Financial Freedom

What is Financial Freedom?

     Financial freedom is about taking ownership of your finances. You have a decent amount of money that allows you to live the life you want. You aren’t worrying about how you’ll pay your bills or sudden expenses. Moreover, you aren’t burdened with a pile of debt.

    It’s about recognizing that you need more money to pay down debt and maybe increasing your income with an alternate source of income. It’s also about planning your long-term financial situation by actively saving for a rainy day or retirement. 

Financial Freedom Tips  

1. Understand where You are now

       You can’t achieve financial freedom without knowing your starting point. Looking at how much debt you have, how much savings you don’t have, and how much money you need can be a depressing reality. But this is a valuable step in the right direction.

      Compile a list of all your debts: mortgage, student loans, car loan, credit cards, and any other debt you may have accumulated. Don’t forget to include any money you may have borrowed from friends or family members over the years.

      Now, add up all the numbers.

      How much debt do you have?

      If it’s a big number, don’t freak out, I promise I’ll share some ways to pay that down later in this article. If it’s a small number, congratulations! Feel free to share your financial freedom tips in the comments below.

     Next, take a look at all the money you have saved up.

     Compile a list of all your savings: savings accounts, FDs, various saving instruments, stocks, retirement plans etc. Then we’ll add the recurring monthly payments you receive such as salary, alternate income if any, and so on.

     Keep these numbers in mind as we work through the next few financial freedom tips. 

2. Look at Money Positively

     Debt can definitely be a little bit discouraging. But you deserve to achieve financial freedom.

     People who don’t make a lot of money often feel shame when it comes to making money. And so the biggest obstacle that many people experience when it comes to making money is that they feel like having money is bad. Many feel guilty for having it and guiltier for wanting it.  

     Money is simply a necessity like food or water. It helps you buy the things you need and live the life you want.

     To experience financial freedom, you’re going to need to look at money as a tool to help you achieve your dreams, fuel your energy, and live a stress-free life you can enjoy. 

     If you view money negatively, you’ll subconsciously sabotage your chances of making it and keeping it. 

3. Write Down Your Goals

    Why do you need money?

    Do you want to get rid of debt for good? Are you desperate to escape the 9-to-5 job? Is there a place you’ve always wanted to travel to? Do you need to save for a wedding, kids, or retirement?

    When I achieved financial freedom, it was because I tied it to an emotional goal. My goal was to get out of any kind of debt and save for my first home. And honestly, it was a euphoric experience watching the debt dwindle away and my savings rise.

    I got so excited by seeing the numbers change that I worked harder to make more money to see a bigger change in my personal finances. Would I have achieved my goal of financial freedom if I hadn’t tied the goal to something emotional? Probably not. I was desperate for my freedom. That desperation kept me motivated throughout my journey.

    You might not accomplish everything you want in a month. But a year is a long time to make progress on your goals. Make sure your goal is tied to a specific number that you want to hit. Believe it or not, you’ll start working towards those goals without even realizing it.

    Knowing exactly what you want to achieve makes achieving financial freedom a million times easier. 

4. Track Your Spending

     An important step toward financial freedom is tracking your spending.

    You can use any tool like Mint, which will let you know how much money you’re spending, which categories you’ve overspent in, how much money is in all of your accounts, and how much debt you have.

     Another cool thing about Mint is that it allows you to set goals within the dashboard. You can keep track of your goals and know the exact month you’ll be expected to hit the goal based on how much money you put in. Thus, keeping you accountable and reminding you to keep putting money towards it for you.

    After using Mint for one month, I managed to save some extra money towards my new wedding fund goal. Mint helped me stay focused on my goal and pushed me towards creating more passive income to hit my financial milestones. 

5. Pay Yourself First

    You’ve probably heard the expression “pay yourself first” before. But in case you haven’t, “pay yourself first” means putting a specific amount of money in your savings account before paying anything else, such as bills or any type of expense. And the act of paying yourself first has helped countless people inch closer to achieving financial freedom.

    Why?

    If you want to pay yourself any sum of money, pay it  first, then whatever’s left over needs to go towards expenses. And if you don’t have enough to cover those bills, then you’re forced to pick up a side income to make up the costs.

    By paying yourself first, you guarantee that you’re always putting money aside to invest in yourself. By doing the opposite, you only get whatever is left over, which usually isn’t substantial enough to help you experience financial freedom.

You can pay yourself first in other ways too. For example, if your company has a retirement program, you can ask to have money withdrawn for your retirement. That way you’re investing in yourself and your future first. The money gets deducted from your pay so everything that’s left over is money that you can put aside for your bills and expenses. 

6. Spend Less

     In 1958, Warren Buffett purchased a five-bedroom home for $31,500 and hasn’t moved out of it since. His net worth? An astounding $90.3 billion. He can afford a bigger and more expensive home. But his frugality might very well be the reason why he’s one of the world’s richest people.

       The truth is, plenty of rich people don’t look like rich people. 

         Buying less stuff can actually help you get richer. By spending less, two things work in your favor. One, you’ll have more money to put aside for your financial freedom. Two, you’ll learn that you actually need a lot less stuff to survive, which also helps you put aside more money. 

7. Buy Experiences Not Things

     Life’s short. It’s not about hoarding all your cash until you’re 65. You’re allowed to enjoy life while you’re alive.

     Ultimately, the things that’ll help you live a more fulfilled life will be the experiences you have, not the products you own. Are the things you buy making you happier over the long-term? Does the debt you have from buying a bunch of stuff make your life easier?

    Now let’s flip the situation.

    What’s your happiest memory? What were you doing? Who were you with?

    Let’s create more memories just like that.

    Maybe you have a friend you love working out with. Invite him/her over to your home for free.

    It’s date night. You want to make it unforgettable. Find a cool activity you’ve never done before.

    You’ve always dreamed of travelling to any foreign country. You’ve been saving up money for a year to experience your dream vacation. Go on that vacation feeling guilt-free. You didn’t go into debt for it, you’ve earned it. Or you can become a digital nomad and travel the world while working abroad.

      Life is made up of moments. The best ones come from quality time spent with friends and family. While some products can help bring you closer to your family,  most of them don’t add much value.

     Don’t spend money you don’t have to pretend that you have money. 

8.  Pay Off Debt

      Some people will tell you it’s wiser to invest your money in stocks instead of paying off your debt. If you’re an expert stock picker, maybe that’s true. But if you’ve never invested in stocks before, you could wind up with more debt.

     A lot of people feel the same thing after finishing their last debt payment: relieved.

    If you have ₹50,000 of debt, even if you have ₹30,000 cash in the bank, you can’t really call yourself financially free. You’re still ₹ 20,000 in the hole.

    While paying someone else isn’t as glamorous as having money in the bank, it does bring you closer to financial freedom.

    There are two main methods of paying off debt: snowball and avalanche. Snowball is when you pay off the smallest debt first. Avalanche is when you pay off the debt with the highest interest rate.

     You need to decide what works best for you. Paying off a big debt lifts a massive weight off your shoulders. After paying off your debt, you see the amount of money you have in the bank rise. It’s an awesome feeling watching the number climb (even if you had to watch it fall at the beginning), and it keeps you motivated to continue growing it. 

9. Create Additional Sources of Income

     Okay, so at this point, you’re probably thinking, “My debt is a lot more than my salary, how can I pay it off if I don’t make enough?”

     If you’re serious about financial freedom, you’ve got to sacrifice some blood, sweat, and tears.

    Your 9 to 5 might not cut it. If that’s the case, you need to step it up and look for money outside your current job.

    Some experts recommend having seven streams of income. If you have a 9 to 5 job, congratulations, you have one, only six more to go!

    Now, you can look at your sources of income in two ways: active income (trading your time for money) or passive income (money that can keep coming in, even while you sleep).

    If you trade your time for money, you’re limited by the hours of the day. Here are a few side jobs you can do to earn an active income:

• Become a freelance writer finding jobs 
• Help a business owner as a virtual assistant with jobs 
• Acquire new skills via online courses for entrepreneurs and monetize
• Become an cab driver
• Help with household tasks 
• Pick up the odd, occasional job 
• And more!

    If you don’t have a lot of time to devote to earning income, you can focus on increasing your income streams with passive income like:

• Starting a dropshipping online store with Shopify
• Start your own custom clothing business on Shopify
• Sell profitable content (blog, ebooks, courses, webinars, audiobooks, podcast, apps)
• Become an affiliate marketer
• Buy properties and rent them out
• Invest in stocks

     Fortunately, your seven streams of income can all come from the same source. For example, if you’re an ecommerce expert, your streams of income can come from creating seven different stores. And remember: you don’t need to start with seven streams, you can build up to it over time. 

10. Invest in Your Future

       The last financial freedom tip is an important one. Say you follow the advice and recommendations in this article, get out of debt, and grow your savings. That might be enough to help you out right now. But what if the unexpected happens? Will you be prepared for it?

      It’s important to set aside money for rainy days, retirement, and (sorry to be morbid here) in case you die to help ensure your family doesn’t drown paying for your funeral, debts etc. Okay, now let’s get back to that happy place.

      If you’ve got that 9 to 5 job, talk to your company about adding a retirement plan, or check to see if you’re already having deductions made towards it. The  deduction gets taken out before it hits your account, so you never feel like you’re losing money. And it’s pretty cool to check it out periodically and see your savings grow.

      Next, you also want to save enough money for an emergency fund. Some experts say six months of your salary. And to be honest those numbers can seem pretty high if you don’t make a lot of money. So instead, start with a goal you can afford – ₹ 1000 for your first month. And as you start earning more active or passive income, start increasing your goal to ₹500 a month to ₹500 bi-weekly and so forth. If you’ve overspent on credit and a high credit card bill comes up, don’t use your emergency fund – focus on taking up more active income opportunities so you can pay it down faster.

     The emergency fund is only for unplanned emergencies like a tree crashing onto your house, a car accident you need to pay for out of pocket, or a visit to the hospital.

     By setting aside money for rainy days and retirement, you’ll be less likely to end up back to where you are now: wishing for financial freedom. 

Conclusion

    Financial freedom can help you take ownership of your finances and, more importantly, your life. It’s about living within your means, being a bit frugal, and making sure that money is spent on things you really need like food, shelter, and even vacations (relaxation is important too, you know). By following the financial freedom tips in this article, you’ll inch closer to achieving the financial freedom you deserve. So take a look at those finances, build additional streams of income, pay down that debt, and before you know it you’ll be free.