Financial freedom is a goal that everyone strives to attain. However, many people misuse this term. While financial freedom can mean different things to different people, one common misconception is that it equates to earning more money. This is not true.
Financial freedom means having enough savings, investments, and cash to afford the lifestyle you want for yourself and your family. It also includes growing a nest egg that will allow you to retire or pursue your desired career without relying on a set salary each year. Unfortunately, too many people fail to achieve financial freedom. They become burdened with increasing debt, financial emergencies, wasteful spending, and other issues that prevent them from reaching their goals. Consequently, they face financial challenges.
If earning more money guaranteed financial freedom, we wouldn’t see as many high-income earners struggling with debt and living paycheck to paycheck. You have likely encountered such individuals at some point.
What is The True Meaning of Financial Freedom?
Financial freedom means achieving financial security beyond your regular income, allowing you to afford the lifestyle you desire for yourself and your family. This security is built on savings, accessible cash, and investments that ensure you can retire or pursue your passions without financial worries.
Many people spend their lives in jobs they dislike or dedicate most of their time to careers, sacrificing personal interests to make ends meet. Achieving financial freedom reduces the stress associated with money concerns and provides the autonomy to make choices without financial constraints.
Moreover, building wealth and attaining financial freedom creates a safety net for the future. It enables preparation for emergencies, unexpected expenses, and retirement. Instead of solely working for income, financial freedom empowers individuals to let their money work for them through various investment opportunities, offering an escape from the cycle of constantly chasing earnings.
Some benefits that being financially free offers include;
- Reducing the stress that comes with worrying about money.
- Giving room for personal autonomy, so you can make choices without money constraints.
- Building wealth and achieving financial freedom provides a safety net for the future. It can help you prepare for emergencies, unexpected expenses, and retirement.
Debunking the Fallacy of Earning More
Earning more money does not equate to achieving financial freedom. While a higher income can provide additional funds for enjoying a lifestyle you desire or making investments, financial freedom is a more deliberate and long-term goal.
According to CNBC, 63% of Americans, including 6-figure earners, live from paycheck to paycheck. This suggests that some factors prevent many of us from being financially free.
So if you’ve been waiting to get a better-paying job or a high-paying side hustle, you must understand that these do not automatically guarantee financial freedom, and here are some reasons why;
- Lifestyle Inflation:
Living below your means might seem daunting when you earn a very high income. When you make more money, new expenses would come up, or you increase the amount of money you used to spend on certain expenses? More like your expenses automatically rise to match your income level. - Lack of Financial Literacy:
Most of the time, we assume that most high-income earners have more savings at their disposal, but most of these people struggle with bad money habits. This reinforces the statement made by personal finance Author Robert Kiyosaki that most people do not realize that it’s not how much money you make but how much you keep.
Most people need help tracking their expenses and putting money aside for savings, which often results in them blowing off all the money they’ve managed to earn. - Debts:
While debt is a great tool you can leverage, it can ruin your finances. Here’s how; imagine getting a high-paying job and still having a debt you’re repaying. This can restrict your financial freedom. Also, most people borrow more money, thinking they always have money to repay. Unfortunately, when you spend most of your cash repaying debts, it becomes impossible to have enough to direct at taking steps to attain financial security.
How To Achieve True Financial Freedom
Financial freedom is a long-term and intentional goal of achieving financial security, which would require implementing some steps over time to keep you on track.
1. Saving
Saving is the foundation of financial freedom. While you don’t have to earn much money to start saving, you could put aside at least 10% of your monthly income on a savings platform and still earn interest over time. You would be surprised at how much you accumulate when you stay consistent with your savings. If you struggle with saving, consider using our Autosave feature to automate your savings.
The best part is that you can earn up to 15% interest per annum when you save towards specific goals on Earnipay.
2. Practice strict budgeting
Setting and sticking to a budget would help you achieve your financial goals faster. While this does not mean depriving yourself of any form of luxury, it would help a great deal in preventing impulse spending. To make your budgeting journey easier, consider using our Autopay feature.
3. Invest in Financial Literacy
Budgeting to meet your saving goals is only part of financial freedom. (Heard of the Zero-based Budget?) By creating a personal budget, you can identify areas where you may be overspending and adjust to your spending habits. This can help you achieve your financial goals, such as paying off debt, saving for retirement, or buying a house. So how do you make this work for you? Let’s look into this.
4. Start Investing
This is important in growing your money and making it work for you. Once you’ve learned the basics of starting your financial journey, it’s time to start investing.
One tip for investing is to avoid putting all your savings into one form of investment. Instead, sharing it across different investment vehicles like mutual funds, ETFs, real estate investments, mutual funds, stock markets, and even cryptocurrency would be best. Also, consider getting a financial investor to guide you.
Understanding financial freedom is the first step to achieving your financial goals. While earning a higher income would help, it is only one piece of the puzzle. So, to achieve true financial freedom, focus on being financially literate and set financial goals for your life, then take active steps like saving, investing, and avoiding debts in achieving it.
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