Financial freedom, or some may call it financial independence, is a common term coined around in this time and age. Being only in the Malaysian workforce for about 3 years now, my peers and I often talk about our dreams of having financial freedom.
It is definitely ironic how this generation of millennials are pondering on financial freedom at the beginning of our careers (I can hear the Gen X and Gen Y nodding their heads).
Many are striving, saving and investing to one day achieve financial freedom. But how do we know when we have actually achieved it? What is financial freedom to begin with?
Some may say financial freedom is having RM1 million in their bank account, while others may think it is when they have fully paid off all their debts; be it student loans, car hire purchase loans or housing loans. Still, others may think that financial freedom is when they have surplus every month from their pay check after deducting all their expenses. That is after all, money that is free for us to use right?
With all these differing ideas, it is best to stop and ask – so what is financial freedom, really?
FINANCIAL FREEDOM
Wikipedia defines financial independence as such – a state in which an individual or household has sufficient wealth to live on without having to depend on income from some form of employment. Kim Kiyosaki from Rich Dad puts it as – the freedom to be who you really are and do what you really want in life.
Paraphrasing it a little, financial freedom for me means having the freedom to do what I want without any financial constraints. I believe that it is achieved when I have passive income that is at least equal (if not more) to my expenses.
Personally, the realization hit me when I noticed that there are many people that are working in jobs that they hate. There’s no growth opportunities, boring job scope, poor management, toxic culture – just to name a few.
Just a disclaimer, I do not endorse switching jobs every time you feel dissatisfied in your career. I agree that every job has its ups and downs and we all have different preferences to the jobs we want.
So, why do people who complain day and night about their jobs, still stay in the same company that they hate? The common answer would be, “I have bills to pay” or “I have commitments”. They call it the “reality of life”.
While I do acknowledge that we all come from different financial backgrounds, I think it is just sad to accept certain things as the “reality of life”.
MY PERSONAL BELIEF
I personally believe that all of us have a distinct purpose in life. We are not placed here on earth just to exist but to truly live a meaningful life. Each one of us have certain passions and skill sets that will be a blessing to others, the community and even the world. It can be applied as our passion projects, in our jobs or even to be ventured out as a business opportunity. However, we will not be able to live that out if we waste time doing things we hate; all because of bills and financial commitments we have to meet.
Hence, the very big reason for me to start this website is to provide financial literacy to all, in the simplest form, so that we are all able to master our finances and not be slaves to it. I truly believe that by removing the financial hurdle, we are free to do what we love – our passions will translate to added value to the society. Money is not the solution to all problems, but poor money management sprouts problems.
So, now that we have understood the meaning of financial freedom; next thing to do is to set our financial goals!
GOAL SETTING FOR FINANCIAL FREEDOM
As with every other areas of our lives, setting goals and vision is crucial for our development and growth. As how Simon Sinek; a famous author, motivational speaker and organisational consultant, would put it – start with why.
Why do you want to have financial freedom?
Think about this for a moment. Your why cannot be money because having money is not the end goal. Money is merely an instrument for you to achieve/get something. Money on its own has no value if it is not used as an instrument. So… why?
Personally for me, my why is time. I would love to have the freedom to spend time with my family and loved ones, time to watch my children grow, play and to teach them in the future. Time to do things I am passionate about. That is my why. Spend some time to think about your why because this is where it all begins.
SMART GOALS
So after identifying your why, the next step is to determine how to achieve it. I like to use the S.M.A.R.T goals concept which is as follows:
S – Specific
Be specific in what you want to achieve. For instance if your why to financial freedom is so that you can explore and travel the world, be specific in which continents and countries you would like to visit. If your goal is to learn new languages, be specific on which new languages and up to what stage of learning. The key is to be specific so that you will know when you have achieved it.
M – Measureable
Your goals must be measurable. Some goals are not as easy to measure like, happiness, fun, and satisfaction. However, this is easier for financial goals as it usually entails a certain measurable amount; for example, how much to save or how much of passive income to achieve.
A – Achievable
This is where your goals have to be realistic. While I do agree with setting your goals a bit higher than your reach, it may not be wise if your goals are too far-fetched and unattainable.
Aim for the moon. If you miss, you may hit a star. – W. Clement Stone
R – Relevant
Your action plan should be in relevant with your ultimate goal of financial freedom. My goal to achieve financial freedom is by having sufficient passive income to cover my expenses, so that means my action plans would be to look into streams of passive income.
T – Time-bound
Last but not least, every goal requires a timeline. Not only does having a dateline create a sense of urgency to act, it also provides you the visibility of your progress over time.
A goal without a timeline is just a dream. – Robert Herjavec
Companies like to measure their revenue and net profits on a year-to-date basis and would look at annualized figures to determine if they are on track to reach their targets. Similarly, in a given timeline, we should also occasionally re-examine our progress VS our goals, to ensure that we are on the right track.
REFLECTION
So take some time over the weekend to figure out what financial freedom means to you. The very first step to taking control of your finances is to envision what your end goal looks like. Thereafter, set your goals and work towards it! What better way to start of the new year of 2019 than this right?
Before I forget to mention this, a key point to goal setting is to share it with people you trust. This is key for them to keep you accountable and to encourage you as your progress. Besides that, I realized that when we vocalize and tell others our goals, two things happen:
- We remind ourselves of our goals;
- We strive to achieve it even more because if you have already told someone about it, you would hate to come to a point of disappointing others or to show that you have not been able to succeed in it. I guess this is partially an ego thing but, no harm in using it to motivate yourself towards achieving your goals.
I have left the comment section available below, so feel free to leave me your thoughts on the topic of financial freedom. What is your why and what are your financial goals?
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