Have you ever thought about what your life would look like if you didn’t have to worry about money? I think about this all the time.
I sit back and look at the amount of money that goes out of my household towards debt each month. There are so many other things that I would rather do with that money than pay off debt.
I also think about the fact that my well-being is dependent upon me getting up and going to work every day.
What happens if I am living paycheck to paycheck and there is an emergency. Will I be able to survive if I am no longer able to work? What if my job goes out of business?
The bills will still need to be paid somehow. I need to put myself in a position to deal with these things if they should arise without stressing out about money.
The thing is, the only way I am going to change my finances and my family tree is to become financially independent.
The reason that I started this blog was to hold myself accountable for my financial goals on my way to financial freedom. I also blog to inspire other people on their journey to financial freedom and let them know that we are in this together.
So exactly does financial freedom mean? This post is going to tell you the truth about financial freedom and give you a few tips on how to reach it.
Let’s jump right in.
What is financial freedom?
Financial freedom is the ability to go through life without worrying about money.
Basically having enough money between savings and residual income to cover all expenses without exhausting your funds.
Let’s use the famous parable of the pipeline to get a better idea of what financial freedom really means. If you are not familiar with the story, watch it below.
Bruno and Pablo started off in the same place as many of us. They were working day in and day out to make money to provide for themselves and their families.
Bruno was happy and worked harder to make more money and support his lifestyle. Pablo was content, but he didn’t like trading his time for money day in and day out.
He knew that there was a more efficient way to make money and sustain his lifestyle.
While Bruno was working hard to make money for his current lifestyle, Pablo worked hard to make money to secure his future.
Bruno became tired and couldn’t work as much. This means that he had to take a pay cut.
Pablo turned his job into a residual income. It took a few years, but he worked at it and accomplished his goal. Pablo reached financial freedom.
Financial freedom means securing your future with residual income and savings. When you are in control of your finances and you no longer trade time for money, you have reached financial freedom.
What financial freedom is not
A lot of people think financial freedom is when you have no debt or have saved a certain amount of money.
Being debt-free is a great start, but that is not financial freedom. As long as your ability to pay bills is dependent on you working every day, you have not reached financial freedom.
Don’t take this the wrong way, because people that are financially free still work. They just have multiple streams of residual income and they don’t have to work daily if they choose not to.
It means that they have time to work on the things that they are passionate about. This will never feel like work to them because they enjoy what they’re doing.
Another common misconception about financial freedom is that it means that you are rich. This is not necessarily the case.
Some rich people are not financially free and some financially free people are not rich.
Let’s go back to the parable of the pipeline. Bruno was possibly rich at some point, but during this time he was still exchanging time for money. This means that he was not financially independent.
When his body began to ache and he needed rest, he didn’t have as much time to trade for his money and his income went down.
Pablo, on the other hand, had a side hustle (building the pipeline) and was most likely not rich until after he completed the pipeline.
So here you have two men, both were possibly rich at some point, but only one of them reached financial freedom.
Why is financial freedom important?
Financial freedom is important because it provides security for your future. You will no longer be bound by money in any capacity.
As you can see from the pipeline story, Pablo made money while he slept and would continue making money as long as the water was flowing through the pipeline.
He made more money than he needed, therefore he could save and invest more money.
In the event that there was a problem with the pipeline or an emergency at home, he would have money to take care of the problem.
When you reach financial freedom, you will have the ability to sustain yourself and your family whether you are working or not. This means that you will have some form of investments or passive income in place to cover your bills.
Knowing that you can provide for yourself and your family is very important. Emergencies happen every day and 40% of Americans cannot afford a $400 emergency.
I don’t know about you, but that scares me. It is very important for us to reach the place where we don’t have to panic when life happens because let’s face it, life happens.
Is it really possible to reach financial freedom?
Yes, this is entirely possible. There are plenty of people that have already reached financial freedom. In fact, a life filled with travel and leisure is becoming the new normal.
A quick Google search for financial freedom or financial independence will give you information on the things that these people have done. You can also find out how they are able to sustain their lifestyles.
I will give you a hint though. It starts with the side hustle. Most people that are financially independent started out with small side hustles.
As they made more money, they moved on to bigger side hustles like investing in real estate.
Real estate is probably one of the easiest ways to reach financial freedom. While this is true, don’t be discouraged if real estate doesn’t interest you or is out of your reach right now.
While becoming financially independent isn’t a “get rich quick” scheme and takes a lot of time, it will change your life.
All you have to do is get creative with your passive income and make your money work for you.
How will it affect my life?
In the beginning, it will most likely be hard. You will still be trading time for money while paying off debt, improving your credit score, and saving money.
In addition to this, you will be working on setting up your “pipeline.”
You will say no to a lot of invitations from your friends to hang out because you will be working towards your goals and saving your money.
People will probably think you’re crazy. They may even laugh at you the way they laughed at Pablo in the Parable of the Pipeline, but that’s ok because you have a plan.
Eventually, financial freedom will affect your life in a positive way. The freedom that you will have will allow you to pursue things that you are passionate about and live a more full life.
There will be more time to spend with your family and more opportunities to travel since you won’t be trading time for money any longer.
What do I need to do?
In order to get started on this journey, you need to figure out what is motivating you. Why do you want to gain financial independence?
Are you tired of working every day? Maybe you want to backpack in Europe for a few months out of the year or travel the world at your leisure.
For me, it is so that I can pursue my passion (this blog). The more I learn, the more I can teach each of you. If my readers follow me on this journey to my financial freedom, they will be motivated to reach this goal for themselves.
So find your motivation.
Next is to create a plan. Pablo knew that he wanted to build a pipeline. He created a plan and got to work. Figure out what you can do to get out of debt, save money, and create streams of residual income.
This will be your plan for financial freedom.
The last step is to execute the plan. Work your plan diligently, no matter how long it will take.
There will be months of ups and months of downs. Push yourself to keep going because it will be so worth it in the end.
How long will this take?
The amount of time that it takes to reach full financial independence depends on your current situation. If you have a lot of debt or a lower-paying job, it may take years.
The best thing to do is to calculate how long it will take you to pay off debt and save money on your current salary. When you have this number, figure out ways to increase your earnings.
Side hustles and passive income will help you shave time off of your journey.
Try not to think about the amount of time that it will take you. Just work hard to increase your earnings and passive income streams each year. Eventually, you will reach your goal.
Will I still need an emergency fund?
When you reach financial freedom, you will still need to have an emergency fund in place. Just because you have enough money coming in to cover your expenses and live well doesn’t mean that the emergencies will stop.
Things happen and we have no control over them. Always have an emergency fund in place for situations like this.
Your emergency fund should consist of three to six months of expenses. This money should be easily accessible and not tied up in things like the stock market.
In the case that something comes up, use your emergency fund to pay for it. Once the emergency is over, use your residual income to replenish your emergency fund.
Continue this practice and you will be able to concentrate on the emergency when it happens instead of how you will pay for it.
What if I get discouraged?
It is ok if you get discouraged on your journey. Sometimes things will get hard. That is with anything in life.
What matters is how you respond to being discouraged. You have to remember that whatever you’re going through is only temporary.
You are living like you are now so that you can live like you want to live in the future.
Remind yourself that you are working towards a residual income that will sustain you for the rest of your life. Anything worth having is worth working for.
Give yourself a few minutes to pout and be frustrated, then shake it off and move on. Keep looking for the light at the end of the tunnel.
What happens when I reach financial freedom?
When you reach financial freedom, the possibilities are endless. This is time for you to explore the things that you really enjoy.
You will see your life change in many ways. Think about this. There will be more time and freedom to travel. There will also be more time to spend with your family.
You will still have the opportunity to work, but it won’t feel like work. The reason is that you will no longer be trading time for money.
The business that you have always wanted to start is within your reach. Organizations that you have always wanted to support can now get a portion of your time and money.
Anything that you want to do is within your grasp even if you don’t know what is yet. The good part about this is, you will still be making money while you figure it out!
The Bottom Line
Financial freedom is more than just being debt-free. It is living life on your own terms.
A whole world will be available to you where you can do all the things that make you happy.
Personal finance is personal, but it also affects other people in your life. Take the time to change your financial situation.
You will have peace of mind about your future and you won’t stress about money. This sounds like a great future. Give it a try and you might just create the life that you dream of having.
What will you do when you reach financial freedom?