How to Achieve “Financial Freedom” with Pro Tactics and Cutting-Edge Tech
Financial freedom is supporting your family and your desired debt-free lifestyle with enough savings, investments, and cash. It also denotes growing a nest egg that will enable you to retire or pursue whatever career you desire without being motivated by the need to earn a particular amount each year.
Regrettably, far too many people lack financial freedom. Even without intermittent financial problems, the continual load of mounting debt brought on by excessive spending money prevents them from achieving their objectives. Further gaps in safety nets are exposed when a severe disaster like a storm, earthquake, or pandemic may utterly destroy all precautions.
Spending time thinking about your priorities and being honest with yourself is crucial. Hence, in this discussion, we will learn about financial independence and financial freedom, their significance, and some cutting-edge strategies/technologies for reaching them.
What is “Financial Freedom"?
Financial freedom is a lifestyle choice. It occurs when you are financially secure enough to live a debt-free life and not to depend on the particular employment you are now holding down to get by.
You have enough savings to cover any significant crises now that your debt balances have been paid off. You'll start making financial decisions considering your needs instead of your money. You're able to shift your thinking and live debt free the way that you want to.
You can choose to stop working and start a side hustle, or you might select part-time employment. Regardless, you've set your finances up to have those choices. Regardless of your financial situation, you can pursue your passions.
Why should people achieve “Financial Freedom”?
It is a state where an individual has enough wealth and resources to meet their financial needs without being dependent on others or constrained by financial limitations. Achieving financial freedom is crucial for several reasons, including:
It brings security and stability to your life
It provides security and stability in one's life. It enables individuals to handle emergencies, unexpected expenses, and other financial challenges without stressing their financial situation. For example, if someone loses their job or has a medical emergency, it ensures they can pay their credit card bills and maintain their debt-free lifestyle without relying on others.
It helps pursue one's life goals
It allows individuals to pursue their dreams and aspirations without worrying about financial constraints. For example, someone who wants to start their own business, travel the world, get out of debt, or follow a passion project can do so without worrying about financial limitations.
It may improve your quality of life
It improves an individual's quality of life by reducing stress and allowing them to enjoy their debt-free living without financial worries. For example, they can take vacations, participate in hobbies, and spend quality time with their family without worrying about monthly payments or outstanding debts.
It will enable you to help others
It allows individuals to help others in need. For example, they can donate to charity, support their family members or friends, and contribute to their community without worrying about their financial situation.
What is “Financial Independence"?
Taking control of your finances is the first step toward financial independence, and it will provide a consistent financial flow that enables you to lead your desired life. You don't stress about how you'll cover unforeseen expenses or debts. And you don't have a mountain of debt to worry about.
It's about realizing that you require additional funds to pay off debt and, possibly, expand your income through a side business; more on that in a moment. Planning your long-term financial status also entails actively conserving money for retirement or achieving financial goals such as being debt free.
How to achieve “Financial Independence”?
There are many strategies to become financially independent quickly. You can increase your passive income through real estate investing or dividends from the stock market. Diversify your investments so that you may minimize risks and maximize returns. Consider investing in stocks, bonds, mutual funds, real estate, and other assets. You might also put aside enough money to live off of your investments. You will have a positive cash flow and live well in retirement, regardless of age.
Develop multiple income streams, such as passive income from investments, rental properties, or a side business. This will provide additional sources of income and more money and increase your financial stability.
The financial objective of reaching this level of independence is to retire early and have enough passive income and assets to endure till your death. Eliminate high-interest debt as quickly as possible, such as credit card debt, car loans, student loans, medical bills, or personal loans. Your credit card debt has been paid off, you have passive income sources, and you can afford your annual costs without working.
Why are "Financial Independence" and "Financial Freedom" often misunderstood?
Regrettably, people frequently mix up these phrases. That's why they share the same objectives. Each of them concentrates on your financial journey. However, financial independence is a financial achievement, while financial freedom is a lifestyle choice.
For example - you can achieve financial independence if you successfully pay off a certain amount of unpaid bills and get out of debt. However, achieving financial freedom is living a debt-free lifestyle using several debt strategies such as debt snowball/debt avalanche, debt consolidation, credit card balance transfer, debt settlement, etc.
Because it represents the realization of your financial beliefs, financial independence is a prerequisite for financial freedom.
You've worked arduously to save money to live the luxurious life you've been able to envision for yourself. Financial independence is the long-term financial freedom that pays off. Regardless of your need for money, the two can combine to create beautiful energy and enable you to begin on incredible adventures.
What happens when you merge “Financial Independence” with “Financial Freedom”?
Financial independence and financial freedom are both critical concepts in personal finance. Combining these two concepts can be incredibly powerful and unlock incredible possibilities. After achieving financial independence, you can follow your passions/interests without worrying about money and debt payments. When you also have the mindset of financial freedom, you are empowered to make bold choices and live a debt-free life on your terms while working towards financial independence.
Of course, achieving both financial independence and financial freedom requires a significant amount of planning and discipline. It involves creating a financial plan that allows you to save more money, start investing, live below your means, pay off debt quickly, and avoid credit card bills as much as possible.
Of course, going into multiple debts for these things is not recommended. Genuine financial freedom allows you to pursue your wildest aspirations, and financial independence is the means to live debt free.
Innovative strategies that may help you to achieve “Financial Freedom” and live a debt-free life
Be aware of your financial situation today
Knowing where you are financially right now is crucial, whether you're fresh out of college or getting ready to retire.
Calculate your predicted income, and add your debt, credit accounts, monthly minimum payments, and extra debt payments. Look for any financial gaps, including a lack of insurance or emergency funds. In this process, seeking professional advice may be beneficial for living debt free, especially if your finances are complicated or you are nearing retirement.
Establish your financial goals
It will be challenging to obtain if you don't initially define what financial freedom means to you individually.
Goals might be short-term plans like taking a vacation or purchasing a new car or long-term goals like retiring debt free. People may find it beneficial to consider their relationships with hard-earned money and explore their money-related thoughts.
Recognize that even middle-class families may transition from living paycheck to paycheck to a financially comfortable existence - as long as they spend less than they earn - rather than presuming wealth is attainable solely by people with high earnings.
Create an ongoing budget
Without a budget, it is hard to achieve financial freedom. You'll wonder where it went if you don't direct your money. Before the month starts, assign each dollar a task, and keep tabs on your spending all through it. You can always change the amount in those categories if you routinely overspend or underspend there.
Setting up a budget is crucial to getting your extra cash in order, but it doesn't stop there. You'll still create a new monthly budget even after being financially independent. Regardless of your financial situation, you must have a plan for debt-free living.
The easiest method to ensure that all bills are paid, and savings are progressing as planned is to create a monthly household budget and adhere to it. Also, having a schedule helps you stay committed to your objectives and resist the inclination to indulge.
Start tracking your expenses
Monitoring your spending is a crucial step on the path to financial freedom and becoming completely debt free. You can use financial tools like Mint, which will inform you of your spending habits, the categories in which you've overspent, the total amount of money in each of your accounts, and your overall debt load.
Prepare a list of your multiple debts, including your mortgage, credit card debt, student loans, car loans, and any additional credit lines you may have taken out. You should include any money you borrowed from friends or family members over the years.
Eliminate debt from your life
It's time to eliminate any debt you may have, including credit card debt, car loans, student loans, and leases. You'll never be financially free and get out of debt faster if you pay hundreds of dollars monthly to banks and lenders.
Your most effective asset for accumulating money is your income. And if all you have to work with is the leftover money after paying your credit card bills and student loan repayments, you won't achieve your financial goals.
You can create a lasting foundation for prosperity by paying off your debt.
Before making payments and getting out of debt faster, make sure you have $1,000 saved and set away for emergencies. You don't want an unforeseen expense to stop you in your tracks.
A monthly budget usually helps people to save and gather extra cash, which is a fantastic approach. Spend all that extra money to make extra payments until your smallest outstanding debt is paid off. Then continue to roll the debt snowball. Apart from that, you may also follow other ways to reach debt freedom, such as debt avalanches, credit card balance transfers, debt consolidation, debt settlement, etc.
Although paying off debt requires a lot of effort, there is nothing quite like the satisfaction of keeping the money you earn each month.
Open the appropriate accounts
There isn't just one account that is appropriate for your money. Retirement funds should be placed in tax-advantaged 401(k) or IRA accounts, while education savings usually are best kept in a 529 plan. If you have a high deductible associated with health insurance, you might want to start a health savings account to cover medical costs.
What amount should you put aside?
Spend 15% of your income on retirement investments. And if your employer matches your 401(k) contributions, take advantage of it! Never turn down free money.
It's excellent if your employer offers a Roth 401(k) with reputable mutual fund choices. You may put all 15% of your money there. If you have a standard 401(k), invest up to the match and put the remaining 15% into a Roth IRA. Return to your 401(k) if you still have some of your 15% available after maxing out a Roth IRA (k).
Keep it distinct from your other savings to avoid unnecessarily dipping into your emergency fund. Many online financial companies frequently provide high-yield savings accounts, which can guarantee that your money earns interest. The fact that an emergency fund is liquid and protected from market losses, however, is the most crucial factor to consider.
Keep an eye on your credit score
Your good credit score is crucial in determining the interest rate you are offered, whether financing a home or a new car. It also affects how much you pay for necessities, such as life and auto insurance premiums.
Because someone with hazardous financial habits is thought to be likely to also be reckless in other aspects of life, such as not taking care of their health—or even driving and drinking—credit ratings are given a lot of weight.
This is why obtaining a copy of your credit report frequently is crucial to ensure that no inaccurate negative information tarnishes your fico score. Investigating a trustworthy credit monitoring service would be worthwhile to protect your information further. Also, follow the steps necessary to build credit, such as paying off credit card debt, personal loans, and car loans, and making regular payments to other credit accounts.
Make wise career decisions
Income is your most important asset for generating wealth. So to earn good money, you must choose a suitable career path. There are several factors to consider before choosing a career.
Avoid remaining at a job that is a dead end, especially if it is unhappy. Choose a profession you like that also helps you achieve your financial stability goals and get out of debt.
Develop more income streams
Having multiple sources of income is advised by some experts, even if you work a 9 to 5 job. You can consider either active or passive income when examining your sources of revenue. You are constrained by the hours of the day if you exchange your time for money.
Here are some extra jobs you can take on to supplement your income:
- Take up freelancing as a career.
- As a virtual assistant, support a business owner with jobs.
- Learn new skills through entrepreneur-specific online courses and earn money.
- Decide to drive for Uber.
- Provide assistance with domestic duties.
If you don't have a lot of free time, concentrate on boosting your passive revenue streams by doing things like:
- Launching an internet dropshipping store.
- Establish a personalized clothes company.
- Sell successful content (blogs, eBooks, courses, webinars, audiobooks, podcasts, apps).
- Become a marketer for affiliates.
- Purchase properties and let them.
- Purchase stocks.
Get the right insurance
Having the right insurance is one of the critical elements of achieving financial freedom. Insurance serves as a protective measure to safeguard your finances.
Without the proper insurance, one unfortunate incident or court case could jeopardize everything you've fought to achieve. Financial freedom can be attained through budgeting, saving, and investing; however, it can also be maintained through insurance.
These are eight forms of insurance that you must have:
- Term life insurance
- Health insurance
- Long-term disability insurance
- Long-term care insurance
- Umbrella policy
- Auto insurance
- Homeowners/renters insurance
- Identity theft protection
Locate a reliable financial adviser
Although some people are confident in managing their finances and assets, others will find it difficult, especially in light of challenging economic conditions.
It could seem intimidating to actively choose how to manage your finances and investments. You are not alone if you feel that way. You need a financial advisor's knowledge to manage your investment alternatives and endure the stock market's ups and downs.
Your financial advisor can:
- Help you to live a debt-free life by making financial plans.
- Make choices regarding your investment approach.
- Regularly rebalance your investments to reduce risk
- Have a realistic strategy for what your level of financial independence will be.
- Discover other financial options than retirement funds.
- Create a withdrawal strategy tailored to your scenario.
How “Financial Technology” (Fintech) can help achieve “Financial Freedom”
Even with digital technology, the best way to achieve financial freedom still lies in properly budgeting, investing, and tracking your finances. As per Tristan Harris, Demand Generation Senior Marketing Manager, Thrive Agency, technology can help automate periodically separating your money for better tracking and consistent patterns.
Financial technology may help you save time and money by efficiently managing your finances, such as automating savings, investments, and payments, accessing personalized advice and data-driven insights, and the ability to compare rates and fees for specific spending quickly. What may be stopping you from financial freedom is something you are not doing:
- Not having an emergency fund.
- Not budgeting.
- Not tracking your spending.
- Not diversifying your investments.
Here are a few ways Financial technology, or "fintech," can help in achieving financial freedom:
Spending, tracking, and budgeting expenses
You can budget and keep track of your spending using fintech apps like Mint and Personal Capital. These applications link to your credit cards and bank accounts to automatically classify your monthly payment(s). This makes it simple to track your spending and interest rates and find places where you may make savings. You can set a budget and monitor your progress for a particular category, such as eating out if you see that you're spending a lot of money there.
Automating your money is simple with fintech applications like Digit and Qapital. Digit examines your spending habits and makes a small automatic transfer into a savings account. You can create saving rules with Qapital, such as saving a specific portion of each paycheck or rounding up purchases to the nearest dollar.
Investing has become more accessible and affordable thanks to fintech services like Robinhood and Acorns. Acorns automatically put your spare change into a diversified portfolio, while Robinhood lets you make fee-free investments in equities, exchange-traded funds, and cryptocurrencies. With the support of these platforms, it's simple to start investing with as little as a few dollars, which can eventually help you amass riches.
Living debt free
Credit Karma and other fintech platforms can assist you in paying off debt and live a debt-free lifestyle. Credit Karma offers free credit ratings, reports, and tools to repay debt balances more effectively. For instance, they provide a debt repayment calculator that estimates the length of time it will take you to pay off your credit card bill and other outstanding debts using various payment levels. This process is very effective for becoming debt free in an organized manner.
Digital banking and payments
Making digital payments and managing your funds on your phone has become more straightforward, thanks to fintech. You may quickly transfer and receive money using services like Venmo, PayPal, and Square Cash, and you can manage your finances with online banking apps like Chime and Ally on your phone. This makes it simple to operate your money and make payments while you're on the go.
These are just a few instances of how financial strategies and fintech might assist you in reaching financial independence in general. These strategies and tools can help you make a sound financial plan and develop disciplined spending and saving practices. You can do this to accumulate wealth over time and achieve financial freedom.