Everyone’s heard of the term “financial freedom” but we seldom think about what it actually implies. In most cases, financial freedom is simply just the ability to use your money how you see fit, but it actually carries far more meaning and weight than just being able to use your money at will.
The truth is, financial freedom is personal to everyone. It has a different meaning depending on who you ask and it’s something that you need to define yourself. To help you define it, we’re going to talk about a scale of financial freedom so you know what to aim for and how.
- Not having any freedom at all
The very first stage we’ll be talking about is the zero freedom stage. This is where you’ll be receiving a monthly or weekly salary and most of your money will be going into things like your mortgage, bills and groceries. Although your job is reliable, you seldom have any spare money to spend on things that you consider luxurious. This could be a night out, a holiday or even just some nice food at the end of the week. The one thing that defines this stage is your reliance on your job. Should you lose your job, you’re going to be in a financial crisis and your savings are going to be gone within a month or two. This is the stage that everyone will likely have been in at some stage of their life and it’s the stage they want to escape the most.
- Temporary freedom offered by sources of income
At this stage, you’ll have more than a single source of income and this often means you have a lot of disposable money that you can use how you want. However, if you were to lose one of these sources of income, then you’ll revert back to not having any financial freedom at all. This is the stage that you want to start using your income in order to clear up as much of your debt as possible. With the help of services like debtconsolidation.loans, this is more than possible. Your goal here should be to continue working for as long as possible so you can pay off things like your mortgage and other money you might owe. You should also be using this extra income for things like purchasing necessities like a car. Your alternate source of income will usually be obtained from a side business, a second job or even a trading career.
- Full financial freedom
Once you reach a stage where you have multiple income streams and you’ve paid off all of your existing debts and have plenty of future investments lined up, you can consider yourself as having financial freedom. Articles such as this one from thebalance.com offer some brilliant examples of how you can approach having multiple streams of income in order to achieve this level of financial freedom. It’s good to note that if you lose too many streams of income, you’ll still have relatively safe levels of financial freedom because your debts and mortgage will have already been paid off, and you should have a considerable amount of savings stored away in investments or a savings account.