Being a money mindset and management coach for women entrepreneurs in India, my clients frequently ask me this question, “Meena, how to achieve financial freedom in 5 years?” And let me tell you, there is no one-size-fits-all answer to this question.
Achieving financial freedom is very subjective and it is dependent on where you are today and what are your future goals when it comes to money.
For example, let’s assume that you are in your 20s and are wondering how to achieve financial freedom before your 30s, you will need to work on lot many more things than a person who’s quite older and has already done some financial planning.
But before we understand how to achieve financial freedom at a young age, let’s quickly go through the definition of financial freedom.
In simple terms, financial freedom is a state of life where a person doesn’t have to constantly worry about money and have enough money saved for the future to live a comfortable life. This is a very common and basic meaning of financial freedom and depending on where you are today in your life, this stage may change.
For someone who’s just starting out, having a three-month emergency fund can be financial freedom for someone else who has been on this journey for longer, it could be having freedom of time and a mountain of wealth that lasts for generations.
Now we have a fair idea of what is financial freedom, let’s get on the steps you can take to achieve your financial freedom.
Also Read: Top Financial Freedom Quotes That Will Change Your Money Reality!
10 Steps to Achieve Financial Freedom and Retire Early
Based on my personal experience working in the wealth management industry, I’ve listed these steps that you can follow to achieve your financial freedom.
1. Understand Where You Are at Present
The first step to designing your financial freedom journey is to see where do you stand today.
Asking yourself questions such as:
👉 What is my financial status at the moment?
👉 What is my income and how much is getting spent?
👉 Am I investing (enough)?
👉 Where am I spending the most?
👉 What are the assets, liabilities, and debts I have?
When you answer these questions to questions, you can get a pretty good idea about where you stand today financially in your life.
2. Track And Analyze Your Spending
Most of the women clients I’ve worked with are scared of numbers and thus they never look at their numbers. If you ask them randomly about where they have spent the most in this month, the higher the chances that they will go blank and scratch their heads. But this is not their fault at all.
If you want to achieve financial freedom, it becomes super important to track and analyze your spending. Having a cash flow sheet template can be very helpful to do this activity easily and without much effort.
When you have a clear idea about where you are spending the most, it becomes easier for you to plan and see which expenses are unnecessary and where you can cut off.
3. Live Below Your Means
I’m not asking you to cut down on all of your luxuries but when you are on your path to financial freedom, sometimes it becomes crucial to be frugal and be very careful about your spending. If you can live a comfortable life in X amount, don’t spend XX amount just to “show off” to society or buy because of peer pressure. Do it only if it gives you inner peace and happiness.
4. Create a Monthly Budget
Having a monthly budget plays a crucial role in achieving financial freedom. It gives your finances a structure and you can get a better eye-bird’s view of your money allocation and transitions.
There are many monthly budget templates out there that you can use to keep planning your finances and take charge of your money. Trust me, following a monthly budget will make you financially disciplined, making your journey of achieving financial freedom even faster and smoother.
Also read: What is Financial Independence and how can you achieve it?
5. Build an Emergency Fund
The starting point of financial freedom is when you have enough monthly income to pay your bills and the next milestone is to have an emergency fund for three month’s expenses.
So let’s say your monthly expenses are 10,000, you should have at least 30,000 in your emergency funds to face any unexpected future situations. As you move forward on the ladder, you can increase this fund for six months and twelve months to secure your future even further.
6. Pay of Your Debts
If you have debts that are either borrowed from friends and families or from banks, it’s recommended to pay them off as quickly as possible to make your life easier. The best debt-paying strategy is to pay off high-interest loans first and then the ones that have comparatively lower interest.
To check which debts are costing you high, you can check your loan agreements or discuss with a money coach to help you understand how can you get out of huge debt.
PRO TIP:
Always pay off your credit card bills in full to avoid additional interest on part payments. Learn more about Do’s and Don’ts of credit cards and many more tips about finances by joining my wealth circle community on Facebook.
7. Start Investing
Investing is the goldmine opportunity to achieve financial freedom as it works on the principle of compounding. And we all know the power of compounding, right?
You can explore investing options like Mutual Funds, the Stock Market, and Properties to diversify your portfolio and mitigate high-level risks. Depending on your capacity and risk appetite, you can start investing to get ahead on the path of achieving financial freedom.
The younger and quicker you start investing, the better the results will get for you.
Also Read: The Best Financial Books You Should Read Today!
8. Have Multiple Streams of Income
Living with one source of income is not advisable when you want to achieve your financial freedom. The best part of having multiple sources of income is that it helps you save and invest more money without compromising on your monthly routine expenses.
You can utilize your complementary skills or turn hobbies into business to create a new source of income and increase the horizon of your finances.
9. Get a Financial Advisor
Lastly, one of the most important factors in achieving financial freedom is having the right mentor who can guide you with each and every turning of financial goal achievements. Manier times making financial decisions may feel overwhelming and confusing and in such times having the right support makes a lot of difference. It stops you from making wrong decisions keeps you on track and helps you achieve your financial goals faster.
10. Be Generous
Remember achieving financial freedom is not just about the money and wealth you accumulate but also the mindset you develop in the process. As you achieve your goals, also make a plan of how you will donate some percentage of your income to the needy and spread some more happiness and joy in the world.
Take the First Step of Achieving Your Financial Freedom Today
I hope with all the information that I have provided about how to achieve financial freedom, you have got a little more clarity on the steps that you can take to get to the next level.
However, based on my personal experience, I can say that there is a huge difference when it comes to a theory part of something and the practicality of the same thing. After working for 23 years in the banking and wealth management industry, I can say that having personal support makes great significance in the results you achieve.
I’ve helped many High Networth Individuals (HNIs) build and manage their portfolios of thousands of crores and you can be the next! Get in touch with me on 8320310332 to book your free discovery call.