Financial Freedom means having enough money to pay for your expenses for the rest of your life. You do not have the pressure of working for money, you are free to follow your passion or do whatever you really want to do. A person who has achieved Financial freedom generally lives on the income generated from investments. Although Five years is relatively not a very short span of time to achieve financialfreedom, there still a lot that can be done in this period that can take you very close to being financially independent if not completely achieve it. Let’s see what all steps are involved in it.
- Check your current financial position
To start any journey, you need to know where you currently stand. This is one crucial step towards any goal you want to achieve. In order to seek financial freedom, you need to learn where your finances stand currently. How much do you own and how much do you owe to other entities, How much you earn and how much you spend.
If your finances have been a mess and you have not been keeping good track of it then also it is never too late to start. Start tracking all your income and expenses from the very next month and see where you stand. Start afresh, it’s okay to not be sorted. The most sorted people also started at some point in their life. You can use mobile applications like Walnut to track your income and expenses.
- Debt Management
To be financially free, one needs to have full control over their income and not be obligated to others whereas debt brings obligation into the picture. Debt is something that should ideally be paid off first from the income of the individual. Debt reduces your monthly disposable income and therefore also reduces your savings and investments hampering your financial health.
One needs to pay off all their existing debts in five years and not take any new loans. Although there are ways to make more money using debt or loans but that only applies to people who are rich in cash flows and have a higher level of Financial IQ.
- Spend only on Needs
There is a significant increase in the average amount of purchases made by an individual over the past few years and consumerism can be blamed. We shop a lot, sometimes we shop more than the money we have. Few people also do impulse shopping. This really messes your finances and also leaves you with things you might never use.
There is a need to ask yourself if you really need that product/service before buying or are you buying because you found it attractive/ you got convinced that you want it/ any other reason. If you do not need it, it’s not worth the money because this money can be in a much better place and work for securing your future. Make wise money choices.
- Increase Your Income
Seeking Financial Freedom in such a short span of time like 5 years can not be done only by cutting down expenses, it is going to be way tougher than this. One needs to think of various ways to increase their active income. Either work an extra job or extra hours or start utilising that wealth of yours which is left idle and put it in appropriate financial assets. One can go for any based on what suits them the most but increasing the income is important if it is not already too much (who are we kidding? even billionaires do not accept they have too much).
- Invest according to your goals
Everyone invests but not everyone can make the most out of their investments as there is a lack of strategy and proper goal planning. Investments are supposed to be done strategically according to your Financial Goals. In the next five years, you should first determine what all your goals look like, how much money do you need to achieve it and then start investing in suitable assets according to your risk taking ability and time period.
Investing in any kind of asset with no planning can make you feel helpless in the times you need your money the most. Planning your investments is a must. Do your research on all kinds of suitable assets and invest wisely. Five years is going to be a very short span of time for all of this but one can definitely create a good set-up in 5 years and work systematically so that money management feels like a cakewalk after that.
Achieving Financial Freedom in a particular time is going to depend a lot on your savings rate. If you save more, you have more money to invest and thus more income sources leading you towards Financial Freedom. It is time to upgrade your Financial IQ if you really want to make your dream of Financial Freedom a reality.
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