The Importance of Financial Freedom

financialtreat – will explain The Importance of Financial Freedom that you will get in the following article. Let’s look at this article carefully!

Entering the working period, all kinds of affairs began to become personal dependents. One of them is of course money. Finance becomes a sensitive topic as we age. Many of you are still struggling with it. This condition then triggered the term financial freedom to become more and more audible.

Not only do you want to be rich, everyone needs financial freedom. In fact, this freedom greatly affects a person is looking at a career and doing his daily work.

Well, this time, we have summarized everything you need to know about financial freedom. Come on, see the explanation so that you can go one step further to reach your financial goals!

Definition of Financial Freedom

From the name alone, of course, you can catch the definition of this one term. Quoting from KBBI, the financial word financial refers to financial conditions, while freedom or ‘freedom’ means ‘free from fear’ and ‘not disturbed and hindered’.

Financial freedom is a condition in which a person is financially free, in a sense, a state in which a person has sufficient wealth to live without having to work very hard and actively to meet very basic needs such as eating or buying clothes.

Thus, financial freedom means being free from fear related to finances and not looking at financial conditions as disturbing or hindering something. That is, you are no longer confused about money to make ends meet.

Purpose of Financial Freedom

Barclays, a British multinational bank company, conducted research on the British public in 2021. As a result, everyone means financial freedom differently. Each age group also has a different view.

Even so, in general, the top 10 meanings of financial freedom according to the research are:

  • avoid debt;
  • pay off home installments;
  • have the confidence to be able to deal with unexpected costs;
  • have control over finances;
  • able to save every month;
  • have any money left over at the end of the month;
  • able to pay bills every month;
  • have an emergency fund;
  • not anxiously waiting for payday; and
  • able to pay something without needing to look at the bank balance first.

You need to note, that none of the above lists explicitly mentions the desire to get rich. The only thing that comes close to “wanting to get rich” is the last point. Meanwhile, the top two points focus on overcoming debt as a thing that interferes with life and tranquility.

In addition, the list above has a majority of items that want to avoid fear around finances. These things include fear of unexpected costs, fear of insufficient salary until the next payday, to fear of having no control over one’s own finances.

Finally, the desire to have the ability to save, have an emergency fund, and have money left over at the end of the month describes a person’s disciplinary process so that his financial freedom lasts for a long period of time.

Benefits of Having Financial Freedom

The number of people who want to learn about financial freedom is certainly not just a follow-up. There must be beneficial benefits that make many people finally willing to learn and change their habits.

The main benefit of financial freedom is being able to meet the needs in life and not be confused financially. Still earn a safe income even though it is not working though. The benefits will be strongly felt when they are no longer able to work or in a state of illness. You still get results so that you can really rest and enjoy life without being burdened.

The wealth owned is able to provide income so as not by selling new assets to get results. Your assets will remain in number but that’s where the source of income can be obtained. Simply put, when you are able to achieve the financial freedom you do not need to force yourself to work continuously. You can rest your body and retire at any time without having to wait for old age.

Interestingly, when you want a vacation than just leave without having to worry about running out of money. Even when sleeping even if you already have a lot of productive assets will get income. This benefit is what millennials are targeting so they are trying to find various ways to be able to realize the dream. Including changing life habits in order to be able to accumulate many productive assets at a young age.

Is financial freedom important?

It is natural to view work as a routine to collect rupiah coffers. If you feel enough, you also quit your routine and do other activities that you enjoy. The need for financial freedom is a watchdog of the long-term goals of your life.

According to the journal by Andreas Rudiwantoro (2018), millennials are synonymous with high consumption behavior to support lifestyle. This is certainly dangerous because, without the desire for financial freedom, salaries will easily disappear.

You must have the principle that one day, you will stop working. It must be a danger, right, if you continue to do something that is not in accordance with passion, but there is nothing you can collect, either science or salary?

If you really have pleasure or passion for what you do, of course, the presence of financial freedom can further improve your performance, right? Since there are no more shackles from the financial side, you can apply idealism to work more freely. The result is certainly an output that is more in line with the self and able to cultivate happiness.

The Stages to Financial Freedom

Launching from the official website of the Faculty of Economics and Business, Universitas Airlangga, there are 6 stages to achieving financial freedom:

a. Dependency phase

In this phase, a person still depends on others to make ends meet. This phase is usually when you are still not working and have not earned income, such as when you are still with parents and school.

This stage also does not include financial freedom because dependence on others eliminates the freedom you have. This is evident when you are still in school, of course, you will follow all the wishes of your parents because if not so, you will not get pocket money.

b. Solvency phase

This is the phase where you begin your financial freedom. Finally, you have a source of income that can meet the needs of life and pay down debts. Even so, the amount is still tight with expenses so there is little you can collect. Even sometimes what is collected is immediately exhausted when there is an emergency need. This phase usually occurs when you are still new to the world of work and the salary is still mediocre. What’s more when the existing salary is not sufficient for life needs.

c. Stability phase

At this stage, progress begins to appear, namely, income becomes greater than the need so that there is something that can be saved. This saving process will give you “safeguards”, such as being able to pay for insurance, investing, to have an emergency fund. You may still hesitate to call it part of financial freedom, but you’re already aware that you’re moving towards that freedom.

To reach this phase from the previous phase cannot just happen. A long process is needed. Especially when work moves from one place to another, then this phase will never be achieved. This is because the career path you will never achieve.

d. Free phase

Debt as the main fear of man finally managed to pay off in the free phase. The risks that initially arise due to debt can be transferred to the investment realm. So this phase is arguably the debt-free phase, not the actual freedom phase.

e. Securities phase

The result of the investment has been able to cover the monthly basic expenditure. Many do not hesitate to call this phase as financial freedom.

f. Phase of independence

You have complete control over all financial decisions. The result of passive income can not only meet basic expenses, but also desires and lifestyles. This is the last stage of financial freedom.

How to Achieve Financial Freedom in the World of Work?

Still based on research from Barclays, there is something unique in the results. Many people in the pessimistic adult category achieve financial freedom. That’s because to get to financial freedom, it takes a big jumping stone which they find difficult to get.

According to Budi Frensidy, a professor at the University of Indonesia, the main key to achieving financial freedom is being able to distinguish between “want” and “need”. Without a correct view of these two things, you tend to increase expenses when you get more income. This wastes a great opportunity that you finally get.

In addition, looking at the stage of financial freedom that mostly focuses on passive income, you can start investing as early as possible. Just start from the low risk, such as money market mutual funds or sovereign bonds.

Also Read Financial Independence:

The last thing to do is to be patient, especially for those of you who are struggling in managing financial conditions. If you continue to be patient, then you will be on the right track. You also don’t have to worry if you can only save a small amount. Later, the number will increase if done consistently.

Financial freedom is important in life. Financial freedom does not mean hating work or wanting to resign quickly, but how you love work more without having to do it forcibly. Working like that must be fun, right?

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