6 Ways to Achieve Financial Freedom
Created on 19 Oct 2021
Wraps up in 4 Min
Read by 4k people
Updated on 14 Sep 2023
Financial freedom is pretty personal & subjective, as Robert Kiyosaki defines it, “More important than how we achieve financial freedom, is the why. Find your reasons why you want to be free and wealthy.”
So the process of financial freedom starts with WHY & HOW? As far as the WHY is concerned, you yourself have to find it, but the HOW is what we bring to you today.
Let’s take a moment and look into some simple ways how you can start your journey towards financial freedom.
How to achieve financial freedom?
1. Know yourself & Set your priorities straight
It is really essential for you to know the lifestyle you wish to have, the assets you want to own, and the bank balance you want to keep. Once you plan this out the next step is to act accordingly, and most importantly try to stick to the plan.
As far as priorities are concerned, If you wish to save a corpus of Rs. 2,00,000 in one year then that’s your priority. You will have 365 days to complete your task so you have to value this rather than spending recklessly. Thus, knowing yourself and setting your priorities are the initial steps to begin your planning with.
2. Make a Second source of Income
Warren Buffett promotes the idea of multiple income streams as he says, “Never depend on a single income. Make investments to create a second source.” Individuals can choose anything present in today's business environment to develop cash flows. Once the income stream is decided the individual can access their way ahead.
3. Scan your Expenses
Japan is known as the savings superpower of the world, individuals out there have a habit of recording, budgeting, and tracking their expenses. The technique is popularly known as kakeibo. The concept goes like this: At the start of each month, one has to sit down with their kakeibo (household financial ledger) and plan what they’re going to spend, what they’ll save, and what they need to do to reach their goals. You then review what you’ve achieved.
What a beautiful way to scan your expenses right? You can develop your own method to do so or just stick to the Kakeibo way but never forget to scan your expenses to avoid unnecessary ones.
4. Plan for Contingency
The analogy of life is just like that of an ECG machine recording one’s heartbeats, i.e it keeps on going up and down. Our life is like a see-saw where on some days prosperity takes the charge and on other days misery commands our life.
One needs to understand that both these phases have an end, planning for contingencies will ensure bad days are within our control and short-lived, for that one way is to Take Insurance which is an effective risk management tool. Another way to plan your contingency is keeping an emergency fund.
5. Invest! Invest! Invest!
This is the most important area to get ahead of a level field. Consider two friends who have recently graduated from the same university and got employed at a similar pay scale, one of them is an active investor of his/her savings whereas the other one is lazy and hence his/her funds lie idle in a savings bank; its an obvious answer that given the fact that both of them have a similar lifestyle the former will achieve financial freedom at a much early stage in a career lifecycle.
Investing should be goal-driven, an investor must analyse their risk appetite and thereby work upon churning their portfolio time and again as per the need of the hour. Along with understanding one’s goal an investor should thoroughly compute the time horizon for which they can invest their savings, this will help them to match the risks-rewards over a period of time and also reap the fruits of compounding. Albert Einstein rightly said that “Compound Interest is the 8th wonder of the world, he who understands it earns it, he who doesn't pay it”
6. Patience, The golden virtue
“Rome was not built in a day” similarly compounding doesn’t show its true potential in a year or two. An investor is one who is clear about their goals and keeps the corpus invested over that period of time, the one who doesn't fall in this category is known as a speculator.
Warren Buffett simplifies it by saying that “Stock market is a place to transfer the money from impatient hands to patient hands”. Most of us must have read the story of the chicken who used to give golden eggs during their primary school days and if we have by heart the lessons we deeply understand that “ The day we plant a seed is not the day we eat the fruit”.
One must plan their life to the best of their abilities, however, life is uncertain. Uncertainty is the most stressful situation, unforeseen events can deteriorate the quality of one’s living standard if one does not have sound financial planning in place.
Financial planning ensures prosperity over a period, it's not something that can be taught like the alphabets of English as it differs for each one of us. Finally, a quote from Chris Brogan will do complete justice to lay the intent of Financial freedom perfectly; he says “ The goal isn't more money, the goal is to live our life on our own terms” and that's what financial freedom is all about.
Hope you liked this blog and understood the importance of Financial Freedom :)
Share this with your loved ones to let them know the power of financial planning and freedom!
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