It is always best to work on your financial freedom while you are young. But what is financial freedom, exactly? Financial freedom is not the same with merely “earning,” because the aim here is to maintain your chosen lifestyle without worrying when your next paycheck would come in.
So basically, this means that you should not just be living from paycheck to paycheck. Sometimes, millennials associate being financially free with being flexible – like they can still earn while travelling and enjoying one place from another.
This is not always the case however. As long as you can sustain your needs, wants, and can afford to relax or go on vacation in a regular basis, then you are basically financially free. Being a young professional who just got started earning a livable income is just the first step towards becoming financially free – there are still certain habits that you need to maintain in order to achieve that fully.
1. Try to generate some extra income.
Even though you are locked in a 9 to 5 job, try to find some time to pursue a passion that can also generate you extra income. You can also accept project-based tasks online (you can try exploring Upwork and Fiverr) that you can easily do during your off-days.
2. Build up your emergency fund – rapidly.
An emergency fund should be at least equal to six months-worth of your salary. This should be set aside to be used only in cases of sudden job loss, accidents and other unforeseen events. This will act as your cushion in times of difficulties and unplanned moments, so that you can easily bounce back after such disaster.
This could also be easily built once you’ve generated a stream of extra income because by then, you have more money to set aside each month and build up a substantial emergency fund faster.
3. Open yourself up to the world of investing.
Assuming that you can now sustain yourself well enough each day, it’s time to think about the future. To build up your net worth, you need to put your resources in different baskets and make them grow. Investing in the right places will help you make big purchases and build a retirement fund for the future, but you need this to be planned out extensively.
There are many options when it comes to investing too. You can choose to invest in real estate, the stock market, mutual funds, unit investment trust funds from banks, or put your interests in a startup business.
4. Spend your money wisely.
It is well known that millennials are easily attracted to new, shiny things such as that latest iPhone model, that new pair of Air Jordans, or even that hot new beach destination that almost all of your friends are raving about.
Rewarding yourself is not bad per se. Sure, you can still go out and shop or go on vacation, but if you have to incur debts, loans or pay the product in installments just to have them, then maybe it is time to think twice.
As much as possible, young people should avoid racking up debts just to show off the lifestyle they want – this habit will totally hinder you from becoming financially free as soon as possible.
5. Don’t forget to get yourself an insurance.
Whether that be health, accident or life insurance, this is yet another investment that could be part of your emergency fund. This is again, your cushion whenever unforeseen accidents and illnesses could stop you from working for a long period of time.
There’s no easy way towards financial freedom. Like any other kind of success, it is built on wise decision-making, and maintaining a good habit from day to day. Also, don’t worry if you can’t achieve it in just a few years – you can take as much time as you need. Good things don’t necessarily pay off immediately.