Financial freedom is a concept that sometimes differs based on one’s background. While some may be drowning in debt, this freedom will mean getting out of this difficult state.
For some, financial freedom might mean earning enough for them to support themselves, not depending on anyone else. Some may equate financial freedom with being comfortable in life.
Regardless of your purpose for achieving financial freedom, many of the ways to get there are pretty much the same.
Want to be one of those to achieve financial freedom in the shortest time possible? Read on!
What Is Financial Freedom?
Many financial experts define financial freedom as having control of your finances that allows you to make better life choices.
This is more of an end state of your financial progress that is characterized by being comfortable and having the luxury of doing what you want without being limited by budget.
Financial freedom also gives you a better quality of life that you can pass down to the generations after you.
It doesn’t necessarily imply that you don’t have to budget anymore, but it just means waking up and not being stressed about money issues.
You’ll know when you achieve this type of freedom when you don’t need to worry financially anymore about what to eat, where to take a vacation, what school or university your kids should study at, or even losing your job!
If you’re excited to start your journey toward financial freedom and early retirement, here are 12 ways to reach your goals faster and live the life you’ve always wanted:
1. Assess Your Current Situation
As many say, you won’t get to your destination without knowing where you stand at the moment.
Although this may be a scary process for many who are starting from scratch or from a negative balance due to debts, this is an essential step if you are serious about reaching financial freedom.
Knowing where you currently stand will also help you determine what goals you need to set for yourself and what type of support systems to use to be successful faster.
Pro Tip: As you work your way toward financial freedom, always revisit this starting point and let it be your motivation to do your best in achieving your money goals.
2. Determine Your Financial Goals
As mentioned in the introduction, there is no hard and fast definition of financial freedom.
Hence, how you define your goals to reach this state will differ based on what financial freedom means to you.
If it means getting out of troublesome debt, then your goals must be related to strategies centered on how to clear your debt as soon as possible.
If your financial freedom is related to having an early retirement, then craft goals that will help you generate multiple streams of income.
It is critical for your goals to be very specific and must have a deadline. You also need to be accountable for your own goals.
Pro Tip: An effective way to set goals is to determine your deadlines first and work backward to your starting point.
This will allow you to check how much time you have and how aggressive your goals should be.
3. Do an Accounting of Your Current Budget
Before you work on cutting costs or generating more income, it is best to sit down first and list all your sources of income and your regular expenses.
For your expenses, it is also best to prioritize them in order of importance, or what you need to survive versus what you want to make you happy or comfortable.
As you list these items down, you are also reviewing where your money actually goes and if your current income is enough for what you actually spend on a monthly basis.
This is also the step where you need to decide which items on your list you can actually live without and are okay to sacrifice.
This will also help you determine how much more money you need to generate for you to reach your goals.
This step is very critical to surviving difficult financial situations and is even featured in our article on how to save money while living off of a single income.
4. Manage Your Money Through Multiple Accounts
One of my best practices, especially when I started setting goals for my own financial freedom, is opening multiple bank accounts that act as different wallets for my different savings categories.
To my surprise, many of the young and successful entrepreneurs I got to know also implement the same money management system I have.
Just to share, my personal goal is to achieve financial freedom so I can provide the best quality of life for my family. This pushes me to have multiple streams of income.
When I realized that managing money from different income sources can be quite chaotic, I set up different bank accounts to organize my money for different purposes.
Here are some of the categories of my bank accounts:
- Main savings account
- Salary
- Investments
- Businesses
- Emergency Funds
- Benevolence
Since I started doing this, managing everything has become much easier!
5. Strategize to Pay Off All Your Debts the Soonest
So long as you continue to have bad debts, it’s like walking with holes in your pockets.
It will not matter how much you earn — you will continue to lose them to useless interests and gain nothing out of it.
Hence, one of the first action plans to achieve financial freedom, regardless of what your specific goal is, is to pay off all your debts.
There are different approaches to doing this, but in our article that lists some of the best money-saving apps, we have featured Undebt.it — a web app that can partner with you in paying off your debt completely.
Here are some of the payout strategies you can choose from Undebt.it:
- Debt Snowball: Lowest balance first.
- Debt Avalance: Highest interest first.
- Debt Hybrid (Debt-to-Interest Ratio): Balances high interest rates with smaller balances.
- Highest Monthly Payment: Highest monthly payment first.
- Highest Credit Utilization: Debts with the highest credit utilization first.
- Highest Monthly Interest Paid: Highest interest first, but looks at the highest actual dollar amount of interest.
- Custom Plan: Design your own personal debt payoff plan.
Once you have taken care of this big hurdle, you will be surprised by how much faster you can build your savings.
If you’re looking for more practical tips on getting out of debt and improving your financial situation, check out our article on how to get out of debt fast.
6. Avoid Mindless Spending
What do you do first when you receive your brand new credit card, a bonus at work, or a huge payment from a business transaction?
If you tell me that you will be able to finally buy that brand-new phone, luxury bag, or designer shoes, that is normal.
However, do not expect to achieve financial freedom when the first thing that goes on in our mind is how we will be spending our hard-earned money.
Many of those who have successfully achieved financial freedom have always prioritized two things before the thought of spending — saving and investing.
What they earn from growing their money first is what they eventually use to buy the things they want.
Even as your wealth grows, maintain living a frugal life. Practice delayed gratification until you can truly say to yourself that you can afford something without straining your budget.
7. Generate Multiple Sources of Income
One of the best habits of rich and successful people that we can follow to achieve financial freedom is to go for multiple sources of income.
Having multiple income sources has two major advantages — you reach financial freedom faster since you earn more, and you protect yourself from earning nothing in case something happens to your main source of income.
It is also smart to have a balance of both active and passive sources of income.
Active income means working actively in exchange for money, such as your job or business.
Meanwhile, passive income is earning money even when sleeping, such as investing in stocks or doing affiliate marketing.
As you near your retirement age, though, you must make it a goal to convert most of your active into passive income.
This gives you the peace of mind that you will continue to earn even as you enjoy your retirement!
8. Build an Emergency Fund
A critical aspect of being financially free is being able to survive regardless of a crisis or an emergency.
In this case, having an emergency fund must be one of your major priorities to protect yourself from sliding back to being in financial trouble when an unexpected event happens.
How do we define emergency funds? It is a set amount of money equal to at least six months of your salary or living expenses.
This means that in case a certain crisis occurs for a particular period, you have a set amount to use for your entire family’s needs instead of getting into debt for survival.
This also means that the length of time you can survive financially will depend on how much you have saved up for your emergency funds.
Case in point, the COVID-19 situation had made me prioritize saving up for at least a year’s worth of emergency funds.
Nobody expected the pandemic to last that long, and it is better to be safe than sorry!
9. Protect All Your Assets
It has always been a scary thought to lose money that took you years to grow. A single unexpected incident can always leave you empty-handed.
And even if you thought you were so near to achieving financial freedom, you find yourself back to your starting point.
Aside from having an emergency fund intact, you also need to consider protecting all of your hard-earned assets from fire, medical emergencies, road accidents, and other unexpected life events.
Here are some of the most basic types of insurance you need to consider in protecting your assets:
- Life Insurance
- Health Insurance
- Fire Insurance
- Car Insurance
When you have these, you can easily rest at night, knowing that whatever happens, you and your family are financially secure.
Pro Tip: When you are looking for a reliable life insurance partner, Pacific Life Insurance tops the list of Forbes Advisor’s best life insurance companies in 2024. Check out their rates and cash value accumulation.
10. Invest in Yourself
It has been said that one of the best gifts you can give yourself is to invest in your improvement.
What types of investments are we talking about? Education and health!
When it comes to learning, you can enroll in financial seminars, classes, or even courses that will give you the expertise on how to manage your money and allow you to engage in businesses and investments more confidently.
You can even do this right in the comfort of your own home! Check out both free and paid finance courses offered by edx in partnership with some of the best universities in the country.
You can also look into developing new skills or talents that can significantly boost your value as you apply for additional part-time or freelance opportunities.
Finally, find time to invest in your health! This is oftentimes neglected when one becomes too busy trying to grow rich.
However, take note that if you fail to stay healthy, everything that you have saved will all just go to medical expenses and hospitalization.
Cliché as it may seem, but the quote “health is wealth” truly makes sense.
10. Get a Financial Advisor
Once you have accumulated a decent amount of wealth, especially for the first time, it might overwhelm you, and without proper guidance, you can easily lose it as well.
At this stage, you will definitely be able to afford a financial advisor to help sort things out for you. This person can help you manage both your liquid and fixed assets.
Financial advisors can also provide you with guidance on where to invest your money further based on your life goals and how to retire successfully.
12. Repeat Your Success Formula
One of my financial mentors has told me that getting to your very first million is the hardest part. Everything after that will just be a walk in the park.
That is so true because once you reach your first milestone, you will have already gone through so many failures, disappointments, and learnings.
These experiences make you wiser, and you already have a template or the right formula for being successful, making it much easier as you repeat the steps that took you to your first million.
This does not mean that you will not encounter hardships anymore, but once you reach your financial freedom, it is easy to stay in that status with the right discipline, flexibility, and decisions.
Final Thoughts
Achieving financial freedom is indeed not a walk in the park. It is a long and painstaking process that works best if you start earlier in life.
Having the discipline, partnering with the right people, and considering the tips in this article will all guide you toward achieving financial freedom, regardless of how you define it.
As you become successful with your financial goals, I hope that you will also be a blessing to those who need help reaching this state of financial security, comfort, and contentment.
How’s your experience so far in achieving financial freedom?
Share your success stories and even struggles with us through the comments below. Feel free to ask your questions too about achieving financial success!
