it can be said that money whether you hate it or love it will play a huge impact on the quality of life you can have, and will lead so its good to understand the basics.
So what then do I mean by financial freedom? The American Dream? Billion dollar mansions and lambos for everybody? Every day looking like a Snoop Dog music video, popping crystal, you get the idea. Well no, rather simply.
The American dream is still held as the standard benchmark most people set their own life expectations by, but it is hardly a concrete concept and I think it has been bastardized to the point where it has become a mockery of its initial concept.
The prevailing ideology is own a big house, drive and expensive car, own a bunch of stuff, go on vacation every year, kids go to college, etc. Keeping up with the Jones's, super ceded the original ideology, and has turned it into this twisted idea of what it once was.
So what is the real "American Dream?" It has its roots in the early colonialist days and takes shape in the form of desire to own ones own property, to make ones own life, and to succeed by ones own determination. It's that same property of spirit that has driven countless waves of Europeans to settle in the Americas, and it is still a noble dream to have. Therefore I think the applique of American dream is wrong, but its a concept everyone understands. I think it's more a freedom lovers dream.
So what then is real financial freedom, and how does it tie into this? Well in a nutshell, financial freedom is, having enough wealth stored away and making interest that one does not need to work at a job they dislike, or to live in a place they detest, and have enough wealth they can travel extensively if so desired.
That's it folks, I know its simple, but it really does cut through it all. Leave the lambos and the mansions to the mega rich, for most average people its nice, but doesn't really add anything to their life.
Instead think how awesome it would be, to be able to say to a group of friends or a partner or potential partner, lets just go for two weeks on a tour of somewhere. Or be able to live somewhere cool like Canada or Norway in the summer months, and in the winter go to Spain or somewhere else. Or chase after a job your really interested in, because even if it doesn't pay well it's something you find fascinating or beneficial to humanity.
Sounds great doesn't it. Well I think it does at least.

So how does one actually start saving anyways? We all might have learnt a small module about this stuff in school, but its hardly going to win prizes in terms of preparing people for their future financial lives. There is great benefit in learning it as a basic skill, and we all can benefit from it.
Its even hard wired into our brains from our primitive ancestors, those who were intelligent enough to save and thrive passed on their genes, which is why we think in terms of acquisitions and preservation of wealth. For the cave man up to the pioneer this would have been mainly food stuffs or precious metals, but for us our main token is now fiat currency, and banking.
So the trick to starting saving is knowing the percentages of what your monthly budget is, and then working out a savings plan. If you need to separate it, or lock it away, I suggest you do that, but you want to ideally aim for 50 - 75% of what you make. I know it sounds harsh to begin with but think about it. What in your life is actual core costs, vs extraneous non-needed cost. If it means cutting out those costs, then so be it. You can live relatively comfortable in a western society without breaking the bank, if it means watching movies at home instead of cinema, go for it. Get rid of your TV package, and use Netflix instead. Eat more veg with a smaller cut of meat. A lot of practical changes can help you trim out cost.
The reason to save, is practical. It helps you deal with the hardships in life and it can make positive changes by giving you the ability to invest in the future. A lot of stuff is droned on about in government about social securities and retirement funds, and its true.
The reason the governments of the west want to start forcing people into paying in to retirement funds is the simple fact that the social security apparatus will not be able to sustain our current populations when they reach retirement age. That is why they keep pushing the clock back from 65 to 67, etc.
As we are all living longer and a lot of people haven't saved any form of retirement funds, counting on the state to save them.
Well I don't know about you, but the amount that will be returned to the majority of retirees when retirement age is reached in the future will allow people to live just on or below the poverty line, so you owe it to yourself. The government will not look after you in your old age, they will be too busy chasing votes and meddling elsewhere to care.

So what can you do to help you on your road to financial freedom?

1) Set up a yearly budget, and keep track of all of your spending including incomes and outcomes. It takes out a lot of the guess work, and also helps during tax time. I tend to have categories of spending, savings, and income all separated. It really easy to start and will help you stay motivated to keep on track, and realize where you might be wasting a lot of money.

2) Become thrifty. We all like nice new things, but the majority of them come at a premium, and some lose value quickly once bought. If it's a vehicle, never buy new, purchase one that had been leased, and haggle a good deal. Lease vehicles tend to run smoothly because they are covered for warranty during the lease, and have regular maintenance. New clothing is ok, but pick and drop a few items every year, so you have just a few changes, it makes a difference in space, and you don't usually wear 60% of whats in your wardrobe anyway. Also buy fad styles. As a rule if you can buy it used and in good condition versus new, but it used.

3) Haggling. We've lost the art, but sometimes you can get a better deal if you ask for it. Some cultures are still more receptive than others, just remember that you have to be able to walk away from the deal, so only pick things that you don't really need as an essential to haggle on. Offer to pay cash, it will usually get a good discount.

4) Paying down debts. We've all owed money once or twice in our life. I have definitely had my own run ins. So if you owe money to a student loan, or lease, or credit card, start paying down your debts. Start that before you are saving, and use the snowball method. Minimum payments on big debt, maximum payments on small. Once the small one is gone, move it up to next, and next. It will give you a sense of accomplishment, and help you feel in control.

5) Understanding credit. The New Testament warned about money lending, or usury as an evil on society, and in some cases that is still sound advice. There is of course good credit and bad credit, good credit is borrowing for something that if successful adds great value to your life, be it business loan, or mortgage. Bad credit is you wracking up 2k in debt going on a Starbucks Frappacino fuelled spending spree on summer fashions. You get the idea. Depending on the credit company, you will be charged between 15% and 25% percent on money owed, and considering a lot of credit companies lend irresponsibly you can get into a really deep hole, really fast.
Not to say don't have credit cards, but treat it with respect. It's not a bank, its a store of credit, treat it as such, a super emergency buffer. I don't see any problem with some of the credit card freebie schemes out there, just make sure you know what your doing, and its worth the free air miles, etc.

6) The danger of obfuscation. Now what do I mean by that? A lot of companies. A lot of government agencies. A lot of banks. Will offer deals, free money, tax breaks, etc, safe in the knowledge that the majority of the population will not know that they exist and therefore not take advantage of them. Its up to you to research but any time you can make money, save money, or take advantage of a deal, do it.
It save you money that a company or branch of government will happily take from you if you don't. It can be hard to find out sometimes, but asking is the best way. They are legally obligated to give you the knowledge if you ask for it.

7) Savings goals. Ideally you want to have enough in terms of savings to enable you to not have to ever work again. It varies from person to person, but ideally you want a plan that once paying dividends at minimum provides you with 30k per year in the UK and 60k per year in the US. Europe it depends entirely on the region, you can retire relatively to exceptionally well in some nations on 20k a year, depending on where.

8) Diversification is key, try and have investments in different areas as a hedge against problems that might arise. Usually when the stock market is down, other markets like commodities does well, so its a case of getting different investments in different places.

9) Can't I just keep it in my savings account. Yes, and no. Yes if you want it safely stored up to a certain allowance deposits. No if you actually want to make any investment capital from it. Point in case, Governments print money, what is a dollar today through inflation might be a dollar and five cents tomorrow, and keep on rising. If you are making a return of 1% you are losing money because your dollars spending value goes down. Even 5% on your savings is barely enough to meet inflation, and as banks are tied to interest rates then they really aren't able to meet your investment goals. So treat it as a clearing house, have a set deposit amount you sit at, and then pay it into other investments.

10) Study investing tools, there are lots of markets, lots of different choices. I prefer ETF's traded electronically by a computer because they are algorithmic and therefore not prone to human emotion, but there are lots of choices out there. Commodities. Securities. Foreign Exchange. ETFs. Company Stocks. Bonds. And outside of the stock market, peer to peer lending, real estate investments, private lending to business.

11) Look to the future Crypto Currencies are currently making a splash with the main stream but they have been around for a long time. If you are going to buy into it, make sure that you know the market and gauge what is going on. It is currently unregulated, and there are a lot of alt-coins that are literally garbage, but some have the chance to become the next bitcoin or lite coin or ethereum. Again don't invest all your money in this market, but it is a fun way to see some good returns on a bit of spare cash.

12) Business Opportunities. If you know someone who wants to start a business and has the sense and the knowledge to carry through and make something of it, do it. I helped a friend out with a small investment as a favor, and now the business is making 10k per year part time. Or start your own business and make it thrive, it is stressful owning one, it is a 24/7 affair sometimes, but the rewards can definitely be worth it, over the person who sells their labor cheaply to a company. Sometimes it can be a small business ventures or part time venture that doesn't require a lot of time initially to start, but then organically grows. Try it, if it fails no one will judge you seriously for it because you tried, just make sure you don't stake a fortune on its success.

13) Productive hobbies. We all have productive hobbies. Self Improvement is in itself a bipartisan effect of the quest for productive hobbies. Some are beneficial mentally, others spiritually, others materially. The point is, sometimes it can also lead to a saleable or trade skill.
I love gardening and while I'm no expert, I know enough of the fundamentals to have more success than failure. Every year I over produce seed crops, because I like giving away and selling some of the plants I have. It's a useful skill and the money I make from plants and produce, covers the cost.
So look for a productive hobby, like woodworking, gardening, painting or sculpting, something that creates something as an end result. It may just turn into a profitable side business.
This is not to say I'm against non-productive hobbies, but if you are a gamer or something akin to that, try and cut down or change what you do. Don't veg on TV, go out to see a movie with friends. Don't computer game all the time, go and play a traditional game, or a pen and paper affair. At least then your deriving some social benefits.

14) The power of compound interest. I'm going to break your heart, well it breaks mine. If your parents had put a 100 each month in a investment with 10% returns on it from the day you were born, by the time you had reached the age of 30 you'd already be a multimillionaire. I know mind boggling isn't it. As most parents don't have the foresight, my recommendation is start as young as possible! The power at work is the compound interest, the dividend paid from your investment each month is rolled back into the investment itself, so in principle. 100 paid in, 2 dollars made, 100 paid in, fund is now 202, and keeps growing etc.

Dealing with success can be difficult, it can be hard suddenly having more money than your used to but remember that if you suddenly find yourself wealthy, keep with the plan and invest it wisely. The lambo can wait until your a multi-millionaire.

You owe it to yourself to look at your financial health and strive towards financial freedom, in the end it frees you up to do the things you want to do and gives you an opportunity to build and give back freely to your community, some of the greatest acts of philanthropy come from those who are wealthy and care about the quality of their community. You can make yourself better, and then with that make a better world. Who wouldn't want that.

As always let me know what you think, comments or questions.
-Kilgore.