Relative to where you are in life, the concept of financial freedom can vary. For a 20-year-old, it’s the freedom to indulgently shop without parental permission. It is the capacity to pay for a home without the assistance of a loan for a 35-year-old. To a 50-year-old, it might mean feeling secure enough to retire when they so choose. It is the capacity to not stress over future expenses to a 65-year-old.

The ability to make significant life decisions without worrying about their financial repercussions is, in essence, financial freedom. It is about taking charge of your money and making sure you have steady cash flow that enables you to live the life you want. An interesting article on financial freedom states,

Financial freedom is not binary, but a scale.

Understanding what financial freedom really means to you and outlining a clear path to achieving it are crucial in this situation. Having a comfortable home and good food on the table may be financial freedom to some people, while leading a lavish lifestyle may be it for others. Whatever your goal may be, it’s critical to have faith in your ability to achieve financial freedom. Anyone can achieve financial security that allows you to live according to your terms, but you must be confident that it is possible.

Here is some food for thought to assist you accelerate your pace on your wealth creation journey:

Your investment journey should have begun yesterday.

In Einstein’s words, “Compound interest is the eighth wonder of the world. He who understands it, earns it, and he who doesn’t pays it.” One of the most underrated powers is compounding. It implies that the choices you make today will have a significant impact on your financial future tomorrow. The wealthy and incredibly successful know this secret. Talk about Warren Buffet or Rakesh Jhunjhunwala. They began investing early in life with a mere $100. Even though they may have made their own unique set of financial mistakes, time and compounding have helped them overcome these obstacles and reach their highest potential.

Financial literacy is a life skill.

Understanding the fundamentals is crucial, including those relating to interest, investments, savings, taxation, diversification, and, especially inflation. Prioritize financial education in your family too. Include your spouse and dependents in the process when you sit down to budget or create a financial plan. Their involvement will guarantee that you are all on the same page and working cooperatively to achieve the specified financial goals. This will help curb unnecessary lifestyle expenses and keep a better tab on budgeting.

Draft a plan today that even “future you” will love.

Many failures can be attributed to shortsightedness. People often fail to visualize a day beyond tomorrow. This can be seen in many instances. For instance, investors often calculate post retirement expenses till the age of 85 or so, while they fail to realize that we humans have the capacity to live to a hundred. This could cause a shortfall in your savings to investment ratio. Similar instances occur when planning for a child’s education, marriage, and other such milestones. Be conservative and make every effort to account for everything by trying to see the bigger picture.

Identify your strengths to build additional income sources.

It can be both limiting and risky to rely solely on one source of income. There are numerous instances where people have lost their only source of income as a result of unforeseen life events. You shouldn’t stake your entire financial future on a single source of income, just as you shouldn’t risk investing all of your money in a single asset class. Make your money work harder for you by investing in assets that generate monthly income while increasing in value over time, such as real estate or debt instruments. Similarly, determine your talent and what you enjoy doing, start doing it as a hobby, and try to monetize it to create multiple sources of income.

If you are yet to begin your journey, follow these basic steps:

  1. Understand and acknowledge the need for financial planning in your life.
  2. List your goals (yours+dependents); divide them based on short and long term requirements.
  3. Factor in the money required to achieve each of these goals.
  4. Determine timelines and how much money you will need to invest starting today to accomplish each of these objectives.
  5. Shortlist assets that can help you compound your investments according to your risk appetite and time horizon. (This step can be tricky for novice investors. Reach out to a financial advisor for help if need be.)
  6. Begin investing today.

The process of becoming financially independent can be both thrilling and unsettling. However, as you get close enough to achieving your objectives to realize it, the compounding effect that began to work on your investments also begins to work on your peace of mind and freedom to do and acquire more.

I hope your journey toward financial independence has already begun, but if not, start today!