An Actionable Guide to Achieving Financial Freedom

Have you ever felt a pit in your stomach when you received an unexpected bill, thinking how to pay for that? If yes, this article is for you. Here, we are going to take you through some interesting ways that can lead you to financial freedom. 

Let’s start by understanding the term “financial freedom?” 

What is Financial Freedom? 

Financial freedom in simple words is a stage of life where you get to make life decisions without having to worry about the financial fallout. This can happen only when you are financially prepared for whatever life throws at you. In an ideal condition, you can achieve financial freedom when you have no debt, have money backed up in the bank, and are investing to secure your future. 

In a nutshell, financial freedom can only be achieved when you have full control over your finances. 

How Can You Achieve Financial Freedom?

Unlike what you might think, financial freedom is not a get-rich-quick strategy. Instead, getting control over your finances takes a lot of hard work, time, planning, and sacrifice. Once you are done with it, you will find it all worth it. 

Below, we have a list of some effective ways to achieve financial freedom. 

✅ Learn the art of budgeting

The very first step you need to take to achieve financial freedom is to start budgeting. It is nearly impossible to become financially independent if you are not living on a budget. 

A budget is a forecast of income and expenses for a specific period in the future. Constant money planning and management is a must to achieve financial freedom and generate wealth. 

A budget enables us to manage unwanted wants by avoiding, delaying, or replacing them. 

It also helps divide available resources towards essential needs and life goals. A quick start would be to list down your annual expenses and in-hand income.

You can learn What Is a Budget & How Do You Stick to One?

✅ Close all your debts

Another essential step towards achieving financial freedom is to get debt out of your life. If you keep paying thousands of rupees of your hard-earned money to banks or financial institutions, you will never have a sense of financial security. 

While you are on the journey of becoming financially independent, always remember that your income is the most powerful wealth-building tool. And if you keep spending it to pay your debts, you will never have enough to be financially stable.  A common mistake we make is to buy depreciating assets with loans. For example buying an expensive phone or car on EMIs.  Resisting or downsizing such purchases is financially healthy.

✅ Set your financial goals

Everyone dreams of achieving financial independence, and it's a wonderful aspiration! 

But merely dreaming won't cut it; you need concrete goals to make it happen. Whether it's breaking free from debt or building a retirement nest egg, setting financial targets is a crucial step to financial freedom. 

Wondering how to set effective goals? 

Here's a guide:

1. Be specific: Don't be vague; pinpoint exactly what you want.
2. Make it measurable: Your goal should be quantifiable so you can track progress.
3. Set a deadline: Give yourself a timeline to stay focused and accountable.
4. Own your goals: Ensure they resonate with your aspirations and values.
5. Write it down: Putting your goals on paper solidifies your commitment.

Let's say you're eager to rid yourself of debt. That's a commendable goal, but it needs to be specific. 

So, if you are setting a goal, we recommend you ask yourself these questions: 

• How much debt do you aim to clear? Say, INR 200,000? 
• Excellent! Now, when do you plan to achieve this? 
• How about within the next 12 months? Perfect!

Voila! You now have a specific, measurable, and personal goal with a clear deadline: Pay off  INR 20,0000 debt in 12 months. 

All that's left is to jot it down and keep it in sight as you work towards it.

✅ Choose the right career

As we mentioned earlier, the biggest wealth-building asset is your salary. This is the reason why you should select your career very carefully. Never be stuck at a dead-end job and we highly recommend you look for a job that excites you and also makes you good money. 

Here are a few questions that you must ask yourself while searching for a career option: 

• Where do you want to be in 10 years?
• Is there income-earning potential?
• Is there a growth potential in the job you are considering?
• Do you enjoy the work?
• Do the benefits offered in the job support your financial goals?

The choice of career will hugely impact your long-term financial goals. 

✅ Save money for emergencies

Another step to financial freedom is to have a solid savings plan in place for emergencies. It acts like a buffer between you and the unexpected life events that happen to all of us like car repairs, broken appliances, and even medical emergencies. 

This is why you must save to create a solid emergency fund. 

✅ Plan all your significant purchases

If you're steering clear of debt, it's crucial to establish a savings strategy for significant expenses that aren't urgent. Consider your summer vacation, for instance. It's straightforward! Just allocate a portion of your monthly budget and divide the total vacation cost by the number of months you have to save. Free from the burden of debt, you can fully relish your vacation without the looming presence of credit card bills.

With a solid emergency fund and a method to handle major expenses set up, you'll be equipped with the financial groundwork to begin investing.

✅ Find Ways to Save More & More Money

If you haven't scrutinized your monthly expenditures yet, it's time to delve into your spending patterns!

Amidst the whirlwind of daily life, it's easy to overlook that gym membership you signed up for but haven't used in ages or those streaming services you subscribed to despite tuning in.

Here are a few immediate ways to trim expenses:

• Opt for generic products instead of brand names.
• Plan meals and bring leftovers to work.
• Brew your coffee at home.
• Pause or cancel subscriptions and memberships.
• Cut down on energy consumption.
• Utilize cashback apps and coupons.
• Set an upper limit for monthly discretionary expenses such as dining-out and shopping.

And here's an interesting tidbit: even though they've attained financial independence, over 93% of millionaires still use coupons to save money on purchases. It seems frugality is a habit that dies hard!

You must also check Personal Budgeting Strategies to Improve Financial Health

Bottom Line

These are some effective ways through which you can achieve financial freedom. Each one of these tips has proved a solid path to becoming financially independent.