Financial freedom (also, financial independence) means running a life without worrying about financial constraints. It’s what you’ve long been dreaming of – quitting the job you despise and pursuing your greatest passion. However differing the notions of financial freedom can be, the equation always involves wealth or money, but efficient financial management and right mindset are the indispensable operations.
Financial freedom provides options and opportunities for personal and professional growth, all that you want in life that do not necessarily revolve around financial issues. Hence, it is a state of financial security.
You can take this article as a model map for your journey towards that ultimate end – financial freedom. As you go slow with it, try to reflect on your financial history, your current situation, and the path you are about to take. In doing so, you can review your major financial decisions and practices, shift gears if necessary, and sharpen your financial focus.
1. Define Your Career Path.
Choosing a college degree and career can be your biggest decision faced at a young age. Ideally, your career path should be defined by your early academic success, interests, skills, and future opportunities. However, the struggle becomes real with more serious constraints such as limited financial resources, poor professional guidance, lack of access to good institutions, and social pressure.
Defining a career path is indeed the start of your journey towards financial freedom. You can push a career change any time after college, but be reminded that your time is precious.
2. Get Financially Literate.
Financial literacy will always have a profound impact on your future financial decisions. As I wrote before, saving and building emergency funds, engaging in and managing debts, controlling personal finances, taking advantage of compound interests, and making investments as grounded on the increasing value of money and other assets over time are widely recognized important life skills. Hence, these must be acquired as soon as you recognize your economic being.
Instead of browsing toxic social media feeds, better indulge yourself in reading books and online articles about personal finance. You can also find inspirations from successful people on how they achieve financial freedom after series of financial struggles.
3. Improve Your Cash Flow.
You don’t want to be a corporate slave forever, do you? While getting employed in a reputable company can always be a career breakthrough, you can never achieve your total financial freedom from begging for a salary increase over your strong dedication and optimized skills.
Yes, you may not have enough capital to purchase huge investments such as in real estate and equities, but you can still improve your cash flow with passive income ideas that require a little work or ‘sweat equity.’
4. Save and Live Within Means.
Others argue that ‘living within means’ is a trap as it implies complacency. Well, that’s what they say. Still, it cannot be denied that many struggle with a tight budget and fall into debts because of financial mismanagement – lack of savings and lavish lifestyle.
If you’re serious about achieving financial freedom, then you need to distinguish your needs from your wants, live within decent means, and save for long-term ends. Likewise, an improved cash flow does not always suggest a major lifestyle upgrade. So, make informed decisions first.
5. Get Insured.
Insurance is a must-have; it is part of managing risks. When you secure an insurance policy, you transfer the cost of a potential damage or loss to the insurance company in exchange for a premium.
Technically, your premium is considered by the insurance company an income, hence making a secure investment out of it. On the other hand, it is also a company liability should you make claims covered by the policy.
6. Build Your Emergency Fund.
It’s all over personal finance blogs – build first your emergency fund equivalent to at least six months of living expenses before making any investment. Both ‘expected and unexpected’ expenses explain the need for this fund.
It is for emergency purposes, not for impulsive purchases. To boot, keep on rolling the fund over as you spend it for the purpose. Don’t get caught off guard.
7. Clear Off Debts and Stay Debt-Free.
As soon as you have built an emergency fund that suffices a financial security should you be faced with personal financial dilemmas, start paying off your debts. Set up a pay-down plan that does not hurt your budget and saving goals, but be more critical calculating the accruing interest rates and penalties.
Debts are not always bad, but staying debt-free comes with some degree of inner peace, financial freedom and security, and with opportunities to save and invest more.
8. Start Investing.
Successful people already enjoying financial freedom simply allow money and assets to work for them – and that is investing. Yes, making an investment can be for everyone irrespective of age, career, and economic status, but you can have the advantage of having a lot of time for your capital outlay to grow and of learning from mistakes when you start at a young age.
Starting to invest can be daunting, but helpful guides and tips are almost everywhere. Whether it’s a stock investment, real estate, mutual fund, or bond, there is always a personal finance blog or an ebook for you. You can count on this blog.
9. Sustain Personal and Professional Growth.
Financial freedom is not all about money. It is also about being who you are and doing what you want in life, hence sustaining your personal and professional growth.
Professional development involves enhancing your necessary skills and refining specializations to carry out your roles effectively. As a wider circle enclosing professional development, personal development focuses on the improvement of almost all areas including health and fitness, soft skills, and personal finance.
While landing a job can be your financial breakthrough, the stiff competition in the corporate world continues to upgrade standards, and your response defines whether you keep climbing the corporate ladder or remain stuck in a boring, low-paying position.
10. Make Bigger Financial Decisions.
Starting a family, business, mortgage, or car loan can be some of your bigger financial milestones that require informed decisions. Of course, you don’t want to face negative consequences and financial regrets later after making these commitments.
Your chance of succeeding in your bigger financial decisions can be high if you’re seriously armed with financial literacy. At this point, you already have the skills and strategies to mitigate financial damages and to keep moving towards financial freedom should you make mistakes.
12. Continue Accumulating Income-Generating Assets.
In investing, your goal should not just be capital appreciation, rather accumulation of assets – income generating assets. Sounds ideal, but still many people focus on quick money making such as short-term stock trading.
Financial back-up building through income-generating assets, not the eight-to-five daily grind, can be the perfect synonym of financial freedom. Since it’s impossible to happen overnight, you must map out your journey and take the transition.
“Your economic security does not lie in your job; it lies in your own power to produce- to think, to learn, to create, to adapt. That’s true financial independence. It’s not having wealth; rather, it’s having the power to produce wealth. It’s intrinsic (Stephen R. Covey).”
12. Retire Early and Enjoy Financial Freedom.
Give up the rat race while you still have the energy to take the adventures of your lifetime. You don’t need to hit 50 and get your pension pot to enjoy financial freedom. With passive income streams from your accumulated investments and assets, no doubt you can retire early even in your 30s or 40s. Isn’t it awesome?