There are many different paths to financial freedom. For some people it’s the product of years of planning and discipline. For others, it’s not necessarily a goal they set out to achieve but one they happen to stumble upon over time.
Your idea of financial freedom might differ from the next person’s, but at its core it’s about being able to pursue the lifestyle you want without being weighed down by financial concerns. Below, we explore what that might look like and how you might be able to achieve it.
Having a reliable passive income stream
One of the more common conceptions of financial freedom involves having a steady stream of passive income. This is income that you don’t necessarily need to work for, such as rent from an investment property, interest on savings, and dividends from shares.
With time (and some help from compound interest), these investments might come to generate enough money to cover many of your day-to-day expenses. This might free you up to reduce your hours at work, or even retire early and pursue other passions.
Steps that might help you get there:
Being debt-free
Debt comes in good and bad forms. Some types of debt are essential for reaching our most significant goals, such as owning a home or acquiring the skills to work in our desired field. But others can be a drag on our finances if not managed wisely (such as credit card debt if left to snowball).
Regardless of which type of debt you have, chances are it’s not something you want hanging over you for longer than necessary. By putting in the hard yards to pay it off you’re essentially clearing one of the biggest obstacles to generating wealth and achieving the lifestyle you want.
Steps that might help you get there:
Having enough money to withstand a financial shock
Life is unpredictable, and despite our best efforts things can suddenly and unexpectedly veer off track. That’s why a robust safety net is often considered an essential pillar of financial freedom. Having one can give you confidence that your plans won’t be derailed by, say, a surprise bill or a prolonged period of high inflation, as well as help you navigate any challenges that pop up without resorting to debt.
Steps that might help you get there:
Having enough money to provide for your loved ones
Finally, many people regard financial freedom as having enough money to provide for your family in ways that both contribute to their financial security and enrich their lives. This could mean springing for overseas vacations, assisting with childcare costs, or chipping in part of the deposit for your child’s first home.
But there’s another element that’s just as important: being able to create generational wealth. As a parent, chances are you want your children to live more comfortably than you did. If you can turn the fruits of your hard work over the years into a legacy that can be passed down from one generation to the next, it can transform their lives for the better.
Steps that might help you get there: