We often hear talk about financial freedom and the many benefits that it brings. However, what exactly is financial freedom, and can we quantify it?
Simply put, financial freedom is defined as a person’s ability to sustain his/her standard of living without having to work. To achieve financial freedom, an individual will have to accumulate sufficient cash/non-cash assets in order to support themselves. All of this is extremely subjective as all of us have different expectations and spending habits.
Realistically speaking, financial independence is a pipe dream for many of us. From declining wage growth to the rising cost of living it sometimes appears as if the game has been rigged from the start.
In the past, our parents were able to live comfortably on a single source of income whereas nowadays, most of us are forced to juggle multiple jobs just to stay afloat. The changing nature of the economy, employment and rising globalization simply means that a paradigm shift is in order.
Investment advice given out by our parents no longer holds any water in this day and age. Instead, we should be taking advantage of the freedom and access to information granted to us by technology.
In this article, we take a non-conventional look at how just about anyone can achieve financial freedom.
1. Make your money work for you
Making your money work for you, is one of the oldest yet most relevant pieces of advice given out. While cash may be king, it’s pretty much useless if you can’t make it work for you.
Cash kept in a bank account is just numbers on a page. When invested however, your cash goes out to work for you. From stocks and bonds to online lending, the future lies in your ability to multiply your cash without any effort on your part.
Online brokerage accounts now let you buy and trade stocks from your smartphone while high-interest bank accounts allow you to earn a steady flow of interest income. As Einstein once said, compound interest is the most powerful force in the universe.
While the going may be tough at first, always remember that investing is a long game. You’re not Gordon Gekko or Warren Buffet, focus on low-risk, dividend paying stocks and bonds. Before long you’ll be able to live off of your investment portfolio.
2. Clear of debt
It’s no secret that banks and lending companies make an absolute killing on interest charged. This is why it’s critical that you clear off any outstanding debts i.e. credit cards and loans that you have.
Credit cards in particular is one of the more dangerous and pervasive forms of debt. Due to the extortionate interest rates charged and the option to pay only the minimum amount every month, it’s very easy to end up with a huge mountain of debt.
While it may seem overwhelming at first, start off by drafting a plan that allows you to tackle any outstanding debt. Over time, you’ll become accustomed to this new lifestyle change and before long, you’ll be living a debt-free life.
3. Develop secondary sources of income
Financial independence refers to your ability to sustain your current lifestyle without having to work a day job. In today’s uncertain economy, it’s best that you develop multiple streams of income where possible.
Where we’ve touched on the value of investing, freelance work can also be a great way for you to build up another source of income. Sites such as Upwork and Fiverr provide freelancers with a marketplace for their skills and now thanks to increased globalization, organizations have turned to the freelance market for their needs.
Accountants and copywriters, graphic designers and programmers have all found their niche online. If you’re reading this article, chances are you likely have some skills that can be monetized.
In fact, there are multiple success stories of freelancers who have chosen to quit their day jobs to better focus on their side gigs. Maybe you are a sports enthusiast and you want to place your luck on BetAmerica.com and guess the winner of the upcoming SuperBowl? Just remember to wage responsibly, so you do not compromise your financial stability.
Financial freedom can be achieved through a combination of hard work and discipline. While these steps are by no means the final word, they have the potential to take you a long way.