Attaining financial freedom is everyone’s greatest goal. But the problem lies in getting there. How do you achieve financial freedom in your current state?<\/p>
We are burdened with increasing debts, money emergencies, excess expenses, and other problems that hinder us from reaching this goal. And such challenges confront everyone, even the richest amongst us. <\/p>
Regardless, there are few habits that, if practised every day can set you on the track to financial freedom. <\/p>
This article highlights all there is to know about financial freedom, its importance, and share some tips to help you achieve financial freedom, including tips that has worked for lots of people. <\/p>
Let’s get started with the basics. <\/p>
Financial freedom is personal. In general, it is having enough savings, financial investments, and cash on hand to afford the kind of life we want. <\/p>
In addition, it is a growing a farm of wealth that will allow you to retire or pursue the career you want without being driven by earning a certain amount each year. <\/p>
Financial freedom means your money is working for you rather than you working for your money. It means that you get to make life decisions without being overly stressed about the financial impact because you are ready for the rainy day. <\/p>
Getting to financial freedom isn’t an easy task. And financial freedom doesn’t mean you’re “free” of the responsibility of handling your money properly. It means having complete control over your finances. <\/p>
Financial freedom is important if you want to build wealth because it means living in a place of financial peace. It is the freedom to quit your JOB to do something you love, even if it means being paid less because you have a goal in mind. <\/p>
When you have financial freedom, you have options. You don’t have to live from paycheck to paycheck because your finances have been taken care of in such a way that it works for you, whether you choose to work right now or not. <\/p>
In general, the importance of financial freedom cannot be overemphasized, as the more financially free you are, you enjoy the following benefits. <\/p>
RELATED ARTICLE: Personal Finance: Basics, Importance, Types, Management ( + Free Softwares)<\/a><\/p> Financial freedom and financial independence are synonymous. In fact, without good knowledge, one can almost use either of the words to describe the other. <\/p> So, what is financial independence?<\/em><\/p> According to Wikipedia, Financial Independence is the state of having enough income to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others. Income earned without having to work a job is commonly referred to as passive income.<\/p> There are many strategies to achieve financial independence, each with its own benefits and drawbacks. <\/p> Financial Independence means you can live independently of earned income, maintaining your current lifestyle, and you can never run out of money.<\/p> Someone who wishes to achieve financial independence can find it helpful to have a financial plan and budget, so that they have a clear view of their current incomes and expenses, and can identify and choose appropriate strategies to move towards their financial goals. A financial plan addresses every aspect of a person’s finances.<\/p> More so, with financial independence, you do not only keep your current lifestyle, you stay in your current lifestyle. People that are financially independent got to that point, by staying below their or equal to their means. <\/p> Generally, If a person can generate enough income to meet their needs from sources other than their primary occupation, they have achieved financial independence, regardless of age, existing wealth, or current salary.<\/p> Financial freedom on the other hand means you can withstand financial challenges that have little to do with choice. According to Robert Kiyosaki, \u201cFinancial freedom is freedom from fear\u201d. <\/p> It doesn’t mean you will spend all your money. It majorly means you have enough cash to spend without putting your financial future at risk. <\/p> Both financial Independence and financial freedom are worthy financial goals we should all strive to achieve. <\/p> Because, while financial independence allows you to be self-insured against a financial catastrophe in case of death, financial freedom allows you to be self-insured against the cost of unexpected expenses. <\/p> If you are ready to be free from financial fear, and have a lot of choices available to you, here’s how to achieve financial freedom<\/p> The first step to achieving financial independence is by learning how to manage your money. You won’t achieve anything if you don’t learn how to manage your money. Instead, you’ll find yourself wondering where your money went at the end of every month.<\/p> More so, financial freedom doesn’t happen by living from paycheck to paycheck. Ensure you have planned every dollar before you spend it. If you consistently overspend or underspend in certain areas, you can always adjust the amount in each category.<\/p> Budgeting is a very important part of achieving financial freedom, but it doesn’t just end there. Even when you get to the level of financial freedom, you still need a plan. Or you’ll soon get out of financial freedom. <\/p> In general, it doesn’t happen overnight. Learning how to manage your money is the first step. <\/p> READ ALSO: Student Finance: Grants, Loans, Applications (+ How to Start Guide)<\/a><\/p> Once you have gradually started to learn how to manage your money, the next step to achieving financial freedom is to organize your finances. <\/p> You may have made some financial mistakes in the past. It’s all right. Now, you know better, it’s time to organize it before you start building wealth. <\/p> This means that if you have debit like credit cards, student loans or car loans, it\u2019s time to figure out a way to get it sorted out. <\/p> This is because, while you are still in debt, your paychecks belong to someone else. So, if you want to achieve your goal and get to financial freedom, you need to have your full income at your disposal, not left overs from paying credit card bills and student loan payments. <\/p> More so, paying off your debt helps you to lay a foundation to build long lasting wealth. Make sure you have enough saved up before you start tackling your debt. You don’t want to settle your debts and become worse than you started, do you?<\/p> So, while budgeting, you’d realize that you may have extra cash left. Throw it into settling all your debts until you are debt free.<\/p> Of course, settling your debts is hard, but it feels beter when you have all your income to yourself at the end of the month. <\/p> You do know that your biggest wealth-building tool is your income right? So when it comes to choosing a career, there are a lot of things involved. <\/p> There’s no need to remain at a job that doesn’t support your financial growth simply because of an attachment. Leave that place and get a job that supports your goal of financial security. It’ll make the journey to financial freedom a lot easier. <\/p> So, while making career choices, here are a few questions to ask yourself. <\/p> Answers to these questions will help you make the right career choice. Remember, your choice of career can have a big impact on your long-term financial plan.<\/p> If your goal is financial freedom, you need to plan for the unexpected life events that happen to all of us, like medical bills, broken appliances and car repairs. Hence, the need for you to increase your emergency fund to cover three to six months of expenses once you\u2019re out of debt.<\/p> Having the cash to cover unexpected life events gives you peace of mind, and is a critical part of your overall financial plan. <\/p> Once you have that fully funded savings account, your budget will soon begin to feel more flexible. And you’ll be able to say yes to shopping splurges and specialty lattes with no guilt at all! <\/p> Since you\u2019re not taking on debt, you\u2019ll also need a savings plan for big purchases that aren\u2019t emergencies. For example, summer vacation. It\u2019s easy! <\/p> Create a line item in your monthly budget and divide the total amount by the months you have to save. You\u2019re not living in debt anymore, and that means you can enjoy your vacation instead of having a credit card bill follow you home.<\/p> With a full emergency fund and a plan to cover big purchases in place, you\u2019ll have the financial foundation to start investing.<\/p> RELATED ARTICLE: PRINCIPLES OF FINANCE<\/a><\/p> Now that you have started budgeting, and you have a plan for short-term savings, its time to seek the knowledge of a financial advisor who can help you make the most of your long-term investment options. <\/p> The good news is the sooner you start investing, the more time your money has to grow. That\u2019s the power of compound interest at work. <\/p> Here are some options to consider;<\/p> Work with your financial advisor to take advantage of the tax-favored retirement accounts that are available to you at work, like your 401(k)or 403(b).<\/p> How much should you invest toward retirement? Go for 15% of your income. And if your employer offers an equal contribution to your 401(k), take it! Don\u2019t say no to free money.<\/p> According to Dave Ramsey<\/b>, If you have access to a Roth 401(k) at work with good mutual fund options, great! You can invest your full 15% there. But if you have a traditional 401(k), invest up to the match then invest what\u2019s left of your 15% in a Roth IRA. If you still have part of your 15% left after maxing out a Roth IRA, go back to your 401(k).<\/p> Why is a Roth a good idea? When you invest in a Roth 401(k) or Roth IRA, the money you invest grows tax-free. That means you don\u2019t have to pay taxes on it when you withdraw money in retirement. That\u2019s a big benefit you don\u2019t want to miss out on.<\/p> If you\u2019re already contributing 15% of your income to retirement and you want to start saving for your kid’s college fund, you can start by investing in an Education Savings Account (ESA). <\/p> Like a Roth IRA, the money you contribute to an ESA grows tax-free, which means you won\u2019t pay taxes on it when it\u2019s used to cover college expenses. <\/p>Financial Freedom Vs Financial Independence<\/span><\/h2>
How To Achieve Financial Freedom<\/span><\/h2>
#1. Learn how to manage money<\/span><\/h3>
#2. Organize your finances<\/span><\/h3>
#3. Make the right career choice<\/span><\/h3>
#4. Have a Short-term Savings Strategy<\/span><\/h3>
#5. Learn about Investments<\/span><\/h3>
Retirement Savings<\/span><\/h4>
College Savings<\/span><\/h4>