This question is not all that different from asking what constitutes financial freedom? And the only problem in asking this question is that many people have their own definitions and understandings of financial freedom. For instance, the manager of a multi-national company will not perceive it as a salesgirl in a pharmaceutical company would. While, all these differences do exist, there are qualities or certain things which can guarantee your financial freedom.
Provided you have these qualities in place and regularly strive to improve upon them, financial freedom will be yours forever. You’ll be sound in your finances and be happy in living a life free of indebtedness and its associated problems. Detailed below are the qualities that constitute financial freedom.
1. Living Debt Free
If you live a life of indebtedness then you aren’t financially freedom. Financial freedom is all about being able to live below/within your means to avoid a life of indebtedness. Even if you make more than $100,000.00 per year but still suffer indebtedness, you’re not financial free.
True financial freedom lies in your ability to manage well on your income and avoid all impulse purchases and unnecessary expenses, which can lead you into debt and out of financial freedom. Here is a link about getting out of debt and saying so forever.
2.Being Able To Save Money
Your ability to save money is also something that determines your financial freedom. There is no way you can save money unless you have enough income to cover your expenses. And this is where you need a financial plan. It is the one thing that’ll allow you to track your expenses and be able to manage your money efficiently. Avoiding impulse purchases can also enable you to effectively save money.
Start budgeting to manage your money today and open the door to your financial freedom, no matter the size of your income. If somebody who earns $80, 000.00 per year can effectively manage his/her money to enjoy financial freedom, you can also do it weather you live on $10,000 or $30,000 per year. It’s all about effective money management, which you can easily achieve with the help of a personal finance budget.
3. Saving For Retirement
You can also be saving money from your income, but still be nowhere near financial freedom. Wondering how that can happen? No problem; just imagine what will happen if you are someone who saves 2% of his/her income and then suddenly you lose your job during a financial crises.
You’ll immediately use up the money you’ve saved down while you look for another job. You may even go in for loans and become a slave of indebtedness again and even sell some of your personal effects to stay afloat financially.
To avoid such a scenario, you must have in place two or more saving accounts. One for general savings and another as a retirement fund. Saving for retirement is very vital in becoming financially free forever.
4. Being Able To Take Financial Risks
Financial risks, that’s what I call investments; those strategic uses of money that can make or unmake your financial future. Whatever, we chose to call them, investments are things that can boost your finances, and there is no way you can go into investments, when you have only one source of income. It’ll be a gamble.
Find other income sources and boost your finances. You’ll then be able to save for the future and safely invest some of your money to make more money for yourself. There is no point in letting your savings lie idle. Put them to work or at least put them into treasury bills and government bonds. These are secured investments you can make to preserve your financial freedom.