Financial freedom usually means having enough money without being overly stressed about the financial impact of unexpected events because you are prepared. It means you are free to make decisions without being burdened by financial worry and that your money works for you rather than the other way around. However, being financially free doesn’t mean that you are free of the responsibility of handling your money as well.
What does it mean to be financially free?
Being financially free doesn’t mean retiring at 40 or becoming rich by the time you are 30. Although, that is the objective the FIRE movement has. When you become financially free, you are able to comfortably afford your necessities, your goals, and experiences that make money feel like a tool, not a restriction. Your financial freedom journey will be different unique to yourself and depends on your income, debt, savings, spending patterns, and values. However, it’s also important to meet certain criteria like paying your bills on time and having enough saved for emergencies. So, how do you exactly go about become financially free? Well, these 5 steps are a good place to start. Let’s kick off with the easiest first.
1. Being or aiming to be, debt-free
When you’re in debt, the interest rates can make your balance grow faster than you can pay it off. This can lead to not feeling in control, making your relationship with money even more challenging. Working towards a life debt-free can give you back that control, putting you on the path to financial freedom. We’ve made some suggestions for how to get help with debt here.
2. Building your financial cushion
Once you’ve started working towards being debt-free, the next step in your financial freedom journey means not having to live payslip to payslip. We know this is difficult, and many people in the UK find it hard to make their money stretch the whole month. So building up your financial cushion otherwise known as your emergency fund is a great first step to financial freedom. An emergency fund means you can cope with any unexpected event life throws at you.
3. Looking beyond emergencies
So you’re debt-free and you’re starting to build up your emergency savings fund, what next? Become financially free means being able to experience things outside of the day-to-day expenses and achieving other financial goals outside of our emergency fund. Things like retirement, children’s education costs, a mortgage, or a holiday are all examples of saving for something that isn’t an emergency. This can require a lot of thought but sitting down and working out how to split your wages simultaneously is important. Working out how you will pay necessities whilst contributing to your saving goals will put you on a path to financial freedom.
4. Creating a positive relationship with money
Money makes the world go round, or so some people say, but financial freedom means not feeling overwhelmed by money worries. Well-being and financial wellbeing are inextricably linked, and when you feel positive about your financial situation your general well-being will feel positive too. A little bit of worry is normal and we all have ups and downs in our relationship with money but feeling in control and avoiding becoming overwhelmed is key to achieving financial freedom.
5. Nurturing your finances
Money management is a lifelong commitment. It’s something you’ll need to come back to repeatedly to improve on your financial goals, giving you the best chance to secure financial stability. For example, checking you’ve got the best deals on your savings accounts or that one of your shares is no longer a dud helps you to keep making the most out of your money. Routinely checking in on your money and evaluating every nook and cranny of it can help you see where you might need to make changes to improve it.
Financial freedom will take time, depending on your situation it might take many years for you to feel comfortable. But financial freedom is more than just setting targets and reducing spending, it’s about your wellbeing and your relationship with money. It’s unique to you and every journey is different, so take pride in your financial freedom and do what’s best for you. When you are financially free, you’ll be able to do what you want while knowing you’re in good hands for the future.
We believe every worker across the globe should have financial resilience. That is why we let you track your wages in real-time, stream the money you’ve already earned, give tips to easily manage your money, and save your wages straight from your salary. If you want to start your path towards financial freedom, begin by updating your payment preferences here, so you will always have entrance to your earned money*.*