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Business News/ Money / Personal Finance/  What are the common misconceptions about financial freedom and how can you overcome them?
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What are the common misconceptions about financial freedom and how can you overcome them?

Financial freedom is not about a predefined sum of money or absolute time freedom. It's not equivalent to being rich or done with financial responsibilities. True financial freedom is having control over choices without being bound by financial constraints or societal norms.

Financial freedom is more than just having money or free time. Premium
Financial freedom is more than just having money or free time.

If you are a regular on LinkedIn, the term FIRE will be very familiar. The acronym, when dismantled, stands for Financial Independence, Retire Early. There are numerous stories of how people have hacked this status of FIRE in their lives and in turn the lessons learnt, which through such posts, get passed on to others.

Mostly, the promoters of financial freedom get it right; they talk about financial freedom being your ability to control your choices in life, your ability to control your time and your ability to generate income without fussing around with a 9 to 5 job and so on.

But, is it just that, your ability to have control?

Before we dwell on what financial freedom is, let’s try to establish what it’s not.

Also Read: Fiscal Empowerment: This is how mothers are redefining financial freedom

This is not financial freedom

It’s definitely not about having some predefined sum of money. Life and life’s choices are fluid. Money is transactional but wealth is a state of mind. It’s true that one can never have enough money, but there comes a point in life where you can consciously have enough wealth. Hence, you may find it tiresome to chase that elusive sum of money thinking that you are moving closer to financial freedom.

It is also not about freeing up your time in an absolute sense. You may be financially free and still go into an office, for a job or whatever work you are interested in. Many people feel that when they are financially free, they can give up working. Once financially free, you might realise that doing the right kind of work is a lot more fulfilling than doing nothing.

Also Read: Financial freedom: Here's how to invest in equities with confidence

Of course, there is that partial level of financial freedom, a mezzanine floor perhaps, which one feels they have conquered when they buy a house. You know something about how to live, once you live in a self-owned house. Once again this is a perception of financial freedom and not its reality. Living in a self-owned house is one of the many financial choices you might make. It is rarely connected to how financially free you are, especially if there is a loan to pay off in order to own that house.

Being rich is also not the equivalent of being financially free. If you are rich and bound by a lifestyle that requires you to have a very high level of regular income for which you need to give up your ability to control your choices and time in life, for which you have to forsake that which brings true value, then you are not financially free.

Lastly, financial freedom is not about being done with all your financial responsibilities, that’s just freedom from responsibilities.

Also Read: From chaos to control: Why is planning essential to achieve financial freedom?

How will I know I am financially free?

If all of the above is not moving towards financial freedom, then what is? How can you know today whether you are financially free or bound? Financial freedom indeed is about taking control of your choices. That choice could be to continue with your job, to start a venture or to spend time in philanthropic work and so on. Whatever your choice may be, you know you have achieved financial freedom, if the opposite state – which means, the sudden loss of your job, failure of your venture and so on - does not impact your daily lifestyle or your short- and long-term financial decisions.

It means that you have created a financial cushion which will take care of all your needs, wants, indulgences and slip ups from here on. With this status, what you do with your time is your choice. You will know you are financially free, when you don’t feel compelled to pursue a course of action with the sole purpose of making more money. In other words, the motivation for how you spend your day, your time, is something other than financial and this becomes a sustainable way of being. Then you are financially free.

It’s definitely about defining and owning your ‘enough’. As mentioned earlier in this article, one can never have enough money. Your ‘enough’ then is not defined by money, rather it is defined by your needs and how much you want to garnish your everyday life beyond just your needs.

If you understand and embrace this idea of financial freedom then clearly, the lower your material needs are, the sooner you will achieve financial freedom. This doesn’t mean that you need to become frugal. What it means is that you must define that line beyond which incremental spending of money doesn’t bring any real meaning in your life.

Here’s the learning

To truly achieve financial freedom, your final realisation needs to trend towards – meaning. What part of your life is it, what are you doing today or what do you desire to do, which can bring genuine satisfaction, true meaning and an alignment with your core values? Once you identify this, which of course is easier said than done, most likely you’re well and truly on your path to financial freedom.

Identifying actions which bring meaning to life, also help you eliminate a lot of other monetary actions you may be partaking in – which are meaningless. In doing so, you are actively reducing your dependence on money or rather wanting more money.

It’s when you are able to go through the day without the compulsion to do one or many jobs that don’t bring you joy, for fear of not conforming to a financial status imposed by society and yet you are able to find joy in the work you are doing for whatever time you spend doing it, plus you are financially secure not just in the moment and for the foreseeable future – that’s when you will know that you are truly financially free.

 

Lisa Pallavi Barbora is a financial coach and founder of moneypuzzle.in

 

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Published: 26 May 2024, 12:56 PM IST
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