Our work towards financial freedom should not be hampered because of age. You can achieve all your financial goals with proper planning. As you start your career, wealth creation, investment and retirement planning will always be a priority, and financial planning is a means to achieve the end goal, i.e. financial freedom.
Financial freedom implies having enough resources to live your life the way you want without worrying about a stop in earnings.
Financial freedom does not necessarily mean being rich – rather, it implies control over your finances in the present and the future. It may signify different things to different people.
There may be different levels of the financial freedom cycle, and each may be complete in its way or lead to the next one:
1. Not living salary to salary: Not being dependent on monthly salary to run the show.
2. Sufficient funds to take a break from your job: You must be free to take a short sabbatical from work, if you wish to, without breaking your head about expenses.
3. Financially sound and safe: You should feel like earning well, living a financially sound life, and going big on savings.
4. Freedom of time: Being able to opt-out of the rat race to pursue one’s dreams is the next level of financial freedom. It may also imply the freedom to be available for those who matter in your life, regardless of time, distance or cost involved. This is aspirational for many.
Financial independence is one of the most critical reasons financial planning is essential. You have been accustomed to a particular lifestyle and standard of living during your work life.
You cannot let go of all those comforts and want to ensure that you enjoy the same lifestyle once post-retirement life begins. That is also the time to take up hobbies and interests you wished to pursue but couldn’t due to your responsibilities. With increasing age, the visits to your healthcare provider may also increase. All these entail expenditure. You may have set your financial freedom goal to support the three levels of retirement:
5. Sufficient to support essential retirement: You tweak your expenses to have an early retirement.
6. Enough for a reasonably decent retirement: You create and accumulate alternative income sources to retire well. A parent is someone the kids always look up to in terms of life and financial decisions. When you have a sound retirement plan and stable income stream, all you want from your kids is their time and availability – everything else you have already taken care of.
7. Being able to support dream retirement: You want to pursue all hobbies and interests post-retirement, which were pushed to a backseat owing to your duties and responsibilities.
8. Money exceeding your expenditure: You have created wealth much more than you could have ever imagined or spent.
Each can select and work on his idea of financial freedom, depending on his lifestyle needs and requirements. There can be different levels of financial freedom, and each person can understand the concept.
Best financial plans provide you with liquidity and good returns to build a substantial corpus to line a financially independent life, leading to financial freedom.