Independence Day is here. While exploring the concept of freedom, one thought that comes to mind is 'What is financial freedom'?  

Financial freedom in a simplistic sense means having the ability to live off one’s portfolio (salary, business profits, rental income, dividends) for living expenses. Financial freedom also entails, the ability to take various life decisions without being overly worried about the financial impact it may have on your day to day life.

How is it achieved?

That is the compelling question. Let us explore this concept further.

Key principles that can help you achieve financial freedom:

1. Increase your income 
This can be through taking more responsibility at work, automating non-core jobs, enhancing skills, becoming a thought leader in one’s profession. A mix of the above generally leads to progress in the income arena.

2. Build a passive income 
Passive income is what is earned without having to work to generate it. Investing is a team sport. It requires inputs from people with different skill sets. A passive income can be generated through -

• Rental Income
• Dividend Income
• Royalties

It depends on what you are comfortable as an investor in choice of asset class and what are your strengths. If you have writing skills/singing skills and have a royalty attached to it, you could have an income for life. A smarter way of living is to build income-generating assets.

3. Increase your standard of living in line with income 
A common problem with many people is that their expenses exceed their income. How does it happen? It happens as many of us tend to overspend on the good things in life at the cost of ignoring the implications of getting there.

Often people buy the latest gizmos by credit card. This results in spending from future savings and low liquidity. In extreme cases, such individuals may have to resort to borrowing money from friends and family to meet their daily expenses.

4. Stay healthy 
Being healthy ensures that the gift of financial freedom can be enjoyed. Not being healthy can drain you of vital energy and it can reduce your earning prospects. Whether you are a business owner or an executive climbing the corporate ladder, being healthy is paramount. One of our clients had to take an early retirement on account of health issues. Apart from good judgment. health is necessary to be industrious and grow in life.

This Independence Day let us work to not only be independent, but also financially worry-free.

To explore business opportunities, link with me by clicking on the 'Invite' button on my eBiz Card.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.