When I was working in my 9-5 job, I remember, it was never limited to 9 to 5. I used to work thirteen hours a day and travel almost three hours a day, making my day fully spent on work. I had no social life then.
But something changed soon. I got the chance to work in the wealth management industry and there I came across the idea of financial freedom. After working for a few months in the industry, I asked myself a question, “what financial freedom truly means and how can I achieve it for myself?”
This question totally changed my life and helped me to be where I am today. I’ve helped many women entrepreneurs and celebrities plan and achieve their financial freedom. With all the experience that I’ve gained guiding these individuals, I’m going to share that information with you so that you can also take the first step toward your financial freedom.
So, let’s get started without any further delay.
What is Financial Freedom? – Definition and Meaning
In simple words, financial freedom is a state of financial well-being that allows you to make choices that lead to a fulfilling life without being constrained by money.
To put it in different words, I can say, that whether you want to buy your favorite dress, start a new business, or go on an international trip; you can do it all without being worried about money at all.
At its core, financial freedom is about control and flexibility. It’s the ability to manage your finances in such a way that you are prepared for unexpected expenses, can take advantage of opportunities, and can make decisions that align with your personal and professional goals.
As you now know, what financial freedom is, let’s understand what aspects you need to look after to achieve your financial freedom.
Also Read: Top Financial Freedom Quotes That Will Change Your Money Reality
5 Components of Financial Freedom – The Foundation of Achieving Financial Freedom
If you want to get your financial freedom faster, it’s important to understand all the things you will need to manage to achieve your financial goals faster. I’ve listed them below for your reference.
1. Debt Management:
The first component of financial freedom is all about being free from overwhelming debt and having a clear plan to handle any existing debt effectively.
Savings and Investments:
Once you start managing your debt well, you need to build a robust savings strategy and make strategic investments plan that grow over time, providing a safety net and additional income streams.
3. Income Stability:
The next component of financial freedom is to ensure a steady and reliable income that covers your expenses and allows you to grow financially, whether through your business, passive income, or other sources.
4. Financial Knowledge:
You can’t ignore the power of knowledge to achieve financial freedom. When you start developing an understanding of financial principles and keep yourself informed about economic trends and investment opportunities, you can make better and wiser financial decisions.
5. Work-Life Balance:
Last but not least, the most important component of financial freedom is to have a work-life balance. When you get the choice and flexibility to spend time on your priorities, whether that’s your family, personal interests, or community involvement, you have achieved financial freedom in the true sense.
When you strive for financial freedom, you allow yourself to break free from financial constraints and empower yourself to live a life based on your terms.
7 Ways Your Life Changes After Achieveing Your Financial Freedom? A Picture From The Future
There’s no doubt that when you achieve financial freedom, your life will turn 360 degrees for the better. It doesn’t only change your money reality but helps you live a happy and fulfilling life with adequate sources of income.
Let’s have a quick look at the changes that you will experience once you achieve your financial freedom.
1. Empowerment and Confidence
Achieving financial freedom empowers you to make bold decisions and take calculated risks that change your financial trajectory. Imagine a situation, where you are not surrounded by constant worry of money and this is the place from where you get the space to innovate new things, invest in new opportunities, and pursue your life/business goals with greater determination.
2. Economic Stability and Growth
A financially secure individual can better withstand economic downturns and market fluctuations. This stability is essential for you to plan the long-term growth and sustainability of your financial situation and portfolio. It also allows you to invest in growth initiatives, have more resources, and take initiatives that contribute to the economy.
3. Access to Opportunities
Financial freedom is not just about money, it’s about having better opportunities. When you plan and manage your finances well, you can seize new opportunities, whether it’s about expanding your business, entering new markets, or investing in technology and infrastructure.
Being financially free gives you the flexibility to adapt and grow in a competitive business environment and defeat inflation.
4. Improved Quality of Life
We all know that when we have better income sources and well-planned finances, we can live the life of our dreams. It allows you to allocate time and resources to your personal lives, such as spending time with family, pursuing hobbies, and engaging in community activities. And this balance is vital for your overall well-being and happiness.
5. Breaking the Cycle of Inequality
Achieving financial freedom helps you in addressing the gender gap if you are a woman. Compared to men, women often face additional barriers, such as limited access to resources and opportunities. By gaining financial independence, you can break these barriers, serve as a role model, and inspire other women to pursue their dream life.
6. Social Impact
When you achieve your financial freedom, you can invest in social causes and community projects that impact society at large. Your success can lead to more job creation, improved living standards, and positive changes in your communities, city, state, and country.
Moreover, financial empowerment allows you to support and uplift others, creating a ripple effect of positive change.
7. Future Security
Last but not least, the ultimate motto that we all have for achieving financial freedom is to feel secure about our futures. Building wealth ensures that you are prepared for the future. It gives you a safety net for retirement, and unexpected emergencies while helping you in creating a legacy for your families. Additionally, this security also allows you to focus on your day-to-day life without the constant stress of financial uncertainties.
Also Read: The Best Financial Books You Should Read Today!
How to Map Where You Stand Today in Your Financial Freedom Journey
Now that you know how financial freedom changes your life, let’s take a look at how you can see where you stand today in your financial freedom journey. When you know where you stand today, you can make calculated decisions on how you can achieve your financial goals.
Follow these steps to map your financial freedom journey
1. Assess Your Financial Health
Like your physical and mental health, it’s important to get a clear idea about your financial health. You can get a clear picture of your overall financial health by calculating your net worth and doing a cash flow analysis.
Here’s how you can calculate your net worth and do a cash flow analysis:
To calculate your net worth subtract your liabilities (debts) from your assets (savings, investments, property, etc.) and the amount that comes defines your net worth.
Cash flow analysis includes tracking your income and expenses. This helps you identify where your money is coming from and where it’s going, highlighting areas where you can cut costs or increase income.
2. Evaluate Your Debt
The next step is to get an overview of your debts like credit card balances, loans, and any other liabilities. Understand the interest rates, monthly payments, and remaining balances. Plus, create a plan to pay off high-interest debts first to reduce your financial burden.
3. Review Your Savings and Investments
Once you have evaluated your debts, you can look at your savings accounts, emergency funds, and investment portfolios. While reviewing your savings and investments, ask yourself these questions:
- Do I have an adequate emergency fund (typically 3-6 months of expenses)?
- Am I contributing regularly to retirement accounts or other long-term investments?
- Are my investments diversified enough to minimize risk?
If you feel overwhelmed or confused by looking at these numbers, it’s always a good idea to get help from a money coach who can help you through all the nuances of understanding your finances.
4. Set Clear Financial Goals
In this stage of mapping your financial freedom journey, you have to define what financial freedom means to you and set specific, measurable goals accordingly. These could include:
- Paying off all debts within a certain timeframe.
- Building an emergency fund of a specific amount.
- Achieving a target net worth.
- Generating a certain amount of passive income.
5. Analyze Your Income Sources
Now let’s be realistic here: to achieve your financial goals, you will have to analyze your income sources and find new ways to double it. And to do it, it’s important to:
- Identify your primary and secondary sources of income.
- Explore ways to diversify income streams, such as adding new products or services, or investing in other business opportunities.
6. Examine Your Spending Habits
Financial freedom is equally about understanding your spending habits so as to increase your income. To understand your spending habits, you can have a look at the history of your bank statements and note down the observations you make.
Categorize your expenses into essentials (like rent, utilities, and groceries) and non-essentials (like dining out, and entertainment). This financial exercise will help you identify areas of improvement and reduce unnecessary spending.
7. Check Your Credit Score
We all use credit cards but how many of us really have an idea about our credit score? Your credit score plays a major role in how banks evaluate you while offering your loan amount and interest rate.
Check your credit score and if it’s not up to the mark, take the necessary steps to improve it. This can include paying bills on time, reducing debt, and avoiding new credit inquiries.
8. Create a Financial Plan
Lastly, to complete your financial freedom journey mapping, create a financial plan that includes,
- Budget: A monthly budget that aligns with your financial goals.
- Debt Repayment Strategy: A plan to pay down debt, starting with high-interest liabilities.
- Savings Plan: Regular contributions to savings and investments.
- Emergency Fund: Steps to build or maintain an emergency fund.
Investment Strategy: Plan a diversified investment strategy to minimize your risks and enhance returns
Achieve Your Financial Freedom with The Right Money Mindset and Management Coach
I hope by now you have better clarity about what financial freedom is. Nonetheless, it’s important to keep in mind that it’s not a one-time process, you will have to take mindful steps for a longer time to achieve your goals and live the life of your dreams. And when you have the support of the right financial coach, the journey becomes smooth.
I’ve 23+ years of experience working with the banking and wealth management sector and I’ve helped multiple High Net worth Individuals (HNIs) to manage their portfolios worth thousands of crores. If you need guidance managing and growing your wealth, you can reach out to me at 8320310332 and I would be more than happy to assist you further!
FAQs:
- How to Get Financial Freedom?
The best way to get financial freedom is to manage your debts, save more, invest smartly, and see where you stand today financially. Once you have done all of these things, you are sure to be on the path to achieving financial freedom.
- How Much Money Is Needed to Achieve Financial Freedom in India?
There’s no fixed answer to how much money is needed to achieve financial freedom, it all depends on your financial requirements and goals.
- What’s the Best Way to Achieve Financial Freedom?
The best way to achieve financial freedom is by getting professional guidance. Having a money coach by your side can help you achieve your goals faster while helping you avoid some common mistakes that people make.