Define Financial Freedom
Many people dream of attaining financial freedom, although this is a concept that is not always easy to define. Some people view financial freedom as a fantasy, like being able to afford to stroll along the shoreline on a desert island day after day, while others may see it in more practical terms. A common link is that people often equate financial freedom with no longer having to worry about money.
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Discretionary Income
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You might consider financial freedom as having a large amount of discretionary income. You are able to cover the basic needs of life, such as food, clothing, shelter and transportation with relative ease and you have money left over to use as you see fit. You could start an investment program, purchase consumer goods or spend money on leisure activities or travel without needing to worry about having enough to pay the monthly bills.
No Debt
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Financial freedom can mean not being burdened by high-interest consumer debt, such as credit cards or unsecured personal loans. You live virtually free of debt, with the possible exceptions of a home mortgage or a car loan. If you use credit cards, you pay the balance off in full when you receive your monthly statement, so you are not wasting money on interest payments. You've established an emergency fund so you can cover any unexpected expenses without having to go into debt.
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Retirement Goals
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You may equate financial freedom with having enough money so that you don't need work any longer. For many people, this means enjoying a prosperous retirement. Your goal may be to place every spare penny into retirement vehicles such as your 401(k) plan at work, your IRA and other products like stocks or mutual funds. You would rather sacrifice now by living frugally so you can enjoy the latter stages of life without having to worry about finances.
Income Level
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You may define financial freedom in terms of your annual income. For instance, you may think that if you earn $100,000 per year, you will be able to afford the home and vehicle of your dreams and still have enough money left over to meet other financial goals. Your primary focus may be to seek ways to maximize your income, such as starting your own business or pursuing higher education so you can obtain a high-salaried position.
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References
- Photo Credit stack of cash image by jimcox40 from Fotolia.com
