I am traveling today to the time of my life when I felt so powerful and happy, with confidence that I could be whatever I wanted in this lifetime. Nothing could stop me or hinder my happiness. I could dream boldly of what I wanted to be in this lifetime. I still vividly remember the days when I was dancing barefoot in the rain, so full of happiness and hopes for the future. I do miss feeling this way today. Life has made me more sceptical, more cautious, and less carefree. I definitely would love to bring back some of these childhood traits to my present: being more in the present moment, more courageous and confident, and keeping moving towards my dreams.
Embracing Life Free From Financial Constraints
Ask anyone, ‘what financial freedom is?’ They will tell you it is having the financial power and not being answerable to anyone. It is a time when you can say, ‘This is my money, and I want to do anything I wish with it’ and actually do that.
Individuals go through the ordeal of college, interviews, burning the midnight lamp, working extra hours, and sometimes even doing work they do not like for an entire lifetime just to be financially free. It might have appeared that our goal of financial freedom was the driving force behind everything we did at one point in time.
It is the mantra we keep humming to ourselves and others, and some achieve and some keep striving. However, living in this increasingly complex world and surrounded by the illusion of choice, this freedom often suffers from constraints.
You have a six-digit salary, but you have never invested a single penny. You are well into your forties, but you have not yet started making preparations for your retirement. You are paying your credit card debts, and that stops you from saving money. Are you financially free, then? Freedom is a diabolic word, and if you do not take charge of this financial freedom, somebody else will, and then you will not be free anymore.
Only You Know What is Best
Everybody has an opinion about the best way to lead your life and save your money. If you allow your thoughts to get drowned by other people’s opinions then you will never get what you want and how to achieve it. Hence, you will never be financially free despite the salary credit every month. So decide what do you want to achieve, how do you plan to save and invest, what are your life goals and how do you go about achieving them.
Talk to people who matter and take their advice. Your financial situation will have an impact on your spouse, your parents, and your children, who play a significant role in your life. Hence, it is only wise that you include them in your decisions and take their opinion into account. Talk to financial advisors and experts, and take their opinion too. However, at the end of the day, it is your call to do it to the best of your knowledge based on facts and not myths.
Know Where You Stand
This is one of the most difficult assessments to make because we either overestimate our abilities or suffer from underestimation of our achievements. However, an honest estimation reveals our financial position and based on that we can predict a financial future. Take an account of your assets and subtract that from your liabilities, this will give you an estimation of your net worth.
Experts stress knowing your future financial worth as well, because when you take a loan, you borrow from your future income, and if you overestimate your future income, you will fall into a debt trap. Knowing where you stand will give you an idea of your financial position, ensuring you are able to chart your financial progress.
Track Your Spending
You are not free unless you are aware of where your money is going. It often feels like you start the month with a full account, and by the end of it, you have a relatively empty bank account and no idea where all that money went. You may never have money left to save or fall back during an emergency. You might find yourself spending when you do not need to and suffering from a lack of money when you desperately need it. This is, in no way, financial freedom.
So before it is too late, have a budget for everything, including little things like family dinners, outings, and shopping, and start tracking your spending. This gives you a clear picture of the avenues you spend too much on and the areas to cut down on. Liabilities are small leakages that erode your savings. Seal off the liabilities as soon as possible. Once you start making it a practice, you might find money that you save, invest, or stash away in an emergency fund.
You do not have to deprive yourself to save or invest; you just have to exercise a certain degree of balance between saving and spending.
Do Not Underestimate Small Savings
Underestimating the value of a few thousand rands or dollars is the biggest mistake we make. Unless it is a large amount, we do not consider it saving or investing, and it does not cross our mind. Small is powerful, and the small amounts you have saved are equally powerful. You may be saving your money in a savings account, which gives an annual return of 4%, or in fixed deposits, where the return is as high as 10%, and that is all.
If, on the other hand, you use systematic investment planning to put this money into mutual funds, then even seemingly insignificant amounts of savings have the potential to ensure your financial future. The monthly investment above is in small amounts. Amounts we spend every month without much consideration. However, the future value given is proof that a little consideration takes you a long way.
Get Insured
Nothing shouts financial freedom more than getting insured. You are truly free when you have taken ample measures to reduce the uncertainties and getting insured is a definite way of doing that. Get a term plan based on your earnings which gives you coverage of as long as 70 – 75 years at least. You can get a higher term plan or have a greater coverage in the same term plan once your income increases. If you are switching jobs and your new organization does not provide insurance facilities then you have to increase the coverage or you are becoming an entrepreneur then you must increase your term plan.
Get a health insurance done because nothing speaks of greater freedom than having a healthy body. While you cannot predict health problems you can make sure you get the best facilities. Insurance not only covers you and your health but it also protects your family. Hence, to be financially free, secure yourself and your family.
Plan Your Retirement
Financially free would definitely imply always having the financial power to lead life on your own terms without being dependent. So would you be financially free if you have lived a great life but during your retirement you have little or no savings to fall back on? We can safely assume the answer is no. Retirement savings is stressed upon because for every other life goal you can have the option of borrowing from your future income. However, for retirement you do not have that option of borrowing.
So it is crucial that you maintain your financial freedom in the future by investing your present income to fulfill future needs. However, the question still remains: how much to invest? While calculating the future value, you have to take rising inflation into consideration. The future value will always be higher than its present counterpart.
Through the table above, it is evident that, despite the amount, the earlier you start, the higher your future value of investment will be. So start planning your retirement early to remain financially independent through the golden years of your life.
Conclusion
We are celebrating years of living and breathing in a country where we are the masters of our own lives and destiny. However, we often forget to claim our own financial freedom and get trapped in debt, credit cards, or loans. They are traps that we create for ourselves and go down so deep that we do not know how to get back. To be financially free, we have to take charge of our own finances and steer clear of situations where our earnings are used to pay debt. Financial freedom, simply put, is the ability to live life on your own terms and with your own finances without being dependent.