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What Does Financial Freedom Really Mean to You?

Oct 13,2021 · 4min read · 1444 views

It’s interesting how elusive something can be if you don’t have a good definition for it. For instance, lots of people want financial freedom, but what exactly is it? Some see it as a vague goal or distant dream. Others think financial freedom is only for an elite few. Financial freedom is a great concept, but can you define it and determine where you stand with respect to being financially free?

How Most People Think?

Before I give you my take on this, let’s explore what most people think:

Is it being out of debt?

Often people make financial freedom synonymous with freedom from the shackles of debt. I agree this is important because until you dig yourself out, you’re certainly not free. Consumer debt—that relentless revolving credit—is extremely restrictive. It seems more painful than a secured debt like a mortgage, but today secured debt can be insecure. Recently we’ve seen how a mortgage can impinge on freedom. A house that’s underwater isn’t truly a secured debt anymore!

Is it having just enough to meet my needs and fund my retirement?

Some think a person is financially free if there’s enough money coming in from passive sources, now or in the future. The word “passive” in this case refers to income for which there’s no need to work. Investments, social security, and pensions are some examples. By being careful, a person in this category can afford a traditional retirement at around age 65.

Is it having enough for my needs?

Most of my wants and a very comfortable retirement: Some people think financial freedom belongs to the independently wealthy, those who can do whatever they want without spending time working. It could also be that their careers, investments, and money management techniques made them very prosperous. The end result is an extremely comfortable retirement and many wants being met over the years.

Is it being able to purchase anything and everything I want?

Certain people think financial freedom applies only to the small category of extremely rich people like Warren Buffett and Bill Gates. There is nothing purchasable they cannot buy.

What Financial Freedom Really Is.

We need to redefine financial freedom as well because the all-or-nothing approach is inaccurate and too restrictive. It can even be a real downer! Many people can’t feel like they’re free until they’ve achieved tremendous riches—so why start? For some, just digging out of debt is a long road.

If you think of freedom as incremental, buying another unit of freedom is within reach. Tracking your Months of Freedom gives you a lot of freedom in itself because each little bit saved brings you closer to another month gained. Your time takes on a whole new meaning. The discipline and sacrifice involved in work become more worthwhile.

Financial freedom doesn’t have to come all at once at the end of your life. For example, someone with a small amount of freedom might choose to take a sabbatical or work part-time.

Most of us never get to the Warren Buffett and Bill Gates version of financial freedom. Many may never even get to the comfortably retired version. That doesn’t mean we have no freedom at all! Let’s reframe our thinking so we can celebrate our progress and keep on becoming increasingly financially free.

About Vola:

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How to Manage Your Money like a Pro

Aug 11,2021 · 5min read · 3343 views

At some point in our lives, we’re going to have to start managing our own personal finances. As daunting as that prospect sounds, it is completely doable. It takes commitment, honesty, and understanding to build your financial literacy and manage your money. But don't you fret, you’ll be able to reach your financial goals eventually. Here are 5 tips to help you out in your financial journey.

1. Create Clear Goals

Financial goals are objectives or milestones that you want your money to achieve at a specific time. Whether it’s building an emergency fund, getting rid of debt, or going on a luxurious vacation, your financial goal needs to be clear.

Some short-term goals can include saving up to buy a car, planning a wedding, or building an emergency fund. Keep in mind, short term goals should be achieved in 12 to 24 months.

Mid-term goals should be around 3 to 5 years long. Some may include saving for a downpayment on your house, paying off a hefty student loan, or starting a business.

Lastly, long-term goals should have a timeframe of 5+ years. These goals can range from saving for a child’s college education, saving for retirement, to paying off a mortgage.

2. Make A Budget

“A budget is telling your money where to go instead of wondering where it went,” said Dave Ramsey, an American personal finance personality.

Budgeting helps you control your spending, track your expenses, manage your money, and save money. It helps you make better financial decisions, prepare for emergencies, get out of debt, and stay focused on your financial goals.

At the beginning of every month, take a day to create your budget. You can try different budgeting methods such as the 50/30/20 split or the 70/20/10 split. You can read our other articles for more information.

3. Select a Money Day

“Pick a day of the week that you can commit to and make that your Money Day every single week. Touching your bills and paying your bills every single week allows you to get very clear on what you’re spending,” suggests Barlin, CPA, financial expert, and founder and CEO of About Profit.

The only way to improve your finances is if you take stock of your current financial situation. Be brutally honest with yourself and record all of your spendings. Afterward, you can take note of where you can save.

4. Make Separate Bank Accounts

Barlin says, “For most of us, we earn money and it lands in a bank account. From that bank account, we spend. We pay our bills. We spend money on the fun stuff. It’s all lumped into this one checking account so when we look at our account, if we have a lot of money in there, we tend to spend more, if we have less, we tend to spend less… Set up different bank accounts and use each bank account for a separate purpose... Once the money is designated for certain expenses, then either you have the money, or you don’t.”

The right bank accounts are critical to your financial success. You’ll need to set up checking, saving, and investment accounts because these are the building blocks of financial success. The reason you open a checking and a savings account are so that you can easily separate your spending cash from long-term savings. Leaving your savings in your checking account makes it easy to spend all of your hard-earned savings.

5. Start Investing

Investing is one of the most effective ways to put your money to work and potentially build your wealth. The greater growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff. Whether you invest in stocks, bonds, mutual funds, real estate, small business, options, futures, precious metals, or a combination of all of the above, the objective is all the same. You want to make a profit.

If you are a beginner, some investing applications you can use are Public.com, Robinhood, SoFi, Stash, and Betterment.

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Resources

-https://www.forbes.com/sites/stephanieburns/2020/08/03/5-simple-strategies-to-manage-your-money-like-a-millionaire/?sh=1b57c0215a49

-https://www.clevergirlfinance.com/blog/how-to-manage-your-money/

About Vola:

Vola supports over 6000 banks and credit unions and uses one of the nation’s largest bank connection providers to securely establish a link to your account.