Financial freedom refers to the monetary stability to follow your dreams without worrying about bills and other necessities. It ranges from opening up the little café you have dreamed about or traveling worldwide with your best friends. You might wonder how to get financial freedom to connect with your dreams efficiently and live the life you have always fantasized about. Here are some tips.
Minimal Reliance on Debt
You may still have a mortgage on your home and use credit cards to pile up travel rewards. But for the most part, financial freedom means limited use of debt, including no carried credit card balances, no auto loans or personal loans, and ideally, no student loans.
Instead of taking loans to afford big purchases, financial freedom means you can save up cash and make those purchases without relying on debt. This way, you will be spared the interest rates and payment schedules brought by debt, helping you keep more of your monthly income in your bank account.
With this low utilization of debt, you’ll also have an easier time getting approved for credit, and managing the monthly payments, if you need to take on debt.
An End to Paycheck-to-Paycheck Living
When you’re forced to live paycheck-to-paycheck, you’re often caught in an endless cycle of paying bills, paying off credit cards debts, and scraping your savings bit by bit over time.
As you grow your savings and strengthen your financial footing, you will no longer be at the mercy of this endless cycle. Instead of rationing your money until the next paycheck comes in, you can take comfort in knowing that your finances will be unaffected even if that paycheck arrives late.
Breaking free of the paycheck-to-paycheck lifestyle can also reduce the amount of stress around your finances, and it will offer day-to-day financial freedom that you may have never experienced until now.
A Healthy Emergency Fund
When you achieve financial freedom, you have enough financial cushion to take on unexpected expenses or even a short-term loss of income. Instead of being forced to take on debt, this emergency fund provides a buffer that offers peace of mind, even when your finances are in great shape.
Ideally, an emergency fund will feature enough cash reserves to get you through three to six months of living expenses. If you’re not able to tuck away that much money, you can gradually build up those funds over time, making a small but meaningful step towards greater financial freedom.
Financial freedom depends on your ability to save money in a savings account and fund retirement accounts and other investments that will continue to grow in value over time.
For greater financial freedom, aim to diversify your investments across several different options. In addition to owning a home, this may include the 401(k) offered by your employer, traditional IRAs, Roth IRAs, and investment properties, among other options.
A financial advisor can help you diversify these investments to control the risk, all the while maximizing your potential income generation, both now and after retirement.
The Road to Financial Freedom Starts Today
Just remember one thing along the process; financial freedom is not about being rich. It’s about the liberation and flexibility of following your dreams without worrying about your next paycheck.
Tips for wealth acquirement
The feeling of being content is one of the basic wealth acquirement keys to lasting health, wealth, and prosperity. Whatever we earn in our lives materialistically, we need to feel content and have a calm mind. When your mental health is not in the right place, it worsens your problems and sabotages your ability to solve problems effectively.
Being prosperous refers to being content with both your health and wealth. It’s related to living a life worth living. Prosperity doesn’t only refer to money; it’s also about the balance between your health and wealth and the basic approach for wealth acquirement. It would be best if you felt content with the money you are earning.
Prosperity is one of the basic wealthy life keys to a happier life. Contentment and happiness are essential for living a healthy, wealthy, and happier life. Substantiality comes hand-in-hand with contentment. The feeling of contentment will help you earn money in sustainable ways, ultimately strengthening your goal of long-term prosperity.
Your internal and external contentment doesn’t only lead you to a healthier, wealthier, and happier life; it also helps you make this world a better place. Your ultimate goal should be focusing on your mental health and contentment before you start working on physical health and sustainable wealth acquirement.
Read along to find a few effective tips for efficient wealth acquirement:
Make Enough Money
This step may seem elementary, but for those just starting out or are in transition, this is the most fundamental step for effective wealth acquirement. We have seen tables showing that a small amount regularly saved and compounded over time can eventually add up to substantial wealth. But those tables never cover the other sides of the story. Are you making enough to save in the first place?
The key is to be open-minded and proactive. You should also evaluate your income periodically, at least once a year.
Save Enough Money
You make enough money, live pretty well, but you’re not saving enough. What’s wrong? The main reason this happens is that your wants exceed your budget. The most important step for wealth acquirement is distinguishing between what you really need and what you merely want.
Finding simple ways to save a few extra bucks here and there could include programming your thermostat to turn itself down when you’re not home, using regular gasoline instead of premium, keeping your tires fully inflated, buying furniture from a quality thrift shop, and learning how to cook.
Invest Money Appropriately
You’re making enough money and saving enough, but you’re putting it all in conservative investments like the regular savings account at your bank. So, is that smart?
Invest your equity and fixed-income exposures over a range of classes and styles. Do not try to time the market when one style (e.g., large-cap growth) under the S&P 500; another may be outperforming it. Diversification takes the timing element out of the game and makes your wealth acquirement easier. A qualified investment advisor can help you develop a prudent diversification strategy.