What is financial freedom and how to achieve it?

Contrary to popular belief, achieving financial freedom requires having control over your finances. Therefore, having enough residual income to enable you to live the life you desire without worrying about how you will pay your bills or handle an unexpected expense is one of the better ways to define financial freedom.

Having a lot of money and being wealthy are not prerequisites for being financially free. Having control over your financial past, present, and future is more important. There are 8 different levels of financial freedom, to give you some context. These levels range from having enough money to last a lifetime to not having to live from paycheck to paycheck.

The first level, where you are not living paycheck to paycheck, is one of the most intriguing. Because not only the working poor must struggle with tight finances, it is an interesting level. It can happen at all income levels. Even someone who is extremely wealthy could be earning and spending to the point that he is living in a tight financial situation. Because of this, having financial freedom is merely having financial control.

Level 4, or the freedom of time, is another significant level. It's a goal that many individuals have. When your income flows are organised so that you may quit your work to pursue your passion or spend more time with your family, you have freedom of time. most essential, avoid going bankrupt in the process.

The FIRE movement can be used to obliquely describe Level 5, which is an interesting one. FIRE stands for Financial Independence, Retire Early and refers to a way of life that is gaining popularity among young adults in the West.

The FIRE movement is based on being thrifty and encouraging individuals to maximise their savings rate by exploring ways to improve their income or reduce their spending. The goal is to set aside 50 to 75 percent of your salary as savings, which will be utilised to build up assets and produce enough passive income to cover retirement expenditures.

Depending on your lifestyle and financial condition, you can choose your desired amount of financial freedom. There are nine crucial measures you must do in order to achieve financial freedom. These steps can include actions as well as tactical and strategic choices. Your path to financial freedom will move more quickly the more steps you can complete.

1. Understand Where You Are Presently

Knowing where you stand right now is the first step toward financial freedom. This entails having a clear understanding of your debt load, savings balance, monthly expenses, income, etc.To put it another way, you must be familiar with your personal financial statement and have a reasonable understanding of your income, expenses, assets, and liabilities. Once you have these figures, you can move on to step 2 of your journey toward financial freedom, which is writing down your objectives.

2. Pen Down Your Goals

Why do you require cash? It can be to pay off a student loan, try to launch a business, travel, arrange child weddings, save for retirement, etc. These are the goals you wish to achieve as soon as you have enough money.Therefore, money is just a tool to help you reach your financial objectives. However, until you put your goals on paper, your money will be wasted and you won't know how to use it wisely. Therefore, put down your top five goals for the upcoming 1, 5, 10, and 20 years on a piece of paper.

3. Track Your Spending

Tracking your spending is a crucial next step toward financial freedom. You can accomplish this in a variety of ways, such by utilising an excel spreadsheet or a notebook. You can also use the ETMONEY app's money tracker feature, which is a simple and useful method to keep track of your spending. Your spending are automatically tracked by the programme, which classifies them according to travel, shopping, dining out, etc.This spending tracking, which increases accountability, is a crucial step toward financial freedom. Additionally, it reveals a lot of unnecessary purchases you made just because you felt like it. An impulsive purchase, if anything, symbolises losing control and stands in the way of your quest for financial independence.

4. Pay Yourself First

Pay Yourself First refers to the practise of saving or investing a set amount of money before paying any other bills, discretionary expenses, rent, or other obligations.Paying yourself first has been one simple step that has brought many people closer to financial freedom. This works because it drives us to look at other options to keep your costs down.For instance, you would be required to take further action if the remaining authorised expenses were insufficient for you. This can involve making simple lifestyle adjustments to cut down on your existing spending or it can entail starting a side business to complement your present income. In any case, paying yourself first ensures that you are

5. Spend Less

Savings equals earnings. However, the ratio of one rupee earned to one rupee saved is not equal. Because you end up making much more money when you invest that one rupee.Spending less today does not entail giving up your current way of life or going without. Smart spending, which may be done in a variety of inventive ways, is more important for financial freedom. One of the popular methods is to develop your cooking skills so you can save money on eating out. establishing auto-debits to prevent late fees on your credit cards.Reduced impulse purchases can be achieved by simply delaying non-essential purchases for a few days, which brings you closer to your goal.