Money is called the root of all evil or rather the greed for it. But one cannot argue that money is what makes the world go round and makes our lives comfortable. There are some people who live paycheck to paycheck while there are some who earn sufficient to at least meet their essential financial goals. And, there are some who have truckloads of money but don’t know what to do with it.
But how much is enough! That depends upon every individual’s personal situation. No matter what, there is one constant goal, somewhere on the back of people’s minds, whether they are aware of it or not. It is the ultimate milestone called financial freedom. There is no precise definition for this term. And there is no thumb rule either for having a specific amount of money to be financially free. It has more to do with how one feels about it rather putting a ballpark figure to it. If you ask people what financial freedom means to them, chances are you will get a long pause and eventually different explanations. It means different things to different people. Here are various interpretations of it:
Living debt free: For some people, being in heavy debt can be a cause of worry, giving them sleepless nights. They feel caught up in a debt trap, the kind which they are unprepared for and unable to get out of easily. It has a bearing on their entire financial and personal lives. They have to push themselves to earn that extra dime to cover for the more essential expenses. For such people, paying off debt and freeing up the cash flow for the essential goals is equivalent to being financially free. When they don’t have to worry about owning money to people, that is financial independence for them.
Having enough: Every individual has different essential and aspirational goals. For some, buying a Rs.1 lakh Louis Vuitton bag is not enough, while some would not splurge exorbitantly on a branded bag even if they have Rs.1 lakh. For a frugal person, financial freedom would mean basic needs met even though he may have enough resources to live in luxury. Frugality is a way of life for him. This does not imply that he is a miser. For e.g., financial freedom for such a person would mean – food on table, own roof to live, no debt, good health, own car to travel from one place to other, etc. Although not more, but he always has sufficient resources to meet his basic needs and that implies financial independence to him.
Being prepared when life is cruel: Life can at times deal a severe blow and drain our financial resources to a significant extent. It could be a medical emergency in the family, loss of job, prolonged illness, physical incapacitation, etc. Such tough phases in life, even if temporary, create a big dent in savings which otherwise could be utilised for essential financial goals. People are even forced to take on debt to deal with such situations. For many people, having sufficient resources to deal with difficult situations without compromising on their other goals means financial freedom.
Want to work, not have to: Financial freedom for many people can mean not bounded to a 9-5 job to pay the bills each month. There is an option but no obligation to work. People no longer have to trade their time for money and are free to pursue what they are passionate about, which normally one is not able to while working about 40 hours a week. It is freedom from worry as to where the next paycheck will come from.
No worries in retirement: Usually, many people aim for financial freedom once they retire. They work hard all their lives to accumulate sufficient personal wealth to cover expenses for lifetime after retirement. For them, financial liberty is freedom from fear of running out of money and not be dependant on their children/relatives in old age.
Having the gift of time: Remember the popular saying – “Time is more valuable than money, you can earn more money, but you cannot get more time”. For many people, money is not the primary focus but other things in life which truly matter. They have already created passive income streams which free up a lot of their time. Financial freedom for such people is having the time to focus on things that motivate or to be in that silent space that boosts personal creativity. It is freedom to spend time with family and friends. Freedom to travel. Freedom to just about do anything or nothing at all!
There could be numerous interpretations about financial freedom depending upon a person’s financial situation. But the one common thread that explains the term financial freedom is being truly free from any kind of stress about money and sleeping peacefully at night. To attain financial freedom, one thing is for sure, know what to do with your money. If you don’t, it will be gone soon until you know. Earning a lot of money will not necessarily enable you to achieve financial freedom. Managing your money well will surely put you on that path. What does financial freedom mean to you and what are you doing to get there? Share your views with us.