What is Financial Freedom and How Can you Achieve it?

Achieving financial freedom is an ambitious goal that more and more people are pursuing. It consists of having enough income to cover all economic needs without having to work. Setting priorities, controlling spending, and mapping out a strategy to generate income is key to achieving this goal that many people aspire to when they think about their financial health.

Financial Freedom and How Can you Achieve it
Financial Freedom and How Can you Achieve it

The term ‘ financial freedom ‘ was popularized in the United States at the beginning of the century by authors such as Robert Kiyosaki or the precursors of the FIRE movement, an acronym for Financial Independence, Retire Early (financial independence, early retirement). This current of thought, which has many followers among millennials around the world, is committed to combining a simple lifestyle and an intelligent investment of savings in order to generate income that allows them to stop working as soon as possible.

As Mónica Melle Hernández, Professor of Financial Economics at the Complutense University of Madrid points out, more and more people “realize how contradictory it is to wait until they retire to start living and, for this reason, they decide to dedicate their time and put effort into a job with a purpose to have financial freedom while they are still young.”

The regions with the most financial freedom

They lead the global rankings of the countries with the most financial freedom:

  • AUSTRALIA
  • SWISS
  • CANADA
  • DENMARK

This concept refers to the ability of a person to obtain income and be able to cover all their economic needs without having to carry out any type of activity. “After the COVID-19 pandemic, free time is more valued and not being tied to a routine.

Passive income is what can help a person achieve such financial freedom and independence. Income that, once the initial investment has been made, generates returns on a constant and periodic basis without the need for much additional dedication. The teacher gives the example of buying a good —furniture or real estate— and allocating it for rent to generate income. Financial freedom can also be achieved by writing a book and earning royalty income or by becoming an investor in someone else’s business. “That is, contributing capital, which gives you the right to a proportional part of the profits based on the capital contributed

Benefits of financial freedom

Having financial freedom can bring with it multiple benefits.

  • In addition to improving people’s quality of life, autonomy and decision-making power are gained. “Many followers of financial freedom have achieved financial independence and have retired before the official retirement age, ” says the expert. Others continue to work, but they do so on their own projects.
  • Among the advantages of having financial freedom, Luis Pita, an expert in personal finance and author of the book “Have a worse car than your neighbor”, mentions that you stop experiencing stress due to economic problems: “You are covered in the face of life crises that can solve with money and you can also work in what you like since you have the freedom and economic tranquility of not depending on your salary to lead the lifestyle you want”.
  • Added to this is the fact that some people may be more successful professionally, since “they can be themselves at work and are not afraid to give their ideas and contribute”. In addition, if you work on what you like, the chances of performing better increase.

Long-term financial control and planning

But achieving financial freedom is not easy. In fact, not everyone can achieve it. Whether or not it is achieved will depend, in large part, on the ability to generate high incomes that allow large amounts of money to be saved. People who typically achieve financial freedom, “are big savers who exercise tight control over their spending and look for new ways to earn more money.” In other words, they make their capital generate a great return and have a long-term vision.

In order to achieve financial freedom, the professor advises:

  • Set
  • Control
  • Draw up a strategy to get money.

It is essential to establish a method that allows you to generate several passive incomes that belong to different sectors in order to diversify risks. “It is important that the whole form a system that works in automatic mode or almost, that is, that does not require a physical presence, in order to achieve greater freedom, and that does not exhaust its production capacity.

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