The questions related to giving financial advice are simple and complicated.
The saver has an input X and asks in what options should he invest the X amount. It is also about outputs, where investors ask how to earn X amount of money they desire. Some investors have both types of questions. These questions are sensible and have well-established solutions.
The most difficult questions are those where all you could do is help the investors know how they can work out their answers because the solution is relative, differs from person to person.
‘How do I achieve financial freedom?’ is one of the grinding questions. Financial freedom means knowing that you need not worry about money ever with a high level of confidence.
Financial freedom is everyone’s dream but very common to articulate. Financial freedom gives relief from the daily grind of earning money that dominates our lives. It has many degrees.
There are people with large inheritances who may not work. There are those whose burden gets shifted to us, the ultimate taxpayer, taking the entire working life to reach the last stage, where you do not have to work for earning money till your lifetime.
It is worth knowing what each level means. Given below are seven stages of Financial freedom:
- Clarity – At this level, you have understood your financial position and what can you achieve and fulfil.
- Self-sufficiency – You can earn enough money to pay off your bills.
- Breathing room – At this stage, you stop living from salary to salary.
- Stability – You prepay your six months of expenses and have zero debt.
- Flexibility- You have savings to meet at least two years of living expenses.
- Financial Independence – Working becomes optional, and you rely on your investment income.
- Abundant wealth – This is the ultimate stage where you will have more money than you’ll ever need.
There is a bit of padding to reach the last stage. There is a general progression of the idea after every level. The first step is about introspection and understanding, which is crucial.
After going through the list, only a few will be realistic to reach the highest levels, but that does not mean financial freedom is useless.
Start saving and investing at a younger age to achieve a lesser degree of financial freedom at an earlier stage of life. It will give you enough time to reach higher levels later.
India is facing a job crisis. There is unemployment at the urban middle-class level. Youngsters are finding it difficult to get their first jobs or have to take low quality employment. Employers are replacing middle-level executives at a lower cost.
The salary-earners should try achieving a mild form of financial freedom early in life. It would be great to reach the third level by 35 years of age and the fifth level by 40. Think about it systematically, set targets, and work towards achieving the goals.
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