What Does “Financial Freedom” Mean?
Financial independence may be defined in a variety of ways, and various individuals have different perspectives on it. Baseline definition of financial freedom: having enough money to maintain an enjoyable living while engaging in enjoyable activities.
It typically involves things like paying off debt, leaving one’s employment, and having several sources of income. Simply said, having financial independence enables you to choose a life of your choosing. Nevertheless, gaining financial independence involves more than just having enough cash. It also has to do with the luxury and freedom of having the time and serenity to enjoy life’s better pleasures.
You may be familiar with the F.I.R.E movement, which is one strategy used in India to achieve financial freedom. But it’s really hard to maintain and makes your lifestyle unsustainable.
3 Elements are necessary for Financial Freedom
However, all forms of financial independence have some characteristics that will enable them to follow a logical path. Here is what you need to do.
- Clearly define your Objectives
It all comes down to what you want to accomplish in life and what gives you the greatest joy and contentment. Your closest guess at what your life objectives are will be the truthful response to these questions. Once you know this, you may work backwards to determine how much time and money you’ll need to get there. The first step to becoming financially free is having clarity on what you want out of life.
- Enduring Lifestyle
It is necessary to keep your lifestyle at a comfortable level, unless your life purpose is to constantly increase the financial worth of it. So you don’t have to rush to buy a new automobile every three to five years or a new phone every year, for instance.
Living comfortably, as opposed to living on the edge of affordability, will allow you to acquire the necessary savings, investments, and other assets to fulfill your life objective and eventually get you closer to financial independence. As you are more likely to retain moderation after financial independence becomes a reality, living in moderation also contributes to financial freedom.
All of this takes time. Planning, goal-setting, budgeting, saving, investing, and eventually carrying out your strategy are necessary. It can take a while to do all of this. In order to adequately prepare for the anticipated financial freedom, you must not only invest and save money over time, but also give those assets time to develop. This is significant because, while you are always free to pursue your desires, being financially independent enables you to pursue your life’s ambitions without worrying about how you will be able to finance other elements of your life. This is another justification for why it’s crucial to start planning for financial independence quite early.Before you arrive, give yourself 10 to 15 years. Financial freedom is merely a matter of time if all the elements are combined in the proper balance.
Which 7 Steps Lead To Financial Freedom?
1. Evaluate your current Financial Situation
Your bank account is the first step on the path to financial freedom. Determining where you want to go and, more crucially, how to get there, will be greatly influenced by where you are right now. If your bank account is somewhat low, don’t worry.
Beginning rather than wallowing in your perceived lack of money is another aspect of financial independence. Moving forward, you’ll also need to consider your debts. Remember that having no debt is a must for obtaining financial independence; we’ll discuss more specifically about debts later. In actuality, it’s a crucial component of financial freedom.
2. Rid Yourself Of Debt
Simply said, if you have debt, you cannot become financially independent. Being financially independent actually means having a green net worth that is sufficient to support your lifestyle and achieve your objectives.
A competent financial expert can assist you in paying off your debts if you consult them with this in mind. However, you can still have important loans, such as a home loan or a car loan. You’ll need to strike the correct balance between repaying the loan and investing in the right assets that will help you get closer to financial independence in India because these loans are often repaid using EMIs.
3. First, pay yourself
Paying yourself first may be the simplest way to answer the issue of “how to get financial freedom in India.” This roughly translates to creating riches for yourself in the future.
Why? Because you want to eventually become financially independent and stop depending on a pension or even live paycheck to paycheck. You’ll build a portfolio that rewards you instead. You may support your future self by developing sound financial practices and making safe assets that produce significant passive income and returns.
4. Obtain a variety of sources of income
One may argue that creating many passive income streams is the key to achieving financial freedom. This will pay your future self now and in the future. In addition, other income streams like P2P lending investments might serve as a fictitious paycheck in the form of regular payments.
An other source of income is through investments. In order to supplement their income and fund goals like gaining financial independence in India, professionals in their 20s and 30s have been known to perform side jobs. Making your money work for you is the overall goal of diversifying your sources of income so that you may finally reach your goal of financial independence.
5. Monitor Your Spending Patterns
One of the compromises you must make if you want to attain financial independence is being thrifty. No, contrary to what some people would have you believe, this does not entail foregoing meals or going without health insurance.
It involves keeping track of your expenditures and making sure you aren’t going overboard. You’ll start to pay attention to the little elements of your spending patterns, which will aid you in your efforts to stop unwarranted overspending.
Keeping tabs on your coffee expenses is a common example of this. Let’s imagine you spend at least Rs 2,000 each month on an excellent french brew since you can’t live without it. This totals Rs 24,000 a year.