Ask anyone if they want financial freedom and the answer is sure to be a resounding “Yes!” But what is financial freedom, really? Depending on who you are, it can mean different things. Life without student loans. Enough money to retire comfortably. Passive income so you never have to go to your day job. These are all examples of financial freedom, to a degree.
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The core premise of financial freedom is the same: Having the fiscal stability to live the life you want. When you aren’t burdened by debt and have enough income to live independent of a paycheck, you’re financially free. It takes a lot of smart decision-making, self-control and hard work to become financially free. But the rewards are worth it.
Here’s your guide to financial freedom, from learning what it really means to the steps required to achieve it.
Financial Freedom From a Fiscal Perspective
It’s called “financial freedom” for a reason! The cornerstone of being financially free is having a personal balance sheet with little or no debt, plenty of assets and liquid capital. But that means reaching some lofty goals like investing in the stock market, real estate or business ventures. Or not having a mortgage or car payment. These things take time, patience and discipline.
Most of us start in the red. We have student loans fresh out of college, a car payment and, soon, a mortgage that’ll stick with us for 30 years. An entry-level job barely pays enough to live paycheck to paycheck. As we start a family, we accrue more expenses. At this point, financial freedom can seem a long way off. And it is! But it’s not impossible. The key is realizing the importance of every dollar.
Every extra dollar you use to pay down debt is a day closer to living debt-free. Every new job or promotion adds more to the income side of your personal balance sheet. And every investment is liable to appreciate, instead of depreciate like most consumer goods.
Thinking about your life in terms of cash flow is a great way to see freedom from a financial perspective. How much money is coming in? How much is going out? Where is it all going?
The Freedom to Live Your Life
The other side of a financial freedom plan is the freedom to live the lifestyle you want, without financial barriers. It’s as simple as buying the things you want without worrying about your bank account or sending your kids to college with no concerns about the burden of tuition. When money isn’t an obstacle, you’re free to live.
To achieve financial freedom, you need to know what you’re working toward. Focus on the things in life that are important to you and understand the level of income needed to attain them. How much does your dream car cost? What’s the cost of a four-year degree from a particular institution? What will you need to spend to take that European vacation?
Remember, these are individual costs. Freedom isn’t just about affording these things – it’s about affording them while maintaining your everyday lifestyle. If you empty your bank account to pay for something, you’re no longer financially free. Affordability is not freedom; sustainability is.
Pillars of Financial Freedom
If you’re wondering how to get financial freedom fast, you need to understand the foundational pillars it’s built on. Each of these is essential for achieving and maintaining financial independence:
- Debt: It’s impossible to be financially free if you have debt, because debt means your money isn’t yours. You owe it to someone else. Even “good” debt like a mortgage is still debt. To be financially free, you need to be debt-free.
- Income: You need enough income to not only pay your bills but also to save money and make long-term investments. In the beginning, this means striving for a high-paying job and working hard. As you become more financially independent, it’ll mean having passive income from things like rental homes or dividend stocks.
- Savings: Accessible savings are a cornerstone of financial freedom. Call it a nest egg or a safety net – whatever the case, it’s money you can have tomorrow if you really need it. It’s for emergencies, unforeseen expenses and sudden opportunities.
- Investments: There are many ways to make investments that push you further down the path to financial freedom. The stock market and real estate are the most convenient. Business investments and private equity investments are other options. Regardless of the vehicle, these are the main drivers of your personal wealth and the keys to maintaining your financial freedom.
These pillars aren’t the only contributors to financial freedom, but they’re definitely the biggest. You’ll also need to consider things like spending control, tax planning, estate planning and entrepreneurship – all of which play a vital role in building and preserving the wealth necessary for financial freedom.
The Path to Financial Freedom
Every person will take a different route to financial freedom using the same roadmap. Jim and Suzie might decide not to have kids and instead, make real estate investments. Thomas might start a business in his early 20s and sell it in his 30s at a large profit. Maggie might spend a decade paying down debt by pinching pennies.
It doesn’t matter when or how you get there, becoming financially free involves the right mindset. Here are the resources you need to earn your financial freedom. Click the links below to read up on these essential topics and how they contribute to the life you’re striving to live—one that’s not constrained by money.
- What is Financial Freedom? Learn more about what it really means to be financially free from an income and debt perspective. Put yourself in the mindset to not just eliminate debt and make good investments, but to sustain this lifestyle through the end of your life.
- Steps to Financial Freedom: Get a step-by-step roadmap to financial independence so you can point yourself in the right direction and start striving for the lifestyle you’ve always wanted. These 10 steps take you from wherever you are, to wherever you want to be financially.
- How to Achieve Financial Freedom: What are your financial goals? Do you have a clear plan to attain them? Are you making decisions that align with your goals? Get some perspective about what it means to you and how to contextualize your personal journey.
- Financial Freedom Books: The best way to learn is through the eyes of the people who personify it. Grab these 10 books and get infallible insights from individuals who pioneered and perfected the art of becoming financially independent and personally wealthy.
- Achieve Financial Freedom Fast: Want to accelerate your journey to being financially free? There’s a lot you can do to expedite your efforts! Learn more about how to put yourself on the fast track to financial independence and what it takes to shave time off your wealth accumulation plan.
- How to Achieve Financial Freedom in 5 Years: Put yourself in a position to become financially independent within the next five years. Learn the math behind compound interest, where to put your money and the struggles of fast-tracking yourself.
A little education goes a long way. Follow the advice above and get yourself familiar with both the principles of financial freedom, as well as the path to getting there. Your journey starts today, right now.
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