What does financial freedom mean to you? Does it mean that you have enough money each month to cover your bills? Maybe it means that you have so much money saved up that you are free to spend it on whatever you want. Other people may claim that financial freedom is to become completely free of debt.
Those are all okay answers, but the real definition of financial freedom is much more. It is more a way of life than a definition and varies from person to person. Becoming financially independent is having the freedom to live your life as you wish without any worry about money. No more being tied down in that 9 to 5 job or working those extra overtime hours just to make ends meet. Financial freedom allows you to do what you want, when you want.
Here are a few key elements that are critical to becoming financially independent.
Diversified Income Streams
Do you own stocks? If you invest in the stock market, then you have heard the term diversification. Financial experts love to stress the importance of spreading your money across multiple assets. Since you listen to your financial adviser about keeping your savings and assets diversified, why wouldn’t you diversify your income as well?
An important step of becoming financially independent is to build multiple income streams from several sources. If one source dries up for whatever reason, your risks are then minimized. Without proper diversification of income streams, financial freedom will never be possible.
Automation & Outsourcing
Automating your income streams is another important part of becoming financially independent. Nobody wants to work their whole lives, so building passive income streams is critical. One way to create these sources of income that require very little of your time is through automation and outsourcing.
If you can successfully leverage technology to automate your income streams and let outsourcing handle the remaining tasks, you have created a passive model. Provided there is enough money leftover after paying for automation and outsourcing (also known as positive cash flow), then you are well on your way to finding financial freedom.
Lower Your Expenses
It doesn’t take a financial expert to tell you that to be fiscally sound, you need to have fewer expenses than your income. Financial freedom relies on this basic economic concept. If you are able to keep your expenses lower than your income, you will have a surplus of money leftover instead of debt. One of the most important building blocks to financial independence is by living debt free.
Defining Financial Freedom
When it comes down to it, financial freedom is really very simple. Build a set of diversified income streams that can be automated which bring in more income than your expenses. At the end of the day, if your portfolio of automated income streams can support your lifestyle of choice, then you have become financially independent!
How do you define financial freedom?
Related posts:
- Plan, Do, Check, Adjust Your Way to Financial Freedom
- 10 Financial Descions I would Like to Have Back
- Profit in tough financial times
- Residual Income – Diversify your Personal Finances
- Motivation behind Passive Family Income
Related posts brought to you by Yet Another Related Posts Plugin.
{ 6 trackbacks }
{ 2 comments… read them below or add one }
I always define financial freedom as the ability to do what you want, when you want it. That might mean go go on a last min vacation, it might mean the ablity to tell your boss or pain in the butt client to go shove it.
It is the ability to follow your desires
@Evan – Great points. I agree, it is have the ability and freedom to do what you want!