What is Financial Freedom?
What is financial freedom and how can you reach this level of stability in your life? This is a question that everyone needs to consider as they navigate through adulthood.
However, its exact meaning may be different for each person. This all depends on your specific goals, age, personal and professional life.
What is Financial Freedom to You?
It’s important to determine what this means for you. In general, it’s the ability to have complete control without debt. This “fiscal stability” lets you live your life without having to worry about having enough income to dictate your choices.
So, by definition, what is financial freedom? It’s the status of having enough savings and income to pay your living expenses for the rest of your life without having to rely on others.
This includes passive income if you are no longer employed or into the retirement phase of life. But, the definition itself may be overwhelming to comprehend.
That is why there are various stages to financial freedom. In addition, everyone is different. You may require more, or less, money to live comfortably than someone else.
First Stages of Financial Freedom
If you can’t tell by now, there aren’t many wrong answers to the question, “what is financial freedom?” This is also true for the different stages of financial independence.
First and foremost, we all begin life in the dependent stage. This is where you depend on others for financial support. Everyone is born into this stage, but some people will remain in this stage throughout life.
If you spend more than you earn, you’ll never leave it. And, in fact, it’s the most difficult stage to transition from. Why? Well, the next stage comes with a huge gap. It’s the stability stage of financial freedom.
Reaching financial stability can be a difficult task. It’s the ability to establish yourself financially after paying off all your consumer debt. You have completely rid yourself of debt, developed a savings plan and continued to earn personal profit.
Now, there’s a difference between good and bad debt. And, in the stability stage, you can still have “good debt.” Bad debt includes credit cards bills, while good debt can include student loans and mortgages.
Final Stages of Financial Freedom
What is financial freedom to you now? I’m sure you are beginning to work out which stage you are in. Yet, there’s more pillars to reach that give you more leeway in life.
It starts with how much money you save. The more you save, the more room you have to take risks.
The final stages of financial freedom give you the ability to make decisions based on happiness, not money. This all begins in the independence stage.
Here your investments and income can fund your standard of living for the rest of your life. This is your basic needs, along with a few comforts from time-to-time. You don’t have everything, but you have enough.
The pinnacle of financial freedom is what many people call the ”screw you money” phase. You now have more than enough that will allow you to go above and beyond your necessary means. You can also begin to share this wealth with others around you.
The world is your oyster. You can live a luxurious lifestyle, travel the world or start your own business. At this point, you can now make the absolute most out of life because your savings and passive income can fund it, and then some.
Building Wealth and Financial Freedom
It isn’t easy working your way up the ladder and it rarely happens overnight. In most cases, this process takes time and due diligence.
However, you can put yourself in the best position possible and find the fast track to financial freedom. Sign up for the Investment U e-letter below for daily insights on building financial independence through smart investments. Our experts have years of experience and success in building wealth.
What is financial freedom to you? Create your own path today and develop smart money habits and skills that will guide you towards fiscal stability.