What is Financial Freedom, is a term that we hear about often in our daily discussions. Different people have different meanings to it. Some say it is about obtaining what you want, when you want it while others say it is doing whatever you want with the money you have. In other quarters, it may be used to mean the ability to support yourself or just being wealthy. Well, while all these responses may point towards answering the question as to what it means by financial freedom, it is clear that they are vague and do not adequately define it. If you are looking for information on what financial freedom actually is and how you can achieve it, this blog gives you a step-wise guide that will leave you satisfied.
What is Financial Freedom? It refers to the ability of an individual to have sufficient residential income to meet all the living expenses. It is not all about being rich or having wealth, but instead having just what is enough to sustain or cover your daily expenses to allow you spend your time doing what you love most without having to worry about earning money. While financial freedom remains largely elusive concept among many average people, experts say it can be achieved but only when you have financial discipline and are committed to it.
What You Need to Do to Achieve Financial Freedom
Be Debt-free
Perhaps the biggest hurdle to financial freedom is too much debt, and especially credit card debt that carries extremely huge interest rates of up to 40 percent. The basic rule is avoiding as much as possible the use of credit cards and commit to repaying your existing credit card debts before you commence investing. But not all loans are bad loans—for instance, educational and home loans offer certain tax-free benefits, but it is good to avoid them altogether if you can.
Start to Invest Early
Many people think that they need huge sums of money to invest. It is wise to start investing as early as possible even if it means on small scale. Remember, even small investments will yield returns just as we learn from the principal of time value of money and the power of compounding. Using a goal-based approach to invest helps one to know and work towards the achieving the set goals. This will help you create and implement weekly, monthly or quarterly budgets. Essentially, budgeting will help to save you from unnecessary stress that comes with financial challenges.
Prepare for Unforeseen Occurrences
Without a doubt, unexpected expenses can derail your plan to achieve financial freedom. Therefore, readying yourself for such eventualities can go a long way in helping you achieve your big goal. To achieve this, you will need to build a contingency fund which is what sets aside a portion of money or resources that can sort out emergencies to avoid sweeping away money meant for investments. The other way is getting a good medical insurance plan to take care of the rising healthcare costs amidst hard economic times.
