The term ‘financial freedom’ can mean different things to different people. For some, it’s about the ability to meet financial obligations. For others, it’s about being able to pursue their passions and do things they enjoy. Some even misunderstand it, interpreting it to mean a life of wealth and luxury, never having to look at their bank balance and the ability to spend money on a whim as and when they please.
In reality, financial freedom isn’t about quitting your job to travel the world – it’s about understanding your money and having control over it, so it no longer controls you. It lets you live life on your own terms, making decisions driven by your wants and needs, not what your bank balance says.
And when you think of it in this way, it actually makes financial freedom achievable to so many more people. Including you.
Why It’s Not Just About Early Retirement
While it might be the ultimate goal of some, early retirement isn’t what financial freedom is necessarily about. For most people, it’s about having options and not having to worry about money getting in the way of what they want to do. This includes the ability to change careers, work fewer hours, travel more or support family without the burden of financial stress.
At its core, financial freedom boils down to:
- Choice: Deciding how you spend your time
- Flexibility: Navigating life’s curveballs with confidence
- Control: Directing your income, rather than reacting to expenses
You don’t need to be a millionaire to feel free, but you do need a plan. Below, we’ll run through five steps to achieve financial freedom, so you experience the liberation of having the choice, flexibility and control you need.
Step 1: Have a Clear Goal
Every successful financial journey starts with a destination. Just like with any journey, if you don’t know where you’re going, you’ll lack focus and flip-flop between here and there.
You need to start by defining your version of financial freedom. What does that look like to you? Is it being debt-free? Owning a home? Retiring early? Building an emergency fund?
Break it down into:
- Short-term goals: e.g. save £500 for emergencies
- Medium-term goals: e.g. pay off your credit card debt
- Long-term goals: e.g. build a retirement nest egg
By getting specific, you give yourself direction and motivation. It’s something to aim for. And when you see yourself getting closer and closer to achieving your goal, it gives you real drive. Simply saying ‘I want to save as much as possible,’ just isn’t going to cut it.
Step 2: Build a Financial Strategy
Once you know where you’re headed, you need to create a strategy that will help you get there. That begins with a simple, realistic budget. If that seems obvious, or a pain in the arse… well, it is. It’s not a fun or glamorous part of the process, but it’s the only way you’ll come up with a plan to meet your goal.
So, it’s time to crack out the spreadsheets and list everything that comes in and goes out of your accounts, so you can make some (sometimes tough) decisions about what to change. Are there certain outgoings you can make smaller? Are there non-essentials you can cut out or cut down on? Is there a way to use your skills and experience to introduce a side hustle so you can increase the money that comes in every month?
A strong financial strategy includes:
- Tracking: Know where every pound goes
- Planning: Allocate income towards essentials, savings and debt
- Reviewing: Regularly check in and adjust your plan
Most importantly, it needs to be sustainable. Sure, deleting all your streaming subscriptions might feel good for a month or two when you see the money still sitting in your account, but what happens when the new series of your favourite show hits? And of course, streaming platforms are just one small example – and by cutting these out, it’s not going to make a significant impact on your finances, but it’s just one small but very common example.
Are there bigger expenses you could limit? Do you buy a new car every year or two? Do you enjoy expensive first-class flights to the Maldives every winter? Take a long, very hard look at your current finances, and make a note of the savings you could make by making some changes. But at the same time, you want to enjoy the money you have. Life is worth living.
A good strategy shouldn’t feel like punishment; it creates peace of mind. It’s about finding that balance between what you want to do now and your financial goals for the future.
Step 3: Eliminate High-Interest Debt
Debt is one of the biggest obstacles to financial freedom. It’s something most of us have in some capacity, whether it’s something large like a mortgage, something moderate like a car on finance or a credit card bill, or something small like a mobile phone contract. But, with every single debt you have, the interest charges can eat away at your earnings, making it hard to save money and achieve your financial targets.
It’s not exactly easy, but you need to focus on getting rid of those debts so you don’t slow down your savings options by paying interest.
Focus on eliminating high-interest debt first, which is typically credit cards or payday loans. Two popular methods are:
- Snowball Method: Pay off the smallest debts first for quick wins
- Avalanche Method: Pay off the highest-interest debts first to save money overall
Which method works for you depends on what debts you have, how much they are and what will keep you motivated the most. Often, the snowball method is a huge morale boost as it lets you see progress early on by eliminating complete debts. But, the avalanche method might drive you as it will let you save the most amount of money early on, but it isn’t quite as obvious as the quantity of debts doesn’t decrease as fast. Think about which method would help you push forward with your quest for financial freedom and stick to it.
Step 4: Save & Invest Consistently
Of course, if you want to meet your goals, saving is essential. But, this should just be one aspect of your overall strategy. To truly build wealth, especially if you have a lofty goal such as early retirement, you need to invest. One of the best ways to achieve financial freedom is using the money and make it work for youl.
Even small, consistent contributions can grow significantly over time thanks to compound interest. The earlier you start, the more powerful the effect.
Make saving automatic. Set up monthly transfers to a savings account or investment fund. Treat it like a non-negotiable bill that comes out every month, like your mortgage repayments or utility bills. It’s a must-do payment that contributes towards your financial goals, which will lead to your financial freedom.
How to Reach Financial Freedom Through Investing
Investing might sound intimidating, but you don’t need to be an expert to get started. And don’t be put off by the surge in crypto investments, which have gained so much notoriety over the last few years – successful people have been investing for decades, and there’s a far less risky and bandwagon-jumping way to do it. With the right research and support, anyone can build a strong investment portfolio.
Here are a few common investment types:
- Stocks: Ownership in companies, offering growth potential
- Bonds: Lower-risk income from lending money to governments or corporations
- Funds: Pooled investments for diversification
- Property: Long-term wealth through real estate
The key is diversification, which means spreading your money across different assets to reduce risk.
Consider exploring passive income options too, like rental properties or dividend stocks, which generate money while you sleep.
Need help getting started? At MHG Wealth, our expert advisers can help you build an investment strategy that suits your risk tolerance and goals. For more information, read our article featuring investment tips for young professionals in the UAE.
Step 5: Seek Professional Support
You don’t have to do it all on your own. While you may look at entrepreneurs and professionals and admire how they broke the mould to achieve the enviable position of financial freedom, none of them did it alone. At some point on their financial journey, they sought help. Because no one has all the answers. Different specialists can advise you on different things. Just like how you might consult a personal trainer and a nutritionist to help you meet different health goals, financial advisers can help you meet your financial goals.
Financial advisers can help you:
- Set realistic, achievable goals
- Create a tailored plan that fits your life
- Avoid costly mistakes
- Stay on track during uncertain times
At MHG Wealth, we understand that everyone’s financial journey is different. Whether you’re just starting out or planning for a future of financial freedom, we’re here to guide you with clarity and care. Find out more about how MHG Wealth can help you secure your ideal financial future.
Conclusion: Start Your Journey Today
Some of the above may seem like baby steps to financial freedom, but you have to walk before you can run. But, the sooner you start, the sooner you’ll be in a position to stop worrying about your finances. Here are the five key steps to financial freedom:
- Set clear goals
- Build a smart strategy
- Eliminate debt
- Save and invest wisely
- Get expert guidance
The way to financial freedom isn’t a sprint, and for most, it’s not something you’re going to necessarily secure in 2, 5 or even 10 years. It’s a series of steady, empowered steps that all feed into your short- and long-term goals, with the overall aim of making sure you rule your money and it doesn’t rule you.
And the best thing is, you don’t have to walk it alone. Are you ready to take control of your financial future? Speak with one of our trusted financial advisers today.
