When you hear the word “money” what thoughts enter your mind? And what thoughts does “wealth” trigger?
This is the power of financial freedom. Intelligent investors are alchemists who’ve managed to turn their money into wealth.
Worried about paying this month’s bills? Do you often think about your loans? Does providing for your family or retirement keep you up at night? Financial anxiety is more common than it should be. It’s the polar opposite of financial freedom. If you’ve experienced the anxiety end of the spectrum, it’s time you work towards financial freedom.
What does it actually mean to be financially free? How does one achieve financial freedom? And how does one deal with change?
Put simply, financial freedom is a state where you always have enough. For many of us, this may seem like a distant dream. In reality, it might be far closer than we imagine. This is where financial planning comes into play. Financial planning lays out a clear path from where we are today to the state of financial freedom that we want to be in. Financial planning is an evolutionary process that easily assimilates change. If financial freedom is on your mind, financial planning is the solution.
Here is what financial planning involves:
1. Deciding financial goals
Financial planning begins with identifying goals. What are you really working towards? Unless you have clarity on this aspect – staying motivated will be a challenge. There are plenty of reasons to spend money. Unless you have a compelling reason to save, financial freedom will remain elusive. Financial planning forces us to think about what we want from our money. It’s easier to take ownership and responsibility of things that matter to us. Naturally, financial goals must be personal.
2. Understanding and Evaluating Risk
Ambition and drive are essential to achieving financial freedom. Yet, it pays to be an optimist with a raincoat. Life doesn’t always work out in our favour. Luckily, some lessons don’t need to be learnt through experience. Financial planning ensures that you become consciously tackle risks preemptively. Through financial planning, you will have the right amount of insurance, the right mix of assets, and the right level of risk in your investment decisions.
But what does risk have to do with financial freedom? More than you imagine. If you had a medical emergency and no health insurance policy to fall back on, what would you do? Would you take a loan to finance the bill? Would you dip into your savings? Or would you avoid treatment?
Latent risks manifest as setbacks. And if you aren’t equipped to deal with them, financial freedom is the first to be compromised. It is vital to know your risks well and be prepared for them.
3. Developing Financial Goals
Being conscious of your financial goals is just the first step. Financial planning plots a timeline that highlights your short-term and long-term requirements. It clearly outlines what needs to be achieved when and allows you to prioritize and rearrange goals.
Financial planning maps how much needs to be saved in what assets. So, you can measure progress over time and bridge gaps as they appear. Essentially, through action you translate dreams into reality. Fulfilling financial goals is a form of financial freedom.
4. Financial Challenges
What if you’re not able to save because of the many loans you are servicing? What if you don’t know where your money goes? What if you don’t know where to invest? What if you’ve made some mistakes in the past? What if you’re afraid of making mistakes in the future? Does financial freedom belong only to those who are perfect?
Financial challenges are nothing new. A tough spot could teach valuable lessons and extract a lot from you. Eventually, this will become your strength. None of us are perfect, and kicking bad habits is the only way to gain financial freedom. Mistakes have the power alchemy – they can enhance your decision-making skills.
- Consult your history: Consult a professional. Consult someone who has achieved financial freedom. You aren’t alone. Face your challenges head on with financial planning.
- Assessing The Current Situation: So, where do you stand right now? How far away are your goals? When can you achieve financial freedom? Financial planning answers these questions and more. A financial plan functions as a map.
Financial planning can elevate your financial health, clean up your financial history, and pave the path to financial freedom.