Financial freedom is a term that most people reading this will be familiar with. It’s something I actively pursue and that most people would like to accomplish in their lifetime.
We’ve all experienced a large and unexpected bill. You may feel panicked, especially if you are already struggling to pay other bills.
I’ve been to that place a few time.
If we all aimed to achieve financial independence, these unexpected expenses would become less worrying. Sounds nice, right?
There are some simple things you can do to achieve financial freedom sooner than you might think.
Table of Contents
What is Financial Freedom?
What does financial freedom mean to you?
How do you achieve financial freedom?
How much money do I need to be financially free?
Financial Freedom: How to Get There Fast
What is Financial Freedom?
Financial freedom is when you have enough saved and invested to afford the lifestyle you desire, according to your own terms. Mastering your finances is essential if you want to retire earlier, travel the globe, pursue your own interests, or be completely free of financial stress.
Financial freedom means being prepared for the unforeseeable and not feeling tied to your paycheck.
Recessions are possible (and inevitable), along with other unusual events such as the pandemic in 2020, which wreaked havoc upon businesses and jobs.
When you achieve financial freedom, your family and you will no longer have to depend on the government for their livelihood.
Financial freedom means a great sense of relief, and a heavy burden is lifted off your shoulders!
The idea of financial freedom should be to live your best life, and have all your needs met without having to rely on a job.
What does financial freedom mean to you?
You are probably reading this article because financial freedom and independence is important to you, or you’re motivated by the idea. It’s good to know!
Unfortunately, many people don’t take this step or only think about it in their dreams. Financial freedom is more important than wealth and riches.
What does financial freedom mean for you? Before you make any financial changes, I believe it is important to ask yourself this question.
You may think that it is:
Starting your own business or choosing a career that you love
You can go on family holidays without having to break the bank
Paying cash for expensive goods without incurring debt
With FU Money, you can do whatever you want without hurting your wallet
Retirement early and living your life as you wish
Personal finances are personal. Your reasons for wanting financial freedom are also personal. There will be overlap, but there may also be your own personal reasons.
For me, pursuing financial freedom meant:
Financial stress can be reduced
No alarms! The freedom to choose when you want to wake up (no alarms!)
Travel and vacations can be taken without incurring credit card debt.
Spending more time with friends and family instead of always chasing after a paycheck to pay for expenses
Can I pay for my expenses if I lose my job?
Ability to help others and start a project that you are passionate about.
Financial Freedom
How do you achieve financial freedom?
The process of achieving financial independence is simple and straightforward. If you’re not sure where to start, here are some important habits and steps that will help you get there.
This level may be reached faster depending on your attitude towards income, budgeting, frugal living, debt repayment, and investing. Remember, do not compare yourself with others. Focus on your own progress.
Financial freedom is possible with these steps:
- Accept Responsibility
Accepting responsibility is the first step to achieving financial independence. Accept responsibility for your mistakes, and realize that your decisions will have a significant impact on your future wealth.
You can make mistakes and not be financial savvy. But you should take responsibility for your actions. It will have a huge impact on your financial IQ, and your mindset in order to achieve your goals.
- How to manage your money
Financial freedom is not possible if you do not know where your money goes or how to control it.
Many people are prone to letting money take control of their lives. It can quickly spiral out of hand.
Don’t be afraid of the numbers.
Personal Capital helps you track your net worth. Personal Capital is free to use and relied upon by millions of users.
Knowing how much you earn and spend is important. You can cut back on overspending to put more money in your pockets.
Create a budget that will help you to stay on track. You can adjust it as needed over time. Spend about an hour a week on your budget. Your budget is your best friend.
- You must pay your debts
Debt is the biggest obstacle to financial freedom and wealth accumulation. Student loans, mortgages and credit cards are all forms of debt.
Some debts have lower rates of interest and will not affect your finances as negatively.
Credit cards, student loans and even credit card debt can make you financially strained. You can spend a lot of money on interest if you have high-interest debts or loans of thousands of dollars.
You need to create a plan for paying off your debts and be more aggressive in managing any debts you have.
- Financial goals
You want to learn how to manage your finances, but you also want to set yourself financial goals. What are you trying to achieve if not that?
Why would you continue to follow your plan to achieve financial freedom if you have no goals? Once you achieve one of your goals set another one.
My initial financial goals were that I would have enough money so that I wouldn’t worry about unexpected expenses and to retire by the age of 45. After I reached my first financial goal, I set a second one to save $100,000.
My views have also changed on early retirement. This is no longer my goal. But setting goals helps me stay on track and can also help you to work harder with your finances.
- First, pay yourself
Paying yourself first was one of the most important steps to financial freedom. This is something I’ve mentioned in many posts. It’s important and helped me to change my mindset.
When we receive our paycheques or money, we tend to focus first on paying bills or other expenses.
What happens if you don’t pay on time?
What’s left after you pay your bills and buy groceries and gas? You can use the money left over to buy entertainment, or even something for your apartment or home.
Your retirement and savings are neglected.
After budgeting, you should immediately start saving a certain percentage. Keep to the rhythm.
- Do not live below your means
You need to live within your means if you want financial freedom and independence.
This is a major challenge for many people. It’s also the number one reason why most people have no savings or are in debt. We want to be like our peers. We want the latest car. We also want to upgrade our home/apartment.
These things can put pressure on your financial goals. Don’t worry about what other people have, or try to upgrade to something better.
Your wallet will thank you for staying within your budget.
- Investing your money
If you want to achieve financial freedom, you will need to invest. Due to low interest rates on savings and increasing inflation, investing is the best option for compounding your wealth.
Retirement investment:
Investments in retirement accounts are one of the most effective financial decisions you can make, whether you plan to retire early. These are tax-efficient investment accounts that allow you to invest in stocks, such as index funds or ETFs.
You can also start with an IRA, Roth IRA, or a 401k. Invest as much money as you can and keep it simple.
Taxable Investments
You may want to consider investing in taxable accounts if you have no debt, a good emergency fund and you’re investing as much money as you can in retirement accounts. It is your traditional brokerage account that you would open. This can help compound your savings.
Remember that this money is not tax-sheltered, like retirement funds.
Real estate investments:
Many people debate whether your home is an investment. However, if you choose the right location and do the finances right, then it could be worth a lot more money in years to come. Investing in rental real estate can also help you reach financial independence.
You can invest in real estate crowdfunding or REITs before you start. Fundrise and Diversyfund are two examples. You can diversify your investments more by investing less money up front.
- You can earn credit by working
It’s easy to get caught up in the money, investments etc. when trying to achieve financial independence. You can’t ignore monitoring your credit score!
Credit score affects how much you pay in interest on future loans and if you are approved for other things.
Financial freedom can be a little more difficult to achieve when your credit scores are affected. Monitoring can also help you avoid identity theft. This can cost you money and time to fix.
Credit Karma and Credit Sesame are free tools that allow you to monitor your credit score.
- Look after your things
Maintaining your possessions is a tip that you may not consider as important for financial freedom. You can maintain your household items, vehicles, clothes, etc.
You’ll spend less in the long run if you follow the proper maintenance procedures and take care of your things. You can now put more money into your emergency fund, and more towards investing!
What if you could keep your car for over 15 years without any major problems? How can you maximize the water heater at your home? This step may not look glamorous, but it is very important.
- ABL – Always Be Learning
ABC is a sales strategy that you may have heard about – Always Be closing. We can also play with ABL, Always Be Learning.
You need to continue learning if you want to achieve financial freedom and lead a fulfilling life.
You can gain more insight by reading personal finance blogs and books.
You can always learn something new about money or gain a different perspective on it.
I read new blog posts on some of my favorite websites and I reread books that I have already finished. Many times, new information was overlooked.
Never stop learning.
How much money do I need to be financially free?
To achieve true financial freedom, you will need 25 times your annual expenditure. The amount you need to reach financial freedom may differ depending on how much money you spend and what your plans are for the money. If you spend $55,000 per year, for example, you will need $1,375,000 in order to reach financial freedom.
You can also follow the standard and popular investment withdrawal rate at 4% after retirement.
Does this mean that you have to spend 25 times your annual income in order to be financially free? I don’t think so, as there are different levels of financial independence.
If you’re on the lower end, you may not be able to retire early. However, you have built up a nest egg that will allow you to live for a few months or even a year if your income source is lost.
You are not financially free for life but you do have a feeling of freedom. Your goal is to continue onward, but I believe that any progress you make gives you a temporary sense of freedom to relieve stress or pursue different endeavors.
Financial Freedom: How to Get There Fast
Financial freedom does not happen overnight for most people. You can be financially free if you inherit a lot of money.
For most people, financial freedom is not achievable. It’s important to remember that if you want to achieve financial freedom, it is not a good idea to take shortcuts.
You need to be consistent and look for ways to earn more and invest aggressively. You can improve your financial freedom timeline by doing this, but you don’t know what the future holds.
You can achieve financial independence by figuring out your goals, creating a plan, and working smarter with money.
You’ll soon realize that financial freedom isn’t just about money. It’s about living the best life possible.
