Financial freedom: Know about its stages and how to achieve it
I can say that the American Dream has changed over the years. It has shifted from living for today to achieving financial freedom in the near future.
However, many of us aren’t sure what is meant by financial independence.
What does financial freedom look like?
The meaning of financial freedom is not like a scientific formula. It varies from person to person. What monetary freedom means to you will not necessarily mean the same to me.
So, you need to decide what you want to achieve to get financial independence.
- Depending no longer on the paycheck
- You can maintain your present lifestyle without having to work
- You enjoy what you do and don't have to work for a living
- No outstanding loans to make payment
- You can work as per your choice and what you like
- Your assets will generate income for you
- You have found a good work-life balance
- You are happy with your present lifestyle
This is not an exhaustive list and there’s much more to findependence. Financial independence doesn't mean that you’d have to retire early or as fast as you can to lead a life of leisure unless you want it. It means making your life independent and doing work what you like.
Financial freedom stages - Where are you now?
Financial independence or findependence doesn’t happen overnight. You have to achieve monetary freedom in stages.
The stages can’t be clearly defined. However, here’s a brief overview of the levels so that you can set your goals with a definite time in mind.
1 Start working towards achieving findependence
At this stage, you’re dependant on your paycheck for a reliable source of income. You won’t be able to sustain much longer without your steady stream of income.
Don’t worry. From this financial freedom level, you take the first step and begin your journey.
2 Achieve the first step - Start saving a significant amount
To achieve success, you have to save a significant amount every month. You have to spend less than what you earn every month.
You would have to save enough to do activities that you can't do with your full-time job. When you can do it, you know that you’ve started to achieve a little bit of monetary freedom.
3 You no longer depend on your monthly paycheck
By now, you have started making a secondary income opportunity, be it a reliable side business or a good investment portfolio to generate income.
From this point, you can start doing what you’ve wanted to do or what you’re passionate about.You can choose how to spend your time.
You do something that you like and get paid at the same time.
4 Attain your final goal of findependence
You can say that you’ve achieved this financial freedom level when your income is more than your expenses.
However, you can continue working to make your portfolio bigger and to enjoy a better and your desired lifestyle.
5 Do whatever you like to do
When you achieve this stage, you can indulge in luxury. You can take more risks for a better ROI (Rate of Return) as you have enough to invest.
You have more than what you need to continue with your present lifestyle or the lifestyle you’ve always wanted.
Financial freedom tips - What you need to do today to achieve success tomorrow
No matter whether you want to achieve financial freedom fast or at your own pace, you’ll have to be positive towards money. Doing so, you’ll see opportunities which you’ve never realized before.
a Set goals with definite date - Make sure it’s achievable
Do not be afraid to set monetary goals with a definite date. That is, make your financial freedom plan - a good one will help you achieve monetary freedom fast at your desired time frame.
However, set realistic goals; it is of no use deciding to achieve financial freedom in 5 years when that’s almost impossible.
b Plan a realistic budget - Which you can follow with ease
How to get financial freedom fast - the key to achieving it is planning a realistic budget. Even if you’ve been saving religiously and persistently, without a good budget you won’t be able to analyze where your money is going.
One of the most important financial freedom tips is to plan a realistic budget which you can follow without much difficulty.
Do not try to save about 50% of your income; more chances are you’ll fail if you do so. Start gradually with saving, say about 20% of your income, a part of which you’ll contribute to the emergency fund.
c Reduce your spending - How much that depends on your lifestyle
Reduce spending, save as much as much you can, cut down extra cost, etc. what you hear from any financial adviser are true. There is no shortcut to achieving independence and you’ll have to follow these.Another term is quite famous and I like it - Spavings. It is a combination of ‘spending’ and ‘savings’.
For example, it is the amount which you can save by shopping around and buying a similar product at a lower cost. Or, save a dollar on your morning coffee by using a reward.
d Build emergency savings - Don’t use even a dollar from it
You can be much assured of your future if you have good emergency savings. In turn, it also helps you stay stress-free and you can focus on achieving monetary freedom.
A rainy fund can even help you in your journey if you lose your job. You won’t have to go back to the previous stage as you can meet your daily necessities with the accumulated fund.
e Make use of your talents - Don’t tell that you don’t have one
Every one of us has some talent; find it out. You will be surprised to know how you can get paid for your talent.
It can be writing, photography, painting, or even pet sitting.
What do you want more? Your hobby helps you earn a decent amount.
f Be proud to fail - Learn from your mistakes
If you don’t fail, how will you know what you don’t have to do? It’s true that you can’t work to lose. But, at the same time, make failure your stepping stone towards success.
Even the billionaires won't be able to share a sure shot success formula which will work for you, too.
g Repay debt as fast as possible
Being in debt is a great hindrance to attain your target. Therefore, be debt free as soon as possible.You can try to repay debt on your own or take help of experienced people in the field.
You can participate in online debt forums, where you just have to post your query and experienced people will help you solve your financial crisis.
You can also take help of financial advisers and they can guide you in making your financial freedom plan.
Above all, stay motivated and positive. This is the key to achieving financial independence.