Financial freedom is a pretty subjective matter. So, it would be better to start a discourse on it by taking up ‘five Ws and one H’. Well, if you are not involved with any subject research, journalism, or any profession that involves information gathering, you may not be aware of the ‘five Ws and one H’. So, let’s move forward after making this simple concept clear for you.  

To keep it short and simple, ‘five Ws and one H’ involves six crucial questions you should ask when collecting information or making a decision. Those questions are Who, What, When, Where, Why, and How. So, for example, when you confront a problem, you could ask yourself questions like ‘Who’ is involved in this issue? ‘When’ did it happen? And the rest of the four Ws and one H questions. Asking these six questions opens the door for multiple perspectives on the problem and helps you reach a solution faster.   

Robert Kiyosaki, a famous personal financial advisor, and author, says that ‘why’ you want to achieve financial freedom is more important than ‘how’ you want to achieve it. Therefore, finding your ‘why’ for being rich and free is significant. Of course, finding ‘why’ rests on your shoulder, but here we look into ‘how’ you can attain financial freedom in six possible ways.

1. Know Thyself

Every person has different financial goals, ambitions, and dreams. So, the first step towards attaining financial freedom is to know yourself and your priorities. The priorities may include your preferred lifestyle, assets, and the size of your bank balance. Remember that setting priorities should culminate in a financial plan, and you must stick to the plan.

2. Create A Secondary Revenue Stream

Several pieces of research have shown that millionaires have at least seven sources of income. Warren Buffett, the legendary investor and the sixth richest person in the world, is an advocate for multiple revenue streams. He has famously remarked, “Never depend on a single income. Instead, make investments to create a second source.”

Today’s markets give plenty of investment opportunities, and anyone can choose freely from them to create cash flows.

3. Budgeting

Savings is a superpower. Like all superpowers, savings are not easy to develop and deploy, but budgeting can help. Budgeting develops a habit of recording and tracking your income and expenses. You can create a household financial ledger to plan your expenses, savings, and activities to reach your financial goals. Then, at the end of each month, you can review your budget and analyze your achievements.

The budgeting approach mentioned above is a standard method, but it would be better to develop your own strategy and stick to it.

4. Create an Emergency Fund

Human life goes up and down with intermittent phases of happiness and sorrow, prosperity and misery, health and illness like the readings of an Electrocardiogram (ECG) machine. However, everyone should realize that all these phases, both good and bad, have an end, and saving for the rainy day brings those bad days within our grasp. Therefore, taking up a life insurance policy, cutting unnecessary expenses, and creating a contingency fund are effective risk management initiatives.

5. Invest

Savings and investing are cousins. They both complement each other. For example, if a person actively invests his savings rather than keeping them idle in a savings account, he will achieve financial freedom sooner than a person who saves but fails to invest.

Investing is not for the faint-hearted. It should be strictly driven by financial goals, risk appetite analysis, and timely churning of the portfolio according to ever-changing market conditions. Along with all these understandings, investors should fix the time horizon to keep their savings invested. It will help them keep an eye on the risks-rewards over a span and let them reap the fruits of compounding. It is no wonder famous scientist Albert Einstein regarded compound interest as the eighth wonder of the world and said, “he who understands it (compound interest) earns it, he who doesn’t pay it.”

6. Have Patience

Rome was not built in a day, and compounding works in similar ways. It never shows its true potential in a year or two. If you are a person who is very clear about your financial goals keeping an eye on long-term financial plans, you are an investor. You are nothing but a speculator if you don’t fall in this category.

In the words of Warren Buffett, “Stock market is a place to transfer the money from the impatient to the patient.”The story of the golden egg-laying goose we read in our primary school days also heralds the importance of patience in our life. In investing, always keep in mind that we can’t eat the apple on the same day we plant a seed for the apple tree.

Conclusion

Life is indeed uncertain. However precisely you may plan your life, chances are large that something somewhere may go wrong at any time. Anyway, no one should let the uncertainty pulls them back from planning their life and financial goals to the best of their abilities.

Uncertainty is stressful, and unforeseen events can bring down one’s lifestyle quality if they do not have sound financial plans in place. There is no doubt that financial planning ensures peace of mind and prosperity over the long term, but it can’t be taught in a school like English. It is because financial goals differ for each of us.

It would be apt to finish writing by giving perfect justice to the idea of financial freedom by quoting Chris Brogan: “The goal isn’t more money; the goal is to live our life on our own terms.” This quote carries the essence of financial freedom.

Justin Raj

Alpha Research