financial freedom

What is Financial Freedom?

LIFESTYLE

Financial freedom is when one is in charge of his or her finances or cost of living. Having a dependable source of income that guarantees you the kind of life you want to live, one will not have to worry about paying bills or unforeseen expenses, and you won’t be heavily indebted.

How can I achieve financial freedom? Financial freedom can be achieved by doing the following:

  • Know where you’re at
  • Start thinking positively about money
  • Clean up your finances
  • Live according to a budget
  • Create automatic savings
  • Bring down the amount of taxes paid
  • Start investing now
  • Ask yourself these magic questions
  • Be active in your journey to achieving financial independence

It also deals with recognizing the need for more cash to settle a debt, as well as adding a side hustle to increase your earnings – we are heading towards that soon. Actively saving for retirement or rainy days begins with having a long–term financial situation.

Why is Financial Freedom Important?

why is financial freedom important

Most people’s goal is to achieve financial freedom. This has to do with having financial freedom investments, enough savings, and cash at hand to enable us to have and enjoy the kind of lifestyles we want for our families, ourselves, and also helping the less privileged.

Unfortunately, most of us couldn’t achieve it. This may be due to debts that keep increasing, financial emergencies, extravagant spending, and issues that serve as a distraction from achieving our goals. We come across unforeseen events, i.e. pandemics that divert our financial freedom plans and expose holes in the safety cage we created for our families and ourselves.

Challenges happen to nearly everyone, but you still have to find a way to set things right.

What Does a Financially Free Life Look Like?

Financial freedom vs financial independence

Financial freedom goes beyond more than having some money. It’s the freedom to do what you want in life and being who you are. It is about making decisions that are not influenced by your bank balances and following what you love doing and living life the way you want it.

Most people lose focus of what we aimed at becoming, we are so occupied putting other people first. Our dreams don’t materialize as we play the role of employee, spouse, friend, parent, etc. These roles despite rewarding, there might still be a resentment that leaves one imagining, “what if?”

Becoming financially free, you need to become a different person from what you are today and leaving behind whatever has held you down in the past. It is a step by step process that involves improvement and gaining emotional and spiritual strength, that is, becoming who you want to be. Then in return, the brilliant, powerful, playful, happy you will come out – like a butterfly shedding its outer covering.

Achieving your goals or dreams is the true reward of being financially free.

What Does Financial Freedom Mean to You?

Financial freedom is something that has to do with your personal life. Being specific about your desired goals and dreaming big. But what does financial freedom or independence mean to you? Maybe, it means something like this:

  • Freedom to pick your desired career without having to worry about money.
  • Free to go on an international trip annually without straining your bank account
  • Freedom to retire a decade early
  • Free to buy a new ski boat
  • Freedom to respond to people’s needs with extravagant generosity

You have a lot of options when you are financially free or independent. You don’t have to bother if your bank account can cater for buying groceries or replacing your spoilt water heater.

Financial Freedom vs Financial Independence

What is the difference between the two: Financial Freedom vs Financial Independence? Most people feel that both are the same. They believe the difference is just in the terms and can be used interchangeably. Those people are not wrong though, but my opinion is different.

Financial Freedom is an individual or family’s financial state. It can be defined as being free from debt, having savings for an emergency, savings for retirement, insurance, estate plan, and long term care, while Financial Independence is an individual or family’s financial state that qualifies them to be financially free coupled with few variations. The major goal of an individual or family aiming to be financially independent is having financial freedom plans of early retirement, or volunteer to work at will (under their terms).

Now, what differentiates them? Being financially stable and debt-free means Financial Freedom. You are ready to handle whatever life brings your way without having to live a life of paycheck to paycheck. You are enjoying and getting ready for a comfortable retirement because you are working. Whereas financial independence makes you step up to another level. You are running your business, investing, and saving as much as possible as you can. You are going to do what you want, retire early and you don’t have to answer to anyone but yourself.

How to Achieve Financial Freedom

Having cleared the air on the difference between financial freedom and financial independence, we will be explaining ways on how to achieve financial freedom in 5 years, financial freedom investments, financial freedom plan, and more.

How to Achieve Financial Freedom in 5 years

Know Where You’re At

Know Where You’re At

Freedom cannot be achieved if you don’t know your starting point. When comparing your debt to how much savings you have and how much money you need could be very depressing. This is an important step in the right path.

Make up a list of your debts: student loans, mortgage, credit cards, car loans, and others you may have compiled. Remember to add any borrowed money from friends and family members. You can then add them all.

How much do you owe in total? If you get a big figure, do not panic, you will learn how to handle it in this article as we go on. If it is a small figure, congratulations! The next thing to do is to check up all the money you have saved up.

Construct a list of all your savings: retirement plans, stocks, savings account, company retirement-matching programs, company stock-matching programs. Next is to add up your monthly earnings such as salary, side hustle earnings, etc. As we work through other ways of attaining financial freedom, keep all these in mind

Start Thinking Positively About Money

Thinking positively about money is an aspect of becoming rich. Negative thinking is an emotional barrier that you have to do away with to become financially free.

You must do away with the thought that having more money can’t guarantee your happiness or that more money leads one to do evil. Positive thinking brings you to more opportunities and opens more ways than you ever thought could be possible.

Clean Up Your Finances

Once you acquire the knowledge of money management, you may realize that in the past you have been careless with your finances. You don’t have to freak out. You must tidy up the mess before you begin to accumulate wealth.

Clean Up Your Finances

This means that if you have debts like car loans, credit card loans, or student loans, this is the best time for you to settle such, and the reason is while you owe people, your paychecks will contain another person’s name.

To achieve your aim and reach your desired goal, you must have your full earnings at your disposal, not the leftover after paying debts. Accumulating wealth can be attained by paying off all your debt. You won’t want your progress to be held back by unforeseen expenses!

Majority of people feel that they saw a raise when they started budgeting. So, this is great news. Do away completely with all your debt, no matter how small. Then keep the fire burning!

Settling all debts is a sign of hard work, but there is no feeling like when you can save all monthly earnings. When you are free from debt, you have to try by all means to maintain such standards. Having an unsettled debt affects your ability to accumulate wealth and will place risk on your financial freedom plans. Stay off debt!

Living According to a Budget

Living According to a Budget - how to achieve financial freedom in 5 years

Saving to be financially free has to do with not eating out and no vacations. A budget for groceries has to be created each month, cut out your expenses on Netflix and cables.

The important thing one has to note is to learn how to adhere strictly to a budget and not to exceed or deviate from it in any of the months. If your house rent payment is high, cut the payment down by getting a roommate. Make sure that your expenses during holidays don’t affect your savings.

Tools like Mint can be used to monitor how you spend your money, areas you have overspent, how much debt you have to pay, and how much money you have left in your accounts.

The nice thing about Mint is that it helps you to set goals within your dashboard. It helps you to keep track of all your goals and the month you are expected to hit the goal base on your entry. Thus, serving as a reminder to keep saving your money.

Create Automatic Savings

This means paying yourself first. This has to do with paying a particular amount in your account before attending to other things such as payment of your bills. Paying yourself has drawn a lot of people closer to attaining financial freedom.

Paying oneself first means that you are always keeping a particular amount aside to invest in yourself, but doing otherwise you won’t get enough to pay yourself because you will be left with little and will prolong your time to experience financial freedom.

Another way by which you can pay yourself includes registering in your company’s retirement plan and taking advantage of any contribution that will be of great benefit.

Learn to avoid the temptation of excess spending. The money should be pulled the same day you receive your monthly earnings. Remember that the recommended amount of money to keep aside is highly debated.

Bring Down the Amount of Taxes Paid

As a good citizen, you cannot avoid payment of taxes, but there are legal ways to bring down the tax you pay. Savings can be increased by utilizing these methods.

Asking how to achieve financial freedom in 5 years? Financial freedom can be achieved within five years and it is a good prospect for people who would love to travel more in the future mostly common among people in their early 30s.

Even aging people as they hustle in the job market are planning their financial freedom within a short time of five years to serve as security against the volatile future economy.

Start Investing Now

start investing now to attain financial freedom

While considering saving as a top priority, make sure your money works for you. Keeping emergency money into a savings account that offers an attractive interest rate would be a smart move rather than keeping it in an envelope in your home.

So far, there has been no better way of building your wealth than through investment. Compound interest will however bring about an exponential increase in saving over time. However, patience is required here to achieve meaningful growth, as it takes a lot of time.

You can create a brokerage account online, which enables you to know how to invest, manage a good portfolio, and have monthly or weekly contributions.

You can get some financial freedom quotes here

Ask Yourself These Magic Questions

At every important event and meeting in your life, there are two “Magic Questions” you need to ask yourself. The first is, “What things did I do right” And the second is, “What would I do differently some other time?”

By evaluating your performance at the end of every meeting, calls, sales, and presentation, you will improve faster and better than you have imagined.

By evaluating the things you did right and things you would do differently some other time, you have keyed into your mind the susceptibility to become even better the next time. This can also help improve the rate at which you grow, learn, and improve in your work. The money you earn can be influenced by an improvement in your work quality and yourself.

Be Active in Your Journey to Achieving Financial Independence

The initial step to take is to make the right investment decision, but tracking your fund performance is vital to getting the best out of all your financial freedom investments. The idea of constantly deciding on your investment may become an overwhelming process. But know this – If you feel this way, you are not alone.

Team up with a financial advisor - financial freedom plan

You have laid the right foundation through hard work, so face it squarely!  The professional advice of a financial advisor is required here to assist you in controlling your investment options and face the ups and downs that usually characterize the stock market.

With the help of a financial advisor, you will achieve the following:

  • Decide on your investment strategy
  • Minimize your risk by a regular rebalancing of your funds
  • Create an accurate financial freedom plan for what financial independence means to you
  • Ascertain what investment choice you have beyond retirement accounts
  • Create a withdrawal plan for your particular circumstances

Related Questions

How does it feel to attain financial freedom? The absence of financial stress is true financial freedom. Being financially free, you can live an independent and stress-free life. You are well aware of what you can spend, free to do whatever pleases you anytime while sticking to your budget, without thinking of the financial consequences.

Is financial freedom possible? Having more than enough money to get or do what you want is financial freedom. Based on your “wants” this can be achieved. There is a school of thought that says that through a well-diversified portfolio, users can withdraw 4% of your initial sum annually and never run out of cash.

Conclusion

Being able to handle and cover unforeseen circumstances like car repair, attending to health issues without difficulty is not financial freedom. The fun begins when you get to know that you can provide for other people’s needs. For instance, blessing a struggling family with feeding allowances, or school fees payment for their kids, providing for the less privileged such as the physically challenged and motherless baby homes. This isn’t about you anymore; it has to do with you leaving a legacy!

If you live your life the way you want, then you can attend to people’s needs enthusiastically. To achieve your goal, hard work is the key to living a financially independent and financially free life.

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