Stage 5 on the financial wellness roadmap is financial freedom.
From financial independence to being financially free, it’s the stage where you can be and live how you want without the trappings of finances. You’re living the life you choose.
What is Financial Freedom?
Similar to financial independence, financial freedom means your wealth covers lifestyle choices and expenses. Making money is not a priority, and work is purely a choice. Additionally, economic freedom can mean the ability to take on risky opportunities because finances aren’t an issue.
Financially free people have attained a high level of financial knowledge, accumulated enough wealth, managed money exceedingly well, and made mindful spending decisions. Being financially free, you have regained full use of your time to do as you wish or to serve a greater purpose.
At stage 5, you’re able to answer questions like: how do you spend your time?
Financial Freedom Key Features
- control over one’s time;
- large financial nest egg;
- income-producing assets;
- passive income streams;
When you’re financially free, it’s much easier to do things you enjoy with little thought to money. Thus, allowing you to focus on wellness.
Financial Freedom Defined
Financial freedom is as personal as your health and wellbeing. People define financial freedom in many ways but often cannot express what freedom means to them. I’ve met quite a few financially independent people who still experience a great deal of anxiety and stress.
Freedom is personally defined based on your set of values and priorities. The idea is to live free of financial stress and spend more time on what matters most to you. The pressure is often related to not knowing what to do with free time or lacking a sense of purpose or direction.
Why Financial Freedom Matters
Imagine having the home of your dreams and not worrying about paying your mortgage, being able to travel freely, and early retirement because you have enough money not to have to work another day in your life. Of course, you can continue to work, but only because it makes you feel good and not because you need money.
More Free Time
It’s important to understand that money isn’t what makes you feel rich. It’s the freedom that comes from having money that enables you to pursue whatever it is that brings you joy and happiness.
I discussed the importance of time in You Only Live Once. Get your copy of my bestselling book on Amazon or listen on Audible.
The true goal of financial freedom is to give you more choices to live your life and spend your days. You regain back your time to be more of who you are and free of financial distractions.
Purposeful Work, Not “Retirement”
Being financially free gives you the ability to choose work that matters to you. It doesn’t mean you stop working altogether. Working on your important projects and with people you enjoy can support your wellbeing. At this point in your journey, you should have a good idea of your life goals. Now, you have the time and resources to embrace them fully.
It means no longer working at a job or doing work for financial reasons. You’re choosing to do work because it interests you and aligns with your values.
But you certainly can retire indefinitely sitting on a beach chair staring out into the horizon.
How to Become Financially Free
Financial freedom sounds like heaven, one that is only possible with patience and determination following the proper steps, amongst other things. You can say you’ve reached financial freedom when you have enough money for all your living expenses and for the things you like. Then work becomes only optional, because you have enough money.
What does financial freedom look like to you? It’s the freedom to:
- work at a job you love regardless of pay.
- spend time on your interests and projects.
- choose family over finances.
- buy things and experiences.
You can start planning for your financial freedom anytime, no matter what age you are. Some people make a very vigorous plan to retire early, and they make the commitment in a time frame, be it five years or 20, depending on what sacrifices they are willing to make.
If this sparked your interest, let’s take a look at the most critical steps to reach financial freedom so you can have fewer worries in your life.
1. Evolve your money beliefs
Financial fear affects many people, even those who we may consider rich and have plenty of money. To live free, you must challenge your beliefs and face your financial fears.
What are some of your limiting money beliefs? Learn how to improve your relationship with money.
2. Create your personal plan
You’ve gotten this far on the road to financial wellness. Financial planning is at the top of the list regarding the steps you need to take to achieve your financial freedom. Having a well-put-together financial plan will help you along the way. Start by enhancing your existing financial plan. And if you’re new to this journey, get familiarized with setting financial goals and assessing your current finances.
Reaching financial freedom starts with becoming independent from a job for income. What’s your FI number? Calculate your financial independence number. An essential step to financial freedom is knowing and thinking about your number or the amount of money needed to help you become financially free. Keep in mind there’s no one size fits all number.
Ultimately, the number helps you know the amount of money you’ll need to enable you to live freely. Your financial freedom plan focuses on ensuring your finances remain on track with little effort on your part.
3. Automate your finances
If you haven’t automated your finances earlier in the journey, you’ll want to do so now. You don’t need to check your deposits or withdrawals constantly. And it would help if you indeed had your investments automated to take advantage of dollar-cost averaging and effortlessly meet your financial goals.
4. Attain debt freedom
To have financial freedom is also to be debt-free. Every financial plan you make needs to include the amount of money you owe and a clear plan in a set time frame to pay it off. To resolve it faster, you’ll need to put more money aside for debt payoff. Be very mindful of all the expenses that you can cut to use the money to pay your debt.
2. Spending mindfully
Spend on what matters most to you. Achieving financial freedom isn’t about spending money freely. It’s about choosing not to spend because your priorities aren’t about owning stuff but owning your time. Mindfully spending is a skill that needs cultivating. It’s not about depriving yourself and choosing the cheapest option. Being financially free means you can afford the best because it meets your needs, not because you’re keeping up with the Joneses.
6. Invest intentionally
Financial freedom includes intentionally investing to ensure your assets continue to grow. Your income is dependent on these income-producing assets. Money has to be consistent and continue to flow into your life.
The way to achieve this step is by investing in income-generating assets. One of the most common assets is having a good portfolio in the stock market. Another is having properties that you can sell when the prices are high. Real estate investments can also be consistent cash flow if you rent them. This way, you will get a monthly/yearly income without having to report to work.
You can get a taxable brokerage account to invest your money in the stock market. In contrast to retirement accounts, you can take your money out at any time, thus making it an investment you can depend on anytime.
8. Monitor, evaluate, and make changes
To reach financial freedom, you’ll need a system in place to evaluate your personal and financial situation. Your desires and interests will continue to evolve. It will require you to make changes to your financial plan accordingly. Follow an annual review of your financial goals and set up periodic notifications to alert you of investment portfolios and income streams changes. Make any adjustments as necessary. Monitor your spending and expenses to protect your finances.
Keep in mind being financially free doesn’t mean you let your money do its thing without supervision. It simply means you don’t stress about money because you’re fully aware of how financially free you are.
You will need to have financial intelligence to work out an achievable plan and stick to your goals. Financial freedom is not easy to obtain, but with consistency, a clear plan in mind, and expert help, you can start working on it right away. You’ll be thankful to yourself in the future for making this decision.