The formula to achieve financial freedom is save more than you spend. Pretty simple huh? Here’s how it works. Let’s say you earn $2000 a month. After taxes, you might have maybe $1500 left. If you spend the $1500 on food, rent, clothes, gas, etc, you have nothing to save.

You can lower the amount you spend. If you only spend $1400 a month on stuff, then you can save $100 a month.

You can raise the amount you earn. So if you now earn $2100 a month, you might bring home $1575 a month. So you could save $75 a month.

What if you lowered the amount you spend, and increased the amount you earn. If you earn $2100, and spend only $1400 as in the examples above, you could save $175 a month.

$175 doesn’t seem like much does it? But if you saved that $175 a month for a year, that adds up to $2100. If you invested that $2100 and were earning 10% returns, after 10 years, that $2100 would be worth about $5447. But what if you saved $2100 every year for 10 years, investing it so it would earn 10% interest? How much would have? Over $36,500!

Okay, so you can’t retire on $36,000. That does not achieve financial freedom. But that is only $175 a month. What if you continue working on raising your earnings, and lowering your spending?

There is a saying in racing, that the easiest way to lighten a race car by 100 pounds, is to lighten the car by one pound in a 100 places. When it comes to saving money, the best place to start is the repeated spending. Do you go out to lunch every day at work? Do you maybe spend $5 on lunch every day? That’s about 20 work days a month. $5 times 20 is $100. What if you bought lunch a few times a week. You might save $50. What other things do you do every day that you might save money on?

Maybe try to earn more money. I make a good living at work. But make quite a bit working at home as well. Some of the ways I have made money working at home is writing a selling shareware programs, selling stuff on eBay, selling books on Amazon.com, building websites with affiliate links, building websites with Google AdSense. I have also looked at manufacturing some products, but these ventures haven’t been successful yet. But I am always looking for money making ideas. And I occasionally take educated risks. More often than not, they work out. Once in a while they don’t. Oh well, see what works, and do more of it. If you tried it, and it didn’t work, you still have learned what doesn’t work. There is always a chance to change something, and make it work. But you have to keep plugging away at it.

Saving money can be addictive. As you start saving money, you will see it grow. As you see it grow you will to save even more money. Don’t be tempted to take the money you have built and spend it. The money you spend, won’t be earning you more money. Money is like seeds. The more you plant, the more you benefit later on.

Saving money and investing it is how to achieve financial freedom!