What all things come to your mind when we talk about Financial Freedom? Is it your savings account or your investments or something else? Saving is a significant first step, but it is not enough to propel you into your journey to financial freedom. Financial Freedom is when one does not worry about money being a hurdle in anything that one requires to do. Money should not come in the way of you and your passion. Not relying on your profession, job or business for your financial survival is financial freedom. Because in that situation you work day and night to make money compromising on their passion, on the things they love and on their bigger purpose in life.
One can not do good in anything if their WHY is not clear. We have to set out goals which becomes the motivation behind what we do and how we do. Sometimes we already have set our goals but that list of goals need to be updated every now and then by removing those goals which are either completed or stand irrelevant. Your Financial Goals have to be very clear and obviously have an estimated number involved.
One must make sure that there is a WHY behind the reason to save and that should be strong and clear enough. It should reflect what you are moving towards. Each person has different goals in life. Your real goals are what you would like to own, not something that society wants you to do. For example, owning a house or a car by the age of 30-35 seems like a norm in the society even though it may or may not be a part of an individual’s plan. So one should not determine goals considering society into consideration but should sit and decide what he/she really wants.
Continue exploring sources
One must not stop exploring other sources of income once they get settled in their job or profession. They must keep looking for other Passive Income sources. One such easy way is from the growth of their existing wealth. They might have already been having their passive income sources but they should still not stop exploring as they might miss on to many great options. The best way to keep looking is investing in upgrading ones financial education through courses, programs and mentors.
What is crucial is taking actions after finding out a better platform for your money. Most people know a lot but are too lazy when it comes to actually moving their money from one platform to other. This leads to their loss.
Emergency Fund is Very important
People save and invest but mostly with a purpose of spending it later on. You might have heard people saying that the bank money they have is for emergencies and that will be used in special situations. Their definition of emergency so far has been things like some hospital bills or some dire need of cash but this clearly is a vast spectrum. The recent crisis due to the Pandemic can also be termed as an emergency as people were losing jobs, losing their money and had no extra contingency fund so that the family and its needs can be taken care of.
An ideal emergency fund should have an amount good enough to take care of the family at least for three to six months. This fund should not be put in an asset which is not liquid. It should obviously be not left idle in the bank as that does not make sense to let your emergency fund de-grow. Having an emergency fund will keep you relaxed and saves you from all the mental trauma you might have to go through otherwise.
Save to invest, merely saving won’t work
As mentioned earlier, saving merely would not at all help in fact keeping your money idle in bank after savings is a loss rather than a step towards financial freedom. The money saved should be invested in appropriate assets based on your risk tolerance and Goals. The assets should only be considered to invest in after there is a good amount of research involved in it. This research can be done by you or you can seek professional help from financial advisors.
Most people simply save and are too scared to put their money anywhere citing that they fear losing it. What they do not know is that there are many financial assets with very low risk (as low as bank money and bank money too recently has been on high risk) and that they should definitely invest in such assets like liquid funds, AAA rated bonds, etc.
Again, taking action when it is required is very important.
Strong willpower to achieve financial freedom is very important. Simply wanting something does not help unless you really put efforts in achieving that. Discipline is the key, financial discipline is very important. There should not be over spending and savings should be invested and reinvested in order to grow your wealth.
Financial freedom will not come very easy, there will be times when you would want to spend all of the money that came after the maturity of your bond but you will have to keep calm, assess the need of what you are going to spend it on and see how much you can re-invest. Financial discipline is the key.