You might have often come across the terms financial freedom and financial independence. And ways one can achieve financial freedom. That would include budgeting, saving for a rainy day, insurance, investing for future goals like retirement and so on.
But what exactly is financial freedom? It might mean different things for different people. For somebody in their late teens it might mean having some income so that do not have to depend on their parents. For someone who has a job, it might mean enough leaves so that he can go on holidays. For a retired person it might mean leading a comfortable life and not having to work again!
At a very basic level, financial freedom means not having to worry about basic necessities like home and food and not worrying about everyday expenses.
Basically financial freedom means the freedom to enjoy something at one’s own pace. It could mean travelling, reading more books and spending time with friends and family. But to do so, money plays an important role. If you are working all day and earning loads of money but not getting to do the things you like, you may be rich, but you are not necessarily financially free.
Ideally, one can think of financial freedom as a situation in life when one has enough passive income to lead a life one wants. But that is not possible, at least not in the early years of one’s lives with lots of responsibilities. One needs to strike a balance, but eventually create passive sources of income so that this becomes a reality.
Let us now try to deal with this topic a bit closer to reality. If you have spent a huge bill on car repair and have to pay your credit card dues the next month, are you stressed out? If you are, you are not financially free. But let us say you have enough money in your emergency fund and you know you can manage your expenses without much fuss. You are then financially free.
This was a small example. But financial freedom consists of a much bigger picture. Once you retire, will you just be able to lead a comfortable life, or will you be able to afford holidays you have always wished for? If you can do what you have planned for, you are financially free.
To sum up, financial freedom means taking decisions in life, without stressing over finances. If you have bought a house but the EMIs that strain your finances, you are not financially free. If you are worried how you will pay your next EMI in case you lose your job, you are not financially free. If you are worried how you will pay for your child’s higher education in the next few years, you are not financially free.
Financial freedom is thus not set in stone. And neither can it be achieved overnight. To begin your journey to financial freedom, first be very clear what financial freedom means to you. Take stock of your finances. Get your basics right and have a financial roadmap in place. Take the help of a financial advisor who will guide you on the right path. Make a pledge to be financially free.