AdeolaFinancial freedom or financial independence regardless of what you call it simply means being able to control how money impacts your life. Being financially free can mean different things to different people. For the most part, what financial freedom means to you can change over the cause of your lifetime.
For example, what you knew and thought about finances in high school will be totally different from how you perceive personal finance as a college graduate or as a gainfully employed individual. Over time, your financial priorities and goals tend to change and so it is important to always revisit what financial freedom means to you.
What is Financial Freedom?
A general view on financial freedom can cover aspects related to income, financial security, savings, investments, wealth generation, and comfortable retirement, amongst others. Financial freedom is personal and here’s what it can mean for you.
Making Steady Income
For you, financial freedom could be the fact that you have a steady source of income. This could be from self-employment, a side-business, or a job with an employer. Sometimes, knowing that you will receive regular income gives you a sense of relief, and eases any worry that comes with not knowing how the next house rent is going to come from.
Having an Emergency Fund
Financial freedom could extend further than just having a regular source of income. Sometimes, you are just an emergency away from going bankrupt. For this reason, some people choose to ease unexpected financial pressures by saving up a chunk of money for when emergencies happen. With an emergency fund, you can sleep peacefully knowing that if your car gets damaged, or you have an unexpected medical bill, you have the funds to fall back on.
Saving Up For Education
Investing in education opens doors for great financial opportunities. Depending on your stage in life, having money to cover your education expenses can mean financial freedom to you. When you consider the fact that you do not have to take u huge study loans and become indebted to the banks, you can feel free and accomplished to a large extent.
Supporting Your Family Financially
Financial freedom could be just the joys of being able to support your dependents. Having money to spend on clothing, extra-curricular activities, toys, feeding, and education for your children can give a sense of financial achievement and freedom.
Traveling The World
Travelling is an irreplaceable experience and many people feel free when they have the resources to travel anywhere and at any time. You need money and time to travel, having this luxury may be financial freedom to you.
Being Your Own Boss
For many people, financial freedom isn’t complete without having autonomy for their time. When the nature of your job requires you to work endless hours for minimal remuneration, financial freedom can mean having the luxury of working on your own terms.
Investing For Retirement
Being able to sustain your lifestyle in retirement is a crucial part of financial planning. Having substantial retirement funds allows most people to feel financially free. You won’t be able to actively work for all of your life, what happens when you retire? How do you fund your lifestyle and live a life you really want in retirement? Having this sorted out makes people feel financially free.
Being Debt Free
Financial freedom could mean having no debt. People get into debt for the right or wrong reasons, but eventually, most people yearn to pay off their debt. Being debt free can relieve you of the emotional and financial stress that comes with owing.
Having a High Net Worth
What amount of money or assets would you need to have for you to ditch worrying and become financially free? Sometimes, a positive and high net worth offers financial freedom. Knowing that you have accumulated wealth for yourself and your family can be your own definition of financial freedom.
Why is Financial Freedom Important?
Financial freedom is important because:
- It relieves you of financial stress
- You have the freedom to choose a career you really want
- You stop living pay check to pay check
- You start building wealth and increasing your net worth
- You become debt free and can save more money
- You have the liberty to live fully and have great experiences like travelling the world
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How Do You Get Financial Freedom?
There is no automatic method to get financially free, usually, it takes time and effort to achieve financial freedom. However, with discipline and commitment, the following steps can lead you on a path to financial freedom.
Manage Your Finances
When you take an intentional decision to manage your finances, you finally get the power to be in charge of your financial journey. Deliberate money management allows you to plan for your income, pay down debt, save more and build wealth. When you start monitoring your finances, you can account for how you spend, save, and invest for the future.
Save Money
Building your savings can lead to financial freedom. Most especially, when you have an emergency fund, you have the capability to withstand most financial pressures. What if you lose your job? What if you need to fix a plumbing issue? What if you have urgent medical needs? An emergency fund can relieve you of worry, you know that if anything happens, you have the finances to fall back on.
Cut Down on Expenses
One of the steps to financial freedom is spending less and saving more. Cutting down your expenses can help you to stop living pay check to pay check. Track your expenses and identify those seemingly little things that you spend money on and evaluate your need for them. Spending money on mere wants can be a financial leak and leave you feeling vulnerable financially.
Invest for The Future
If you want to build a high net worth, you need to invest. Having an emergency fund is great, but investing takes it a little bit further. After building an emergency fund and having enough savings to fall back on in case of an emergency, your additional savings should be invested. One major reason to invest is the concept of compounding interest. Investing allows you to earn returns on your mone. Essentially, your money grows through capital gains and dividends.
However, not that investing can be risky, so make sure you do your research and are well-informed before investing in any asset or through any investment platform.
Pay Off Debt
Debt can be a huge burden and the longer you have a debt balance, the more money leaves your pocket to the bank in the form of interest. Sometimes having debt puts you into more debt. Financial freedom can start when you do not have to worry about debt collection agencies and the bank coming after you. Live within your means and start paying off debt.
Key Take Aways on Financial Freedom
For a large part, financial freedom starts with your mindset. First, you need to believe that you can be financially free. Then, take intentional steps to start your journey to financial freedom. Set financial goals for yourself, and learn to say no to things that do not align with your goals. Start making more income, spend less, save more and invest for the future you want.
Need to start budgeting your way to financial freedom, here’s a budget template to help you achieve you financial goals.
