Financial FreedomPosted on October 16th, 2010 William No comments
What does financial freedom mean to you? For many people, it means getting out of debt. For others, it means having enough money to retire. Still others think that financial freedom means owning a nice home and having enough money to eat out every night. What does it mean to you?
I define financial freedom as meaning that you no longer need to worry about money; in other words, you have a large enough nest egg (or sufficient passive income) that you can pay your bills for the foreseeable future without needing to work. Jobs can disappear at any time; freedom is forever.
So what are the steps to becoming financially fee? First, obviously, is to get out of debt!
The rich rules over the poor, and the borrower is the slave of the lender.
Debt can be an effective financial tool; by leveraging the money you already have, you can create wealth more quickly than you could otherwise. Unfortunately, in today's society most debt is taken out not to create wealth or to survive, but for convenience. We want what we don't have, and we don't want to wait or work for it. Thus, the magic piece of plastic makes the wait go away! To become finally free, you must rid yourself of debt; you must be saving for the future rather than paying for the past.
Second, of course, is to build a nest egg. When I retire, I don't want to have the same standard of living as I do now, or worse; I want to travel the world and do whatever I like! With compound interest, it's easy to save now and play later. Ok, that's not quite true - saving is never easy, at least until you get into the habit! I recently calculated that if I were to accumulate $300,000 in retirement savings by the time I turn 40, I'd have the retirement fund I need ($3 million) when I reach 65 without ever saving another dime. Ten years earlier, I'd need only a third as much for the same result!
These days, we spend entirely too much time worrying about money when we should be enjoying life. The key to reaching financial peace, financial freedom, is to simplify, avoid buying what we don't need, avoid going into debt, and save for the future. Revolutionary? No. Surprising? No. Effective? Yes.