Most people have a dream to achieve financial freedom at an early stage of life however there are some selected people who succeed to achieve such financial goals but mostly people have just thought in their mind.
Accumulation of wealth doesn’t happen by accident. We need to plan things meticulously and implement those systematically. Financial Independence is available to those who learn about it and work for it.
Here I would like to refer to a famous quote that "if you want something you've never had, you've got to do something you've never done" because thoughts are wandering in our mind. but not everyone is able to implement it in the real world.
If you want to achieve something in your life in my opinion you should start implementing as early as possible but a fear factor restricts us to do something. The thought of failure bound us to take one step further.
If you look at history, people who achieve success in their lives mostly start with failure, it means failure makes us stronger, more knowledgeable and more experienced. It's an important factor toward achieving goals.
What is financial freedom
Financial freedom is the term used when we have enough money or income sources to bear living expenses without having a thought of further active work. if we are able to generate income through such passive sources which we don't require to work, such enough money to cover your expenses so that we can spend our time for ourselves rather than to invest our precious time for others to earn money.
Such financial independence give freedom to explore life, spend time with family and friends and fulfill our hobby and interest.
In simple terms financial Independence is that state of mind which can be felt when you are totally worry free about your finances. You stop thinking frequently about money matters in the back of your mind.
How to achieve financial freedom in early 30
In order to achieve financial freedom, you need a right direction approach and first answer yourself that how much money you require, how to and where to get that money, what is the strategy you follow to get financial freedom, what are your short term and long-term goals.
There are four types of people when we think to achieve financial freedom or can say early retirement.
- First, people who say how to save money for financial freedom.
- Second, People who don't care about and don't think about how to achieve financial freedom.
- Third, People who think money can't buy happiness.
- Fourth, people who think about how much amount is required to achieve financial freedom.
These all types of people have different mindsets and as per there thought they act and behave accordingly. However, to achieve financial goals can be common but strategy use to achieve such financial freedom can be different.
In this article we will discuss these strategies which are used to help to achieve financial freedom.
Understand your current financial state
To Achieve Financial Freedom, there are three important questions to answer: -
- What are the present yearly Expenses?
- Am I going to maintain the same throughout my life?
- What is my present Net Worth?
- How much money am I adding to my net worth every year?
- What is the return that I can expect on my Investments?
Strategy to achieve financial freedom
Create Additional Sources of Income
Financial freedom just by 9 to 5 job routine is sound difficult hence experts suggest at least having seven streams of income. If you have a 9 to 5 job, congratulations, you have one, only six more to go.
Active income demands our time and energy which keeps us involved in work for money to fulfil our needs. If you trade your time for money, you’re limited by the hours of the day.
Passive income is a source of money that can keep coming in, even while you sleep, we don't need to be involved directly while other sources automatically generate money over the time.
Start business with zero investment if you don't have enough money, if your business ideas have potential later your investor to promote your business apart from number of freelance job option available.
Invest, and learn to trade early
Stocks, commodities, public traded companies, forex and other modes of investment start learning it early as possible. Don’t be influenced by the people who compare trading and investing with gamblers.
Because these people are either victims of their own vices who lost money in the stock market because of ineffective strategies or they are simply working men and women who like to point out how their life choices are superior to those foolish investors.
Understand Power of Compounding because saving is just the start, in order to achieve financial independence, you need to invest and grow your money.
As per research only 1% became wealthy before the age of 30 to 40 hence early start is always a good move to achieve financial freedom.
Buy experience not things
Know the difference between what you need and what you want. This doesn’t mean never to buy things you want it’s OK to enjoy your money even before you’re out of debt
Needs are the basic things like food, clothing, shelter, and healthcare or an investment like education or a home to live in.
Wants are things you desire above and beyond your needs which can be experienced by investing some money instead of debt. If our goal is financial freedom, wants are the things you can cut back on in order to get out of debt.
Four Percent Rule (4% Rule by William bengen)
William P. Bengen is a financial adviser who first introduced the 4% rule or withdrawal rate ("Four percent rule") as a rule of thumb to achieve financial freedom at early 30, this rule implies withdrawing 4% of your savings each year.
Suppose you have accumulated $1 million for retirement till the age of 30 in your portfolio as per this rule you can withdraw $40,000 in the first year and from next year $40,000 plus inflation that is $41,200 additional $1,200 compensates for inflation to ensure maintain your standard of living.
While keeping rest amount invested as per your portfolio which allow you to earn average return over the time. as your investment will grow over the time you can maintain a standard of living with this 4% withdrawal each year.
Financial freedom can be attained by self-discipline and by assimilating good money habits into daily routine but it is not an easy task, it requires dedication towards your goals which can gain financial knowledge.
Hence some financial education It is important to achieve what is not available in school but can be obtained by learning and implementing it in our daily lives.
You do not need to be a financial expert, but you should have such a mindset and interest so that you can achieve financial independence.