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Everyone wants to have a beautiful home. They also want to have enough savings that can help them tide over a difficult phase like a medical emergency or a business loss.
We also want to travel, have diverse experiences, and be able to provide for our families and assume responsibilities.
The question is- how are we going to achieve all this and much more?
The answer is- through Financial Freedom!
In almost all the above-mentioned questions, the financial freedom journey involves money. However, the real challenge is managing money. In other words, understanding your income streams, allocating them into various buckets, and then living your life.
In this article, we are going at how one can achieve financial freedom and bust some myths surrounding the same on the way.
What is Financial Freedom: Meaning and Definition
Let me try to explain financial freedom in the simplest manner possible.
Financial Freedom is all about having a steady cash flow of income or earnings that allows you to do whatever you want, without having to worry about where the money is going to come from.
Sounds simple enough right? Well, in reality, it is not as easy or simple as it sounds. At the heart of financial freedom lies managing your money efficiently.
The following are some of the most common myths that a majority of us have regarding financial freedom-
The thing about financial freedom is that it is often misunderstood. What we need to understand is that this is a concept that connects very strongly with our value systems. It means that you have the money to support your values, without having to worry about the finances.
In the following section, we are going to look at how to reach financial freedom. We are going to do this by listing the top five strategies.
List of Top 5 Strategies to Reach Financial Freedom: By Financial Experts
You might turn around and say that this is something vague. Well, to be honest, it is not. This is all about setting a financial number and aiming for that.
This includes understanding your earnings every month, determining your expenses, and creating your responsibility buckets. This also means having an exact number that you need to maintain in your bank account, and evaluating whether the same will be enough to fuel your lifestyle.
This will help give you purpose and also create a plan of action. In other words, you will have a roadmap.
Once you have the numbers all worked out, you need to move towards the next step. This involves creating a budget. The budget is your detailed estimate of all earnings and expenditures.
At no point should your monthly expenditure exceed your monthly income. If this happens, you are sliding into debt my friend and you need to kiss away your dreams of financial freedom.
The budget should have components of monthly bills, savings, investments, emergency funds, and more. Sticking to a monthly budget is a positive financial habit.
Availing credit might sometimes be a strong financial play to save on additional taxes. You can take a home loan and this would definitely be a sound investment, as you are investing in appreciating assets.
Most financial experts agree that the first step to reaching financial freedom is to stop using credit cards. No matter how good you are, you will end up making mistakes with credit cards.
Do not try to go for any financial practices that will dent your freedom. Credit cards and personal loans with their high-interest rates are things you need to avoid at all costs.
If you do not understand how the crypto markets work or feel that the stock market is too technical for you, leave it. You have plenty of safer options in terms of investment.
Real estate, precious metals, and government bonds are great investment options. Likewise, you also need to develop the habit of savings. No matter how little you save every month, it is all about getting into a habit.
Over a period, it will be your savings that will start accruing and help you experience interest benefits. There is no alternative to financial freedom other than savings.
Earning money is always tougher than spending it. If you are living frugally, and within your limits, you will easily end up in debt.
This happens to a lot of us who try to live our lives on social media platforms. By trying to outdo our friends and colleagues, we undertake expensive vacations, even when we might not like doing the same.
It is best to understand what works for you, your likes and dislikes, and not fall prey to peer pressure. At the end of the day, it is all about developing a mindset and habit.
The Bottom Line
The key to achieving financial freedom is to watch your credit at all times. You need to aim to get it down to as low as possible. If you have an opportunity to repay an educational loan, please take it. Eliminating financial obligations, debts and credit will help you achieve financial freedom.
While all the points mentioned in the article will help you understand financial freedom better, this is not by any means, a comprehensive list. For different people, achieving financial freedom might mean different things. If you have any other questions, that you would like us to address on the topic, please do not hesitate to reach out to us in the comments below.
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