What is financial freedom?

Allan Johnson of Johnson & Tennent Chartered Accountants
Allan Johnson of Johnson & Tennent Chartered Accountants Janie Kayes

WHAT is financial freedom? For most people, winning millions of dollars in the lotto would be necessary for them to feel financially free - while others would consider themselves free with considerably less resources. 

So the question is: what does financial freedom mean for you? If you talk to financial planners (as I often do), most would agree that people tend to overestimate the amount they need to achieve financial freedom. With some expert guidance, you can calculate the necessary amount with reasonable accuracy. An appropriate plan can then be developed to achieve that end result.

However, the real benefit of this process is the peace of mind that you gain by knowing how much money you need, and having a workable plan to get there.

Defining what financial freedom means to you removes the stress of not knowing where you are heading, and having some vision of the end result provides motivation when times are tough. Of course, having your definition in writing (somewhere you can often refer back to!) is key to maintaining your focus.

If you want to define where you want to be financially, you need to clarify the difference between happiness and wealth - a fine balance. I'm not saying that wealthy people are not happy, some people just need more wealth to be happy than others!

So, what makes you happy? What do you enjoy doing? You need to understand the activities, possessions, relationships and passions that resonate with you - because financial freedom will be having sufficient wealth to enjoy these things as often as you desire.

Clearly, to be able to do that you need a certain amount of wealth, and this is how you should be defining financial freedom - sufficient wealth to enable you to enjoy your heart's desires. Once you know the end result, you need to come up with a definite plan to achieve this result (and don't forget, the timeframe you want to do this in is a big consideration).

You will more than likely need some expert assistance to make sure your plan is viable and to help you keep on track.

You also need to ensure that your plan is written in language you can understand. Don't be afraid to ask for help - it's a lot less painful to learn from mistakes that other people have made, and the time you save in achieving your goal will be well worth the investment.

Now is always the right time to start moving in the right direction - and the first step is to define what financial freedom means for you and start taking giant steps to achieve it.

Topics:  allan johnson budgeting income opinion

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