Robert Kiyosaki, the famous American businessman and author once said, "financial freedom is freedom from fear." Indeed, most of us dream of doing something but end up not doing it simply because of fear. In financial freedom context, this fear is mostly the fear of not having any money left. The irony of the entire debate on financial freedom is that those who dream of becoming financially free need much more time whereas those who can enjoy that freedom today, don't do so!
So what's it's like being financially free? What's the definition? Well, there is no sure shot definition or formula for same but it all boils down to the below given conditions. Once these conditions are fulfilled, one could say that financial freedom has truly dawned.
No financial or social obligations/liabilities:
Before one even thinks of financial freedom, one has to become 100% debt free. There is no point of compromise on this important element. One has to be free of any outstanding debt including home loans and any kind of personal commitments. One also has to be free of any important obligations or life goals like the purchase of a home, child education, etc. Even if you are not free of such obligations, one has to make sure that these obligations are well arranged for in advance.
Right temperament for handling existing wealth:
Right temperament for handling wealth is perhaps more important than the temperament to create wealth. There have been umpteen stories of people who were rich but went broke due to their approach to managing wealth. One should have the ability to be patient, grounded, risk-averse, prudent and logical when handling wealth. Flaunting wealth and spending it on things that you do not need is a sure shot road to exhausting your wealth quickly.
Alternative / passive source of income:
Any activity of personal interest that also helps you earn a steady income is surely most welcome. Many of us choose to work even when we are surely financially independent and is indeed welcome. An alternative source of income could be in form of rent on any invested property or even any active consultancy or your own side business venture. An alternative source of income in addition to your primary income can work wonders for your financial well-being.
Adequate risk protection for any uncertainty:
When you believe you have everything sorted out, there is still one thing which you cannot control – uncertainty. There is a lot of uncertainty in our daily lives and it is not restricted to your job or business. The uncertainty can manifest itself in form of any eventuality to life and health of you or your loved ones. One should be 'adequately' protected for the same, at all times. There is no compromise to this important element since it acts as a safety net to avoid a hard fall to the ground in case of any unwelcome eventuality.
Adequate long term wealth invested in growing assets:
The need to have your investments growing helps you fight inflation and thus protect your wealth. It is important that your rate of wealth consumption is lower than that of wealth creation and also the net wealth growth is higher than inflation. In such an ideal scenario, your wealth will sustain you much longer and ensure you never run out of money. For this to happen, it becomes critical that you invest in an asset that creates long term wealth and delivers returns that are significantly higher than inflation. If your size of investments is small, the need to save in such assets, namely equity, becomes more prominent.
Family understanding and support:
A strong and supportive family environment is important for any journey of or towards financial freedom. Most of the times in a family setup, the decisions have to be taken in consensus. Often we also end up entertaining demands of others. In such a scenario, your approach and philosophy to life and wealth management may not be fully appreciated by others. When there is such a clash, it is bound to create ripples on your financial journey. You have to get everyone on board by educating them, showing them both the sides of any financial decision and making them understand all that is needed. This is a sort of teamwork which will ensure that not just you but your entire family acts like one on this journey of financial freedom.
Keep learning and developing your skills, knowledge and experience:
Continued learning in life has become much more relevant today. The knowledge and skills required to be successful at any job and business are rapidly evolving. Business models are being transformed, new businesses, jobs and careers are being invented almost at an hourly rate. The typical lifespan of most things has also shorted. Hence, irrespective of your position in life, it is important that we spend at least some amount of time in learning new skills and gaining relevant experience and knowledge.
How can we be free:
Having talked about the crucial conditions necessary for financial freedom, we now simply ask, how can we be financially free? Though a simple question, the answer is quite complex. The easy way to answer this would be to highlight the behavioural attributes that will take us there.
Vision: The vision tells us what is possible and helps us believe in that vision. The right vision would help us imagine a personal /financial position in life that we would aspire and dream to be. That vision has to come backed by a strong sense of realism that it is possible with the determination to achieve to not just dream but to achieve it.
Courage: Courage is of utmost importance as it helps you take life-changing, critical decisions at the right time. Most of us regret the things we haven't done and not the things we did but failed. Courage is what helps us fight through difficulties and rise above ourselves to realise bigger goals for ourselves.
Patience: Rome wasn't built in a day and neither are our dreams. One has to be patient for a decent period of time to realise the merits of good investments and the results of your plans. Jumping out of the boat before it has docked on the ports, is a mistake that many of us make in our lives. Having patience in life, not just in financial matters, also helps you live a wholesome life and enjoy it.
