Don’t let stereotypes fool you. Financial freedom is not about being rich. In fact, you could be a millionaire and still be a financial slave. You know you’re financially free when you’re not worried about money anymore. The path to financial freedom isn't much different for freelancers. I'd even say we have the ability to get there faster by making certain business choices. So how do you get to financial freedom?
By Being Debt-Free
Financial freedom requires you to be debt free. Which is why I want to pay off my student loans even though some financial gurus say I should do otherwise. (Check out the comments on this post for a little discussion about that.)
Debt keeps you from reaching financial freedom because it’s something you must pay if you don’t want to face dire consequences. Missing payments on your debt leads to increased fees and sometimes increased interest rate, blemishes on your credit history that keep you from borrowing money in the future, and you even risk being sued and having your wages garnished or bank account levied. Bad things happen when you don’t pay back your debt. To me, that spells financial slavery.
Having Savings and Investments
What would happen if you were in some type of accident and weren’t able to write for several weeks or months? What would happen if your biggest client dropped you? What if your computer crashed today and you had to buy a new one? There are an endless number of what-ifs that could come manifest at any given time. Sure, we take steps to prevent them from happening, but financial freedom also includes having the means to get through these crises without creating additional debt.
Financial freedom today doesn’t mean financial freedom tomorrow. At some point in our lives, we’ll all want to retire from successful careers in freelance writing. What will you live on when you retire? Social security isn’t guaranteed and if you’re not paying taxes on all your income, i.e. getting paid under the table, your social security income may be limited. So it’s important to put money aside for the future.
The Ability to Live on Less Than You Earn
The closer your expenses are to your monthly income, the more likely it is that you’re living from paycheck to paycheck, not able to put something away for a rainy day much less for the future. Living below your income gives you some extra money complete the other steps to financial freedom – paying off debt ad saving for retirement.
Generally, you can increase the gap between your expenses and income in two ways: decrease what you spend or increase what you make. As a freelance writer, I like having the ability to increase earnings. I don’t have to wait for a performance review or wonder what percent I’m getting this year. I decide when and how to make the change and do what it takes to make it happen.
Financial freedom can mean different things to different people. What’s your definition of financial freedom?