What Is Financial Freedom
Financial freedom refers to having enough monetary means in your possession at one time to cover all your needs without depending solely on a paycheck for fulfillment.
Economic freedom refers to being freed from being bound to your job by its money obligations alone.
Formulate Financial Freedom
These Steps Aim at Establishing Monetary Freedom
The Four Types of Financial Freedom
For Beginners, Monetary Freedom can work differently: 1. Analyse 2. Write Out Goals Its Its How Does Monetary Freedom Work For Novices
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Formulation of Monetary Freedom
Financial freedom allows individuals to escape the biblical curse of making their living by sweating for it.
However, they have achieved it without becoming wealthy, or by understanding entrepreneurship more fully than their counterparts. Instead they have managed to save and generate enough earnings to meet life needs by saving and making investments that provide regular profits that allow them to pursue entrepreneurial ventures without financial strain or stress.
Here we will look at two components that can help us attain financial freedom:
- Financial Savings
To reach financial freedom, the first step you should take is savings. Putting away less of what you earn could create enough wealth that enables you to break free from corporate servitude and live an independent lifestyle. - Passive Earnings (REITS)
Passive income refers to amounts that come directly into your pocket without you exerting too much energy, such as returns on an investment, benefits reaped through info-product sales or royalties from book writing efforts. It could come in the form of returns from investments made, investments returned on, sales generated via info products or royalties generated when publishing books written by yourself – in essence any amount not related directly to time commitment is passive income.
Accordingly, financial freedom rests upon this framework: savings + earnings> fixed bills essential for daily survival.
Financial independence occurs only when your savings and earnings exceed all fixed and variable bills that require funds, making your savings available for repayment without needing to borrow extra to cover them all. What Are The Types Of Monetary Freedom?
To reach financial freedom, now we must consider that our journey must be divided into stages or types.
Financial independence may seem impossible without first facing several hurdles – from loan applications and investment decisions, through bankruptcy filing and asset sales – before reaching financial freedom.
- Monetary Safety
Our first goal should be to move from uncertainty about meeting expenses towards economic security.
An individual may enjoy financial security if they possess sufficient funds to pay all necessary expenses (electricity, water, mortgage or lease payment, food).
Once this happens, leaving your job may no longer be an option due to extra bills which cannot be covered through savings and current earnings.
By now, you should have gained sufficient financial independence that allows for secure earnings to cover both basic needs as well as extravagancies without recourse to wages.
Your savings won’t just cover basic necessities such as rent and utilities; rather, they could pay for meals out, trips away or purchases such as vehicles or equipment. - Monetary Freedom
Step 7 entails having enough savings so as to be ready for anything that may arise – such as paying fixed and extraordinary expenses without having to work.
But it should be made clear that financial freedom may not give us full freedom in life and give us all that luxury we crave and desire.
How Does Financial Freedom Work for Novices
If what you’ve read intrigues you, we are happy to explain how monetary freedom works as it’s likely foreign territory to most.
Assume that wealth creation will take time. Work hard and save wisely over the course of several years for maximum effect.
However, if your goal is achieving financial freedom through self-directed retirement savings plans without depending on state pensions (which could potentially dwindle away over time), or working toward “hearthing” your boss within medium or long-term, then following this plan aimed at financial independence for novices is crucial:
- Assess
Just like an organization must keep accurate accounting to understand its financial reality, personal financial freedom requires knowing your starting point.
Make an incline chart outlining all of your money owed: mortgage, student loans, auto loans and credit card bills as well as money borrowed from friends or relatives over time. Don’t forget to add loans made possible by gifts from loved ones as part of this exercise!
Take a deep breath. Now add up all the costs associated with this trip. Don’t panic if they seem overwhelming; we have written this piece so that you may learn to manage them later on.
Have a small savings amount already? Congratulations and please feel free to share any tips for financial independence in the comments at the end of this text.
Keep track of all of the money you’ve saved below. List all current funds such as money, bank accounts, shares, treasury bills, outstanding bills owed and retirement financial savings plans as well as monthly earnings such as your salary or profits from side jobs etc.
Remind yourself of these facts while working through these techniques to achieve financial freedom. - Write Your Objectives
Reaching financial independence should have an emotional goal attached. Perhaps, for example, getting out of debt and saving for a house may be your objective.
As your debt declines and savings increase, you’ll feel an incredible sense of relief and fulfillment.
Everybody gets so invested in seeing the numbers change that almost everybody works harder and longer to earn more cash and experience an overall increase in their finances.
Writing down financial freedom goals and reviewing them regularly will be of tremendous help in reaching them. Here you’ll find a template you can download to write out your monetary freedom targets and plan how they’ll be met.
Chances are, you won’t achieve all your objectives within one month; but having one year provides enough time for reviewing progress and adding corrective actions as necessary should initial goals not be reached.
Goal setting should also involve setting specific numbers that you need to achieve; you’ll find that by setting realistic, specific objectives you begin working toward them without even realising it!
Understanding exactly what needs to be achieved will make achieving financial freedom much simpler. 3. Monetary Safety
To truly reach financial independence, steps need to be taken incrementally.
As this statement shows, achieving financial independence without first attaining financial security can only happen rarely; to maximize chances of success you should aim at first reaching this level first and covering important fixed bills from there on out. Your first goal should be securing that fund can meet this threshold of security before setting other financial goals.
Start small and you could soon achieve financial independence more quickly and effortlessly. - Establish an Autonomous Earning System While saving is obviously essential to financial independence, creating an automatic source of passive earnings should not be underestimated either – otherwise you risk giving away too much of your time working jobs that demand your time in exchange for salary and limited availability to work at other pursuits.
Commence planning how you will generate revenues of these kinds on an ongoing basis:
Attracting Interest
A solid investment should offer returns in the form of either interest or dividends, respectively. When purchasing shares or bonds, prizes are distributed every so often; with Treasury bills you get some form of periodic reimbursement from your government in terms of additional remuneration from them as well. Rents/Pension Plans/Leasing agreements etc offer their own forms of rewards too!
As a property owner, leasing them out to generate financial returns can bring financial rewards in the form of rents.
Recurring Earnings There are various methods you could exploit to earn additional income streams like selling affiliate products or having membership programs.
Your membership website or service could generate income periodically via subscription fees and commissions from sales made on it, which would eventually net more recurring funds over time. Utilise any competitive advantages to maximize ongoing recurring profits for maximum return. Copyright your work wherever appropriate for extra recurring funds!
Writing an ebook or writing music results in copyright royalties every time it sells; similarly composing tracks on Spotify generates royalties for composers as well.
But if you sell courses, each time someone signs up for it is another source of passive income for you!
- Save All Remember that being wealthy does not depend upon having everything they desire but not wanting anything at all! To become truly wealthy is more about giving than taking.
Therefore, even as we live in an overconsumptionist society, a growing trend towards minimalism can also be observed.
Minimalists believe it is possible to live comfortably with less. No need for 20 shirts when five will do just as well or two cars when just one would suffice!
Learn to be frugal and downsize to achieve Financial Freedom?
Have a clear grasp on what financial freedom entails and its pathway. If this is new territory for you, don’t fret – all is clear here!
However, you might still feel lost as to where to begin saving and creating that first income stream. We have provided you with some guidance so that you don’t waste any time getting started today.
Now we will demonstrate ways to achieve financial freedom: Examples and concepts for realizing it.
- Make Investments From Your Savings
You need your savings to work for you if they’re to grow into more money in the form of investment returns, so instead of keeping it under your mattress unused money should always be put towards growth by making smart investments from it all – creating two positive effects from one investment decision: increased returns AND reduced expenses!
Since you don’t have access to them, investments will allow for additional returns like returns, interest and dividends that provide greater income streams for you in return. - Shop Experiences Instead Of Things
Life is short. Don’t just save all your cash to enjoy life later on when you turn 65; experience is what will allow for fuller lives than material goods!
Have a buddy that you like training with? Invite him over for training sessions at your own home with an array of YouTube movies as your playlist!
Are You Planning an Epic Date Night Soon? Well, Groupon provides amazing activities you have never done for an affordable price that are sure to leave an indelible mark!
Life’s moments come from everyday interactions between loved ones; those spent together make some of its finest ones. Though certain merchandise may help create such moments (ie online game night time), most do not add significant value.
Don’t waste money; do not pretend that there will be some big sum to come into. Attainable 3. Pay Your Debt as Quickly
After paying off their debts, most individuals feel relieved. But for someone owing fifty thousand euros in debts even with thirty thousand saved up in savings they won’t truly feel financially free as there still remains 20 grand to pay back.
Though repaying someone may not feel satisfying at first, doing it will bring you one step closer to monetary independence. There are two primary methods of debt repayment.
Snowball: pay the smaller debt first
An Avalanche Technique: you should pay off debt with the lowest rates of interest first.
Debt repayment can relieve much of your stress. After paying down debts, your financial account should become fuller with cash reserves and greater amounts available for savings and investments.
See your savings grow, even when initially it seems lower, keeps you motivated to continue growing and keeps the goals clear and focused in mind.
- Diversify Your Sources of Earnings
Pursuing financial freedom will require sweat, tears and hard work on your part if it is to succeed. To do this successfully requires developing multiple sources of earnings; otherwise it won’t get done at all!
If your regular job does not provide sufficient income, extra jobs should be undertaken during any free time to supplement what’s coming your way. Some specialists suggest diversifying into seven sources of revenue for maximum productivity.
At times we find it tediously repetitive to state that when your income relies solely on time spent working, your hours become limited and earnings become dependent. Here are a few ideas for starting profitable enterprises to generate additional earnings:
Grow into a contract writer by searching platforms such as Twago for work. Assist a business owner as a digital affiliate with jobs from Upwork. Its Sign on with Uber/Cabify as drivers or Process Rabbit to assist with house responsibilities or find one-off gigs on Craigslist/Fiverr.
There are so many more things you can do from home to make money! But, should time not allow, here’s one idea that might increase your earnings stream:
Establish an Oberlo dropshipping business; Set up an online Shopify store.
Sell data products (blog, e-books, programs, webinars, audiobooks, podcasts and applications). Gain affiliate internet marketing results. Buy properties to lease out to tenants for rent and invest the proceeds into shares of stock.
Lucky for you, all seven sources of revenue don’t need to come from one single source. For instance, an expert in eCommerce might consider creating seven separate online shops as sources of earnings.
Be careful not to underestimate this business model: You might not fully realize just how much potential there is in operating an internet retailer. Keep this in mind; don’t try starting up all seven simultaneously; they can all be added gradually over time.
- Transferring to a Poorer Nation
There are various money-making enterprise ideas out there; but other ways can also save. One such method involves moving into countries with lower GDP rates to expand your savings opportunities further.
One strategy could include moving to a country with lower living costs; doing this would save on income loss from living in rich nations.
Since salaries tend to be larger in wealthy nations than poor ones, so too will all associated bills. With an ever increasing number of individuals turning to telecommuting for professional work, telecomworkers may continue delivering services while living in less wealthy nations with lower cost-of-living costs and thus reduce fixed expenses by telecommuting.
Due to the lockdown caused by coronavirus pandemic, many employees discover telecommuting.
As a result, more individuals working in countries such as Germany, Sweden or Norway are considering moving to lower cost places like Spain with lower living standards.
Simply stated: Teleworking makes financial sense due to reduced living costs and enhanced quality-of-life benefits that accompany remote working arrangements.
There’s also been an increasing interest in digital nomadism, or digital nomads traveling all year around for extended stays in particular nations such as Thailand, Indonesia (especially Bali ), Panama or Costa Rica.
While visiting these countries, visitors might come across popular on-line services or jobs requiring search engine optimization guides, copywriters or net designers – tasks which could easily be accomplished using just their computer and Web access. - Make Money on the Stock Market
Stock investing entails purchasing shares in companies, with these organizations then handing you part of their earnings through dividend payments. By purchasing many shares at once, your dividend returns could become substantial – just remember: buying more may mean greater dividend payouts!
However, we advise against investing in stocks by buying shares at reduced costs and then selling them more expensively; otherwise you risk potentially incurring large financial losses.
Purchase and Maintain is a method in which one builds their portfolio with shares from secure companies with stable financial bases, buying more shares each month with extra money set aside from income sources.
So as the portfolio increases and dividends increase at a similar pace. Utilising long-term strategies doesn’t matter whether shares go up or down; what really counts are dividends received.7. Make investments for the Future
Our final tip for financial freedom is integral. By following all the recommendations in this article and repaying debt and increasing savings accounts accordingly.
Assuming you don’t experience anything unexpected in the short term, these savings should suffice; but, it is vital that you plan for retirement now while it may seem far away.
Time slips away quickly, and if you wait too long to start sowing now, then tomorrow won’t bring you any rewards of your labors.
Assuming you have an ongoing job from 9-5, talk with your employer and consider subscribing to a retirement plan or reviewing it periodically so you can watch as your savings grow.
Save enough to create an emergency fund. Although some experts advise saving three or six months worth of salary as an emergency cushion.
However, for individuals without high salaries saving an emergency fund equal to six months’ of their pay can be challenging and so starting with achievable goals should be your approach.
If you have overspent on credit cards, don’t use your emergency fund to repay this debt: search instead for business ideas which will generate cash faster and help cover immediate emergencies. Your emergency fund should remain separate for that purpose only.
Calculation of Monetary Freedom
Now that we understand our goals for financial independence and independence from working, let’s conduct a calculation to figure out a way to reach it and answer “how much do I need in savings to live comfortably” or the question, “Does financial independence require working?”.
This Financial Freedom Calculator utilizes three elements in its calculations.
- Determine Your Wealth
To understand how much wealth exists within, it is imperative that one understand how much cash would exist if they had given up work altogether.
Add up all the money that’s sitting around at home, the cash deposited in your checking accounts and deposits; as well as investments with short return times (less than seven days).
Determine what state your finances would be in should an unexpected end to salary payments come about. - Calculate Your Monthly Bills
Carefully consider all fixed and variable bills you incur each month (such as electricity, gasoline and mortgage payments) or annually ( such as life or health policies). To do this effectively.
Only with accurate data will you understand whether you spend more than what was invested or save. - Calculate Your Financial Freedom
Our Monetary Freedom Calculator enables you to know exactly how many months’ of living expenses would remain unfulfilled in case your job were to vanish and income stream would cease flowing in.
