“Financial Freedom is a mental, emotional and educational process. - Robert Kiyosaki”
"20s are meant for partying, travelling and enjoying life to the fullest. Right? Your answer for this question will decide how soon you will be able to experience financial freedom in life. Well, before figuring that out, let’s understand what financial freedom actually is.
The most-talked about term “financial freedom” isn’t about the abundance of money, but it's about having various sources of passive income that gives you the freedom of enjoying life without worrying about money.
Image Source: Unsplash
So, how to attain financial freedom?
You must have heard one of these financial freedom quotes “a penny saved is a penny earned”. Almost all parents may have advised their kids to save money. It is undoubtedly one of the best money advices but when it comes to financial freedom, you can not attain it just by saving, you must learn about money in order to invest it wisely.
The best selling money management book, Rich dad, poor dad talks about why a rich person keeps getting richer and a poor gets poorer by explaining compounding, asset & liability, cash flow etc. If you want to understand how to attain financial freedom early in life, you must read this book. In this article, we will talk about the things that you must follow in order to be financial independent in life.
1. Focus on improving financial literacy
Everyone wants to get rich but not all want to understand the psychology of it. Remember, the more you learn about money, the sooner you will be able to understand how to make it work for you. In your initial 20s, you must read financial literacy books as it helps you understand a lot about money. It’s ok, if you are a beginner, you can also refer to finance books for beginners which will help you get enough ideas to get started. Money management books that help you be financial literate:
Rich Dad, Poor Dad by Robert Kiyosaki
Think & Grow Rich by Napoleon Hill
The Psychology of Money by Morgan Housel
2. Crack the power of compounding
You opt for any aspect of your life be it finance, health, career etc., Compounding works like magic. Exercising for one day may not show you any result but when you keep doing it for days, months or years, you see remarkable results. Don't you? In the same way, the sooner you start investing your money wisely, the faster you will be able to experience financial freedom in life. Where can you invest?
Bank Fixed Deposits - 5-8% - Low Risk
Public Provident Fund - 7.1% - Low Risk
Post Office Time Deposit - 5.5% - Medium Risk
Stock Market - Market linked - High Risk
Mutual Funds - Market linked - High Risk
3. Don’t fall in the trap of bad loans
How your whole life is going to be mostly depends on what type of decisions you make in your 20s. Most of us start earning in initial 20s, and then we dream to have a car, our own house, expensive smart phone and what not? We try to upgrade our lifestyle and why shouldn't we? After all we are earning now. Right? But sometimes, in order to fake a rich lifestyle, we fall in the trap of bad loans i.e. car loans, gadget loans, credit card debt etc. This my friend, should be highly avoided, if you dream to retire soon in life. Remember, the only thing that stops you from getting closer to financial freedom is a bad loan. Thus; before opting to take a loan, plan out things pretty well.
4. Passive income should be your priority
We all love money. We all think about money. We all want to have money. But not all want to work for it. But hey, that's absolutely possible only when you generate passive income sources. Confused? Wait, let me help you understand. When you work every day and get paid, that's your active income. However; when you work for something once and it keeps generating you income for years and years, that's your passive income. Let's understand it more clearly with an example. You created an online course. Though you worked on it once but it will keep generating you income till the time people will keep buying it. That's the power of passive income and thus; it should be your priority.
5. Know where your money is going
Have you ever asked yourself, "man, where is my money going?" Don’t worry, we all have been there. When you are able to earn money, you must also have a track of where your money is going. You can use various money tracking apps to manage your income/expenses.
Effective money management apps:
Clarity Money
Mint
Chillr
mTrakr
Walnut Expense Tracking App
What’s your take on financial freedom, share your experience with us in the comment section below, we would love to know it!