What is financial freedom and what are the important steps in achieving it?
Having “financial freedom” means different things to different people. But, generally, it is understood as being able to live the lifestyle of your choosing while managing your finances. Financial freedom should be personal. Dream big and be specific about your goals. Financial independence is having enough residual income to cover your living expenses. This can be achieved only when you are ready for it. All you need is a little financial plan. Achieving financial independence is an objective for most individuals. Financial freedom usually means having enough savings, financial investments, and cash on hand to afford the kind of life we desire for ourselves and our families. This means of savings enable us to retire or pursue the career we want without being motivated by earning a set salary every year. Financial freedom means having our money working for us rather than the other way around.
How to get financial freedom?
Once you have decided that achieving financial independence is your goal, below are the steps you need to follow:
- Define what financial freedom means to you
Once you have defined what financial freedom means to you, you can start taking steps toward your goals. - Set your goals
Everyone’s needs and goals vary and this is an important difference. Regardless of where you are currently in terms of finances, make life goals and general goals that you need money. It can be for retirement, marriage, vacation, children’s education. - Live on a budget
Achieving financial independence starts with setting goals. The best way to achieve your goals is to stick to a workable budget. Create a budget based on how much you earn each month. Divide this budget into 3 buckets: essentials, savings, and wants. Allocate money from your salary based on what works for you. Most people use the 50/30/20 rule. - Develop the habit of investing
Saving money from your salary ensures that you preserve your wealth. But to be financially free, you must invest a part of your savings in options that can create long-term wealth. - Automate your finances
Automating your investments has its perks. You don’t need to worry about transferring money to your savings or investments. Also, it ensures that you remain disciplined. Your salary may get deposited on the 29th or 3rd, but many SIP investments are deducted on the 1st. So you will be automatically deducted at 1 for naturally reserving a part of the money from the previous money. - Use the help of a professional
Managing your money is not always an easy task. It is wise to enlist the help of a financial advisor or financial planner who understands your goals as well as the market. - Conduct regular financial check-ups
You may need to adjust your financial plan or re-evaluate your goals as life changes. One way to check with yourself is to monitor your credit score. You can also monitor your investment accounts and have regular check-ins with your financial advisor. They will be able to help you pivot as needed and help you adjust your investments based on your goals and how far you are from reaching them. You can also regularly evaluate your budget to make sure your daily, weekly, and monthly activities are helping you move toward your goals.