What is Financial Freedom and How Do You Achieve It
To survive and live life to the fullest, you must care for your financial health. Because of different economic circumstances, money is often a touchy topic in people’s lives. If you want financial peace of mind, you must work smarter about your income and salaries.
It’s much better to live and not worry about where to get your month’s rent or how to supply emergency money when an accident happens. The answer to living your life to the fullest? Financial freedom.
What is Financial Freedom?
Financial freedom means being debt-free, with enough safety net of savings, and creating multiple cash flows to support your living and lifestyle expenses despite changing times and unexpected financial emergencies. In a nutshell, it means attaining financial peace of mind.
Financial freedom is what every adult must strive towards; while it can be tricky, there will be sure ways to achieve it.
How Can You Achieve Financial Freedom?
1. Learn about personal finance
The first step to financial freedom is education. An engineer cannot become one if they did not learn thermodynamics, and a financially free individual cannot be free without learning about personal finance.
People are lucky nowadays because of the abundance of information that everyone can easily access through the internet. From diversifying income streams to making money work for you, all that information is at your fingertips.
2. Set a financial plan
You know what they say, “If you fail to plan, you plan to fail.” Making realistic and educated plans for your financial freedom journey will give you an overview of the steps you need to take. These plans are essential for growing your money and protecting it. Life can be unpredictable, and you must be more intelligent than the odds.
Moreover, you can benefit from financial planning by setting realistic goals and intentions. The more you immerse yourself in the plan, the more likely it will come to fruition. Think of planning as a form of manifestation for your financial goals.
3. Track your expenses and make a realistic budget
Many people jump into budgeting immediately without tracking their spending patterns first. The most common mistake is only computing the necessary expenses, like rent, groceries, phone bills, etc., without accounting for their lifestyle spending. When you budget realistically, you are more likely to stick to it without sacrificing your life’s joys.
4. Live within your means
Everyone deserves the best things that life offers. However, attaining these life joys without mindful spending can only hurt your financial health in the long run.
For example, you may spend too much living rent on an upscale apartment, order takeout food every meal, or splurge on non-needs. In whatever way you wish to make your life look, always leave room for savings and investments.
5. Automate your savings
The biggest misconception about saving is it’s something that is what’s “left” of their monthly budget—it’s not. It should go first. Think of your savings as a fixed “fee” you pay yourself regularly, whether monthly or bi-weekly. Automate your transfers once money comes in so you wouldn’t be able to spend it on other things.
Once automated, ensure they will go to a trusted, high-interest savings account to retain their value through time.
6. Secure an emergency fund
Securing an emergency fund is necessary before making more significant money decisions (i.e., investing, obtaining insurance, taking loans, etc.) It acts as a buffer when “emergencies” arise, leaving you still capable of financing your lifestyle. The suggested amount is three to six months’ worth of salary.
7. Get a financial advisor
It is a default skill to learn personal finance. However, some financial decisions may need the aid of an expert. They can help with your investments and wealth protection, and you can even make a solid financial plan.
Before committing to a financial advisor, ensure that you have some goals and investing principles in mind. The following questions can help you identify if a financial advisor is right for you:
How do you get paid?
Are you a fiduciary?
What are your qualifications?
How can we make this relationship work?
What is your investment philosophy?
8. Start investing
In your early years, you will work for money. If you are lucky enough to save enough for investment, then your money can start working for you instead. Thanks to compounding interest, you will not only retain your money’s value despite yearly inflation rates, but you can also increase its value.
Make sure that when you profit from your investments, you put them into good investment vehicles until you acquire multiple income streams.
9. Look for multiple income streams
Investing is one of the most viable options for multiple income streams. If you have the time and energy, you can always find various “side hustles” to increase your income. A part-time job or a small business can help improve your revenue.
10. Borrow smart
In many cultures, borrowing money is a concept that is frowned upon. However, borrowing money can be good when you are smart about it. Think about it, instead of using your life’s savings to finance a promising business or investment opportunity, why not just take out loans and pay them religiously? This way, you can reap the benefits of your investments without hurting your finances.
Moreover, borrowing money can help with your credit score. If you pay on time, you can increase your loaning credibility in financial institutions. Some loans and credit companies even offer rebates and other perks. Just keep in mind that you should not borrow money that you cannot pay back.
Live Out Your Best Life
Financial freedom is genuinely achievable when you first believe that it is possible. Deciding on your lifestyle and expenses can seem intimidating and overwhelming at the beginning of your financial journey, but you know what they say: “Rome wasn’t built in a day.” You can also live a worry-free financial life through mindfulness, discipline, and hard work.
Hopefully, this guide helped you learn and motivate yourself to become financially free. It’s a long journey, and you might need just enough grit.