Financial freedom is a goal that drives many people, and significantly influences the choices they make throughout their working lives. The recent upheavals to our way of life – both economically and socially – have made people more fearful of what the future will look like.
The COVID-19 pandemic and subsequent disruptions to the way we work, travel, shop, etc. have shaken long-held assumptions which we once relied upon to guide our choices. The effect on the global economy has upended many people’s long-term financial goals, including (but not limited to) their path to financial freedom.
What is financial freedom?
Today, financial freedom can be defined as having enough savings, liquid assets, and an investment portfolio that allows you to live a life that fulfils the needs and wants of you and your family. Achieving financial freedom will allow you to overcome the need to work, giving you the freedom to pursue passion projects, or to retire without worry.
Financial freedom then and now
In the past – even as recently as your parents’ generation – financial freedom meant a different lifestyle from what it means today. Financial freedom used to look like owning a house, having a healthy savings account, and working at a job you had been employed at for decades (which secured you a solid pension plan).
Nowadays, loyalty to a job does not guarantee you a pension. Today, financial freedom may mean having the ability to pay off high-interest debt. Escalating debt obligations, coupled with a sudden job loss or a medical emergency, can be a huge barrier towards financial well-being for many people.
People today also dream of being able to afford a mortgage and of building a solid investment portfolio that can provide a comfortable lifestyle and a safety net for a future that has become that much more uncertain.
The difference between the past and the present is that nowadays, there is a lack of stability in the economy: moving jobs every few years is more likely to increase your salary and benefits, and there are now more ways to save and invest money.
The end goal still remains the same for past and present generations: we all want to feel secure and retire comfortably, or even early.
Smart financial practices
Luckily, with some ingenuity and a solid plan, you too can overcome any barriers you have that make you worry about your financial freedom. Consider that you will have already achieved financial freedom if you develop a healthy investment portfolio. All you really need is a portfolio that is able to provide enough returns to take care of the basic needs that your salary covers, as well as a bit extra.
As such, clearly outlining your goals and restructuring your life to achieve those goals will not only bring you closer to financial independence, but will give you a sense of purpose in everything you do.
Adopt these habits as recommended by Bank Negara Malaysia (BNM) to more effectively work towards future financial freedom: