What Is Financial Freedom? How To Achieve Financial Freedom?

Financial Freedom

Today, we have the right to freedom of thought, freedom of speech, freedom to practice any religion you choose, etc. But are we financially free? Almost everyone has some sort of loan that needs to be repaid. The family’s primary breadwinners have credit card debt, mortgages, auto loans, and personal loans. Even before they begin their professions, our youngsters are weighed down by student loan debt. We certainly can claim to lack financial independence. In this article, we will discuss what is financial freedom or money freedom and how to achieve financial freedom.

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What Is Financial Freedom?

Financial freedom or money freedom is having enough extra money to pay your living costs. It’s not about being wealthy and having a lot of money; it’s about having enough to cover your costs so you can spend your valuable time doing what you enjoy rather than working endless hours just to earn money. Only if you are ready for it can you accomplish this. All you need is a little bit of financial planning. If you follow money management in a good way, then you can achieve financial freedom in very few years.

Financial freedom gives you:

  • The freedom of choice
  • The freedom of security
  • The freedom of adventure
  • The freedom of comfort
  • The freedom of time

How To Achieve Financial Freedom

Most of the people keep doing 9 to 5 jobs because they do not have any other way or it is their only income source. Many people believe that people doing such a job can never get financial freedom, but it is not true, if you plan for the future while doing your job you can surely achieve it. Nothing is impossible!

Here are some things you need to do to achieve financial freedom or money freedom.

Understand Your Present Position

The path to financial freedom starts with knowing your current position. This includes having a clear idea of your income, monthly expenses, savings and how much debt you have. In other words, you must have a fairly accurate knowledge of your income, expenses, assets, and liabilities.

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Write Your Goals

Achieving financial freedom starts with setting goals. Every individual’s needs and goals vary. Regardless of where you are currently in terms of finances, create life goals and general goals that are specific, measurable, achievable, realistic and time-bound. It could be for retirement, marriage, vacation, children’s education, starting a business etc.

If you want to fulfill these goals you must write them down. This is what most people don’t do. It is very important  to take a piece of paper and write down your top 5 goals that you would like to achieve over the next 1, 5, 10, and 20 years.

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Create A Budget

The best way to achieve your goals is by setting a practical budget. Most People keep accurate records of their income because it is required to file income tax forms annually. But have we ever kept a record of our spending? Many of us don’t. Depending on how much you earn each month, make a budget and split it into: essentials, wants and savings. This will help you manage your personal finances.

Reduce Your Wants

Money saved is money earned. We should understand the importance of saving money. When you examine your spending patterns you will realize how much money you waste on unnecessary expenses that are easy to prevent. Remember every rupee not spent today is a rupee saved for tomorrow. You can never predict when a misfortune will befall your family. It may be a death in the family, the loss of a job, unanticipated medical expenses, etc. So, we suggest that you keep track of your expenditures and cut back on the unnecessary expenses. The easiest strategy to save money for the future is to spend less on things that are not absolutely necessary. Financial freedom is more about smart spending which can be done in many creative ways.

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Develop A Habit To Invest

Saving money from your salary only ensures that you conserve your wealth. But to be financially free, you must invest a portion of your savings in options that can create long term wealth.

We are not advising you to sacrifice all of your wants in order to save for the future. You can set goals for yourself like taking a vacation every two years, buying a house or car, etc. So, we suggest classifying your desires into short-term (emergency fund, rainy day fund, insurance, etc) and long-term goals (buying a home, retirement, etc). Budget your savings and invest money wisely to meet both your short-term and long-term objectives.

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Start Investing Early

Choosing and establishing your goals is one component. It’s crucial to accomplish them. To assist you in achieving them, you must prioritize these goals. Saving money from a young age is the best course of action. It promotes the habit of saving money. Start investing keeping in mind your short-term and long-term goals.

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Decide On The Best Investment Combination.

Planning your investments is the key to achieving the required level of financial freedom. We suggest that you avoid investing all of your money in the same kind of securities. Look for various investment alternatives before investing. To meet your short-term immediate demands, you can maintain regular savings accounts. You might be able to achieve better profits if you invest in a few bank fixed deposits with maturities under three years. Additionally, investing in mutual funds enables you to earn higher returns than bank FDs.

Another investment option is chit funds which is a saving, investing and borrowing tool. Chit funds give you better returns (10%-15% p.a.) as compared to saving accounts, FDs, and RDs (3%-6% p.a.). They are actually an instrument of regular monthly savings with the added advantage that the depositor can withdraw their entire investment at the time of their need, any time during the investment tenure. No penalties, no hassles.

The Money Club is India’s trusted AI-driven digital chit fund platform. Chit funds are regulated by the respective state governments. Our aim is to provide a savings solution that’s better, cheaper and more reliable than banking systems. Chit funds are one of the oldest forms of investments to grow your money. We currently have more than 3.4 lakh satisfied customers

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Reduce Bad Debt

Getting rid of debt is one of the most crucial factors to achieving financial freedom. Debt can make it very hard to become financially free. Debt not only reduces your overall net worth by the amount you’ve got in loans but also increases your monthly expenses.

There are two main methods of paying off debt. The first one is the snowball method where you pay off the smallest debt first. So basically get one tick mark in your checklist and then move on to the bigger debts. And the second method of paying off debt is the avalanche approach where you first pay off the debt with the highest interest rate and then move to the lower ones. Both these methods work efficiently and if you have a pile of debt. You need to decide what works best for you.

Related: How to Get Out of Credit Card Debt- Step by Step Guide

Create Additional Sources Of Income

Everyone should have more than one source of income. The primary source is related to functions like salary, commission etc. Secondary sources are income from side activities. This includes activities like side business, part-time work, freelancing, online work from home jobs, online earning sites, etc. There are many platforms that provide such earning opportunities.

According to financial experts, you must have five streams of income. Additional income can come in 2 ways. The first approach is active income i.e you trade time for money. And the other approach to building an additional income is to do it passively, where you do the work once and money keeps coming in an automated manner.

If you take the first approach i.e. trade your time for money then you are limited by the hours in a day, which cannot go over 24 hours in any circumstance. However, active income is very quick to implement. Passive takes time and effort in the beginning but once it begins there is no looking back. The activities that generate passive income include selling digital content like e-books and courses, becoming an affiliate marketer, investing in stocks, etc. So, see what works best for you and work towards starting a second income.

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Financial Freedom can help you take ownership of your finances. It’s about living within your means, being a little frugal, and making sure that money is spent on the things you really need like food, shelter, and even vacations. By the end of this article you might be clear what is financial freedom or money freedom and how to achieve financial freedom. By following the financial freedom tips in this article, you will get closer to getting the financial freedom you deserve.