May 24, 2024

Financial Freedom – The first thing you should do before planning it

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Whenever you do some research regarding personal finance, be it SIP, Mutual funds, Debt related investments, or even fixed deposits, all the pages/articles will have one word in common – “FINANCIAL FREEDOM”. The word itself is very appealing as it involves two attractive words – Finance and Freedom. It gives a feeling that you can retire early and be free from all the work you are doing right now and you can finally decide on when to work, whom to work, and spending some quality time with your family. While these things are true to some extent, this idea of financial freedom in reality is very different from what you see on Social Media platforms or what you hear from so-called Investing Gurus and Mutual fund advisors.

Financial freedom

“Make your mind free before you plan for financial freedom”

Basically, your desire for financial freedom stems from a necessity. Take your time, sit down, and just write in a paper what makes you think that you need financial freedom. For some, it may be due to the Job/ Profession they are currently in, and for some, it may be lifestyle oriented. 

Job related necessity

In case of job-related necessity, you may have any of the following thoughts in your mind like

  • I don’t like the 9:00 – 5:00 job
  • The job tires me out easily
  • I don’t like my boss or seniors commanding me
  • I have to compete with many other colleagues to make my position safe
  • Want to be away from office politics
  • My clients are rude or lack sympathy towards me

While some of the thoughts may be genuine, mostly it comes out of frustration/disappointments in the Current Job. The problem with this kind of mentality is that you gradually lose your interest in your job and keep on dreaming about financial freedom. Remember, working towards financial freedom and dreaming of financial freedom are two different things.

Frustration in your current job?

Your frustration towards your current job makes you hate the Job or Profession. With this dream of financial freedom, you start hating it more than you hated earlier. This creates a notion that whatever you are doing right now is worthless and you are wasting your time. In the end, you want to quit the job as soon as you can so that you want to be financially free. But, is this even possible? Without having any interest in your work how can you earn more money or in case how can you make a promotion or a pay hike? You might be deceived to think like “I am going to be financially free sometime soon, I need not bother about my work or no need to give my full dedication to it”.

Instead of thinking like this, you should be saying something like this to yourself

“This job (Whether I like it or not) is very important to me now. The income I am generating from this is going to be used to fulfil my longer goal of becoming free financially. Though I may have some disappointments in my job I will be doing this job as efficiently as I can so that I can be free financially” This kind of positive attitude will give you enough motivation and stronger will power to achieve your goal even faster. Remember, whether you like your job or not doesn’t matter here.

Lifestyle oriented necessity

While the job-related issues are more often due to frustrations/disappointments you face in your day to day work, the second necessity related to lifestyle changes is even more dangerous. You may think that after becoming financially free you can be doing the following things with ease:

  • You can be on vacation frequently,
  • Sleep as long as you want,
  • Enjoying all days just like you do at weekends like watching films with your family,
  • Rejoicing in a swimming pool,
  • Relishing continental foods in your favourite star hotels, partying all night long and the list goes on. There is literally no end to this list.

If you are having the above-said thoughts you have completely misunderstood the concept of financial freedom.  The reality is far more different from what you expect. While some lifestyle changes like spending some quality time with family, working when you want and where you want are really necessary, the luxuries you dream of above is very filmy. Imagine the corpus you would need if you want to do all the above-said things frequently. So what’s financial freedom if I can’t enjoy life as I want? I can hear that. I would like to put this in simple words –

” One can be said to have achieved financial freedom if he/she has generated enough corpus (calculating the future inflation rates) so that he/she can live the life in the same way he/she is living right now, without any need to work, for the rest of his/her life”.

I hope you can understand what I am talking about. Say if you are having a two-wheeler and a small car now, achieving financial freedom does not mean that you will be having four luxury sedans. It simply means that you can have that two-wheeler and a small car for the rest of your life and maintain it (Petrol, Servicing, Insurance, etc.,) for the rest of your life without the need to earn any other income.

Now, don’t ask “So can’t I have luxury cars and luxury life”? Of course, you can, but you have to plan the corpus accordingly. Luxury or need varies from person to person. What’s cheap to you may be luxury to some and vice versa. Actually, there’s no limit to the luxuries in the world. If there is a limit, why multi-millionaires are working hard more and more even though they had achieved financial freedom long back? It’s because there is no end to the numbers. You put any number and there will be another number bigger than that. That’s why the word “Infinity” had been coined. Because there is literally no end to this number game or we can rightly call it as “Number Trap”.

So what can be done?

You have to free your mind before starting your journey of financial freedom. Focus to become mentally free before you become financially free. You should be clear about what type of life you are planning to live. I am no one to decide the limits for your desires. You can desire any luxury you want to enjoy in life, but you have to plan accordingly.

If you want to go on vacation twice a year it is absolutely fine. No one has the right to say that it is an unnecessary luxury. But the question is “Have you planned for that? Do you have the estimate of the corpus you will need for that? Are you investing that much amount currently? Does your job give you the salary you need to invest in for that? If not, have you planned for any secondary income which can overcome the deficiency? How much time and dedication you are willing to give to achieve your goal?”

If you don’t have satisfactory answers to the above questions it’s really difficult for you to become financially free irrespective of your income. After all, thoughts arise in mind which is then converted to actions. So it is very important to be free and clear in your mind about your needs rather than reading “N” number of articles, watching all the You Tube channels, listening to all investing advisors to become financially free.

Disclaimer:

This article is written just to give an insight into what financial freedom really means. When I started my financial planning I had some unrealistic goals and needs. I was totally wrong about financial freedom and I still may be wrong. However, my perspective has changed over time and I thought it is worth sharing, with my fellow aspirants who want to be free financially. It is not my intent to be preachy or to judge anyone’s lifestyle or their desires. You are free to disagree with my thoughts.

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