Financial freedom means different things to different people. For some, financial independence is the ability to live life with the smallest debt possible, enjoy making money doing a job you love, and have enough savings spare to cover an annual vacation or two. For others, there’s a stronger focus on building wealth, generating passive income streams, and acquiring enough assets to never have to work ever again.
Generally, financial freedom can be loosely defined as:
- Being debt-free and enjoying financial stability in day-to-day life.
- Having enough savings to cover emergencies and unexpected expenses.
But this definition can easily be extended to include:
- Having the freedom to travel, pursue passions and hobbies and spend time with loved ones without financial constraints.
- Building up sufficient savings to retire early financially free of any worries.
- Holding a diversified investment portfolio that generates sufficient passive income streams.
How Can You Achieve Financial Freedom? Five Experts You Should Learn From
Being able to experience financial freedom is the dream of many. Each of these five experts has actually achieved financial freedom and is keen to share their insights with others who might be pursuing an early retirement or a life of financial wellness free of debt and money worries:
1. Dave Ramsey: The Man Behind the “7 Baby Steps” Plan
Dave Ramsay is probably the most well-known financial expert on this list globally. This US-based author’s “7 Baby Steps” plan for financial success is frequently quoted by influential entrepreneurs and journalists.
Philosophies:
- Living debt-free
- The importance of starting investing and wealth-building early in one’s career.
2. Suze Orman: The Queen of Personal Finance “Self-Sufficiency”
A renowned American financial advisor and author who is highly regarded for her expertise in personal finance. Suze Orman’s philosophy focuses on the significance of achieving financial independence and self-sufficiency by means of intelligent investing and responsible spending.
Philosophies:
- Self-sufficiency through smart investing and responsible spending habits.
- The belief that a person’s financial goals should be at the center of their strategizing.
3. Tan Min-Liang: A Master of “Hard Work and Dedication”
All Singaporeans know the name and face of city-state entrepreneur, Tan Min-Liang. Having co-founded Razer, a now-global gaming hardware company.
Philosophies:
- Hard work, innovation, and persistence.
4. Jack Ma: The Alibaba Entrepreneur Who Believes Bigger Risks = More Money
Jack Ma is a Chinese entrepreneur and founder of the hugely influential Alibaba Group, which today ranks as one of the world’s largest e-commerce corporations. At the centre of his success lies a philosophy emphasizing hard work, persistence, careful planning, and calculated risks as crucial for anyone keen to reach financial freedom.
Philosophies:
- Hard work, persistence, careful planning, and calculated risks as crucial for reaching financial freedom.
- The belief that bigger risks lead to more money.
5. Christopher Tan: The Expert on Why You Should Start Investing Today
CEO of Providend, a fee-only financial advisory firm, Christopher Tan is the second Singaporean in our list. Mr Tan claims he got to where he is today through goal-based investing.
Philosophies:
- Goal-based investing that tailors investment portfolio savings to an individual’s most important financial goals.
- The belief that starting to save as early as possible is crucial.
How to Achieve Financial Independence: Our Experts’ Advice Combined
Below, we’ve combined the key aspects of their teachings into five tips that we at Instant Loan believe are bound to improve your financial health, help you establish financial mileposts, and improve your all-around financial habits.
1. Live Debt Free and Spend Responsibly
To achieve financial independence, it is crucial to live debt-free and spend responsibly. Understanding the types of debt, such as secured and unsecured, can help avoid unsuitable ones.
Different strategies, such as:
- Debt consolidation or refinancing, combines all your confusing debts into one simple, single monthly payment and can ultimately save you money in the long run.
- Seeking advice from a financial advisor who can act as coaches on your journey, encouraging you to take sensible, more calculated risks and explore new investment options.
2. Save for an Emergency Fund and Retirement Savings
Good retirement planning is important, but building a strong financial foundation and an emergency fund is equally crucial. To build an emergency fund:
- Setting smaller savings goals: Breaking down a larger savings goal into smaller, more manageable ones.
- Starting with smaller contributions: Beginning with smaller contributions to a savings account or investment and gradually increasing the amount over time.
- Automating payments: Setting up automatic payments to a savings account, investment account, or bill payment.
- Avoid spending on non-essentials: Being mindful of discretionary spending and avoiding unnecessary purchases.
- Following the 50/30/20 savings rule: A savings guideline where 50% of income is allocated to needs, 30% to wants, and 20% to savings or debt repayment.
3. Set Specific Financial Independence Goals
Financial experts suggest creating a personalized plan with achievable goals, prioritizing suitable investments, and tracking progress. Diversifying investment portfolios with different options like shares, pensions, and rental income is also advised due to unpredictable markets.
- Create a personalized plan: A personalized plan should be based on your specific financial goals and tailored to your individual circumstances. This plan should include actionable steps that can be pursued on a day-to-day basis to help you achieve your financial independence goals.
- Prioritize suitable investments: Suitable investments are those that align with your financial goals, risk tolerance, and time horizon. These could include stocks, bonds, real estate, or other investment vehicles.
- Track progress: Tracking progress is essential to ensure you’re making headway towards your financial independence goals. This could involve regularly reviewing your budget, tracking your investment portfolio’s performance, or monitoring your debt reduction progress.
- Diversify investment portfolios: Diversifying your investment portfolio involves spreading your money across different asset classes to reduce risk. This can help protect your portfolio against market fluctuations and volatility.
4. Stay Hard Working and Persistent
Once you’ve established an emergency fund, reduced your debts, and developed a realistic, tailored plan to one day become financially free, the hard part kicks in. From here, elbow grease and persistence should be your mantra.
Recommendations include:
- Setting mini-goals on a monthly or even weekly basis: These mini-goals could include exploring new investment opportunities, reviewing your budget and expenditure, or taking steps to fine-tune your spending habits.
- Being prepared to pivot: Markets change and every investor will always encounter highs and lows along their journey toward financial freedom. It’s important to be adaptable, which means keeping your options open and not being afraid to take new risks.
- Regularly reviewing your budget and investments: This might mean adjusting your budget accordingly from time to time and checking in to see whether any existing investments are financially fighting fit, or if quick and easy adjustments can be made that’ll leave you better off.
This allows for adaptability, taking calculated risks, and staying motivated.
5. Be Innovative
A huge part of pursuing financial freedom relies upon your ability to be resilient in the face of adversity. If you make a bad investment, be prepared to learn from the experience and adapt next time around. If things don’t go your way, embrace the situation, and know how to spot new opportunities.
Countless experts stress that financial success rests upon:
- Being innovative: think outside the box to identify new opportunities, diversify income streams and develop passive income. Attend networking events, explore side hustles and analyze new markets.
- Bouncing back from setbacks: have backup plans ready in case of unpredictable financial situations.
- Making calculated risks: analyze and investigate potential investments before making any major decisions. Seek advice from experts and financial advisors.
Additional Tip from Instant Loan: Stay Healthy
Focusing solely on financial health can be counterproductive; it’s essential to prioritize physical and mental health to pursue financial freedom effectively. Maintaining good health can reduce insurance costs, increase productivity, and improve overall well-being.
Poor health can negatively impact one’s ability to achieve financial freedom. Research suggests that higher levels of mental well-being lead to increased productivity and a happier lifestyle. Prioritizing physical and mental health can improve one’s lifespan and ensure a fulfilling life.
Case Study: A Millennial in Singapore Aiming for Financial Independence by 55
Meet Jane, a 30-year-old millennial living in Singapore who wants to achieve financial independence by the age of 55. By following the expert advice combined above, Jane can improve her financial health and work towards her goal. Here’s a step-by-step plan based on her unique circumstances:
1. Live Debt-Free and Spend Responsibly
Jane has some student loan debt and a car loan. To live debt-free, she first focuses on paying off her high-interest loans. She considers debt consolidation to combine her loans into a single monthly payment. Jane also seeks advice from a financial advisor to help her make smarter decisions, such as cutting unnecessary expenses and creating a budget.
2. Save for an Emergency Fund and Retirement Savings
Jane sets a goal to save six months’ worth of living expenses in her emergency fund. She follows the 50/30/20 rule, allocating 20% of her income to savings or debt repayment. Jane automates her savings contributions and cuts back on non-essential spending.
For retirement savings, Jane contributes to her CPF (Central Provident Fund) account, a mandatory social security savings plan for Singaporeans. She also sets up a Supplementary Retirement Scheme (SRS) account, a voluntary program to save for retirement.
3. Set Specific Financial Independence Goals
Jane creates a personalized plan outlining her financial goals, including paying off debt, building her emergency fund, and growing her retirement savings. She researches suitable investments, such as Singaporean stocks, bonds, and real estate, and tracks her progress regularly. Jane also diversifies her investment portfolio to reduce risk and protect her investments from market fluctuations.
4. Stay Hard Working and Persistent
Determined to achieve her financial independence goal, Jane sets monthly mini-goals, such as exploring new investment opportunities or reviewing her budget. She remains adaptable and open to new risks. Jane also regularly reviews her budget and investments, making adjustments as needed to stay on track.
5. Be Innovative
To increase her income and diversify her revenue streams, Jane explores side hustles, such as freelance work or starting an online business. She attends networking events and keeps an eye on new market opportunities. Jane is prepared for setbacks and learns from her experiences to make better decisions in the future.
6. Additional Tip: Stay Healthy
Jane understands that maintaining good physical and mental health is crucial for her overall well-being and financial independence journey. She invests time and effort into staying active, eating healthily, and practicing stress-reducing activities, such as meditation or yoga. By prioritizing her health, Jane ensures a higher quality of life and a more productive journey toward financial independence.
Read also: Ways to Become Debt Free
Conclusion
Becoming financially independent means much more than having enough money to survive or live comfortably. It’s about setting goals, exploring investment options, strategizing, and working hard to reach your financial mileposts, boost your net worth and enjoy an all-round better life. Here are some things to keep in mind:
- Clear debt and improve spending habits for better financial health.
- Set financial goals beyond retirement and find ways to improve your situation.
- Achieving financial freedom requires planning, persistence, and being open to new income opportunities.
- Consider working with a financial advisor and seeking advice from experts for unfamiliar investments.
- Good physical health can positively impact financial health, while poor health can have negative consequences.
Instant Loan frequently shares financial news and tips that can help you achieve financial freedom and pursue your financial goals. We also offer a loan comparison service where you can compare personal loans and other similar loans from banks absolutely free.
