We hear a lot about financial freedom when talking about personal finance. I talk a lot about financial freedom and financial security. But since financial freedom means something different to each person, I think it is important to take some time to figure out what it means to you.
I just read an article that goes over 8 levels of financial freedom. You can use this to explore your own thoughts.
Here are the 8 levels of financial freedom according to the article:
- Not living paycheck to paycheck
- Having enough money to quit your job for a bit
- Having enough money to be financially happy and still save
- Freedom of time
- Having enough money for a basic retirement
- Having enough money to actually retire well
- Having enough money for a dream retirement
- Having more money than you could ever spend
I am in agreement, financial freedom starts with paying attention to your income and budgeting to stop living paycheck to paycheck. And with the money that is left over, you need to invest and save.
I think the next step is to create an emergency fund. Similar to number 2 above, this is a fund that would allow you to quit your job for a bit, or to be used if you lose your job for some reason. Hopefully you never have to use this emergency fund… but it is sure nice to know it is there if you need it.
And that produces a sense of freedom and security.
After that I would focus on investing. Investing is a way to put your money to work for you to make more money. This is a much better option than saving alone. Investing can produce multiple income streams that over time can grow to real wealth.
I personally create multiple income streams in the Forex Market, which is a big part of what I do on my own path to financial freedom and security.
I think making the step to become an investor is a very important action on the road to becoming financially free.
Now, the next step is saving money. And what I mean by “saving money” is to take money from your investments and put the money in a place where it is easily accessible and not at a lot of risk.
A lot of people would frown at taking money from your investments and putting it into low risk, low yield savings. But you have to remember, personal finance is not just theory that happens on a piece of paper. There is REAL money involved… and money that needs to be USED at some point.
Otherwise, what is the point?
The older you get, the safer you should be with your money. That means having money in a place you can get your hands on it and that is not exposed to a lot of risk. That is the point, in my opinion, where you can really start to feel financially free and secure.
The point is, achieving financial freedom is a journey. And like all journeys, the path you take and your final destination is going to be different from other people. But becoming financially free is not going to happen by accident… you need to plan for it and execute your plan.
If you are still living paycheck to paycheck, you are not on the path to financial freedom, no matter how much money you make. So, start there.