What does financial freedom really mean and how can you get there? A look at your financial freedom number

BY KEISHA BAILEY

You’ve probably heard the term ‘Financially Free’ before as it is trending heavily on social media. Whenever we scroll on Instagram or Facebook and see a picture of someone on a remote beach destination with #goals in their caption, we immediately are filled with #fomo and start to wonder how we can achieve that lifestyle as well. In fact, there is a whole movement behind this, it’s called F.I.R.E – Financial Independence, Retire Early.

What does financial freedom really mean and how can we get there? I am a huge advocate of abundant living, so I wanted to share exactly what financial freedom is and provide a few simple practical strategies to get there. If you are seriously seeking that #goals lifestyle, then take notes and be sure to consistently implement these strategies in your own life.

Financial freedom occurs when your income can comfortably meet monthly bills and have some excess for wants. When you are no longer dependent on your salary, you are financially free. Those of us who are seeking financial freedom envision a life beyond working a 9-to-5. We want to be able to enjoy our lives on our terms without stressing about toxic work environments. We want time to truly explore our passions and be there for our friends and families. One thing we have learnt over the past two years is to treasure the precious moments in life and not take a single second for granted.

Can’t imagine not being dependent on your salary? It sure does sound like a dream, but it’s possible. I know because I am well along my journey to financial freedom. In fact, I can clearly see the finish line and I want you to join me as we reach financial freedom together. So, let’s get into the details.

To achieve financial freedom, you must replace your monthly salary with some form of investment income – income that you don’t need to work for. One source of investment income, and this is my favourite source, is dividend-yielding stocks.

Now you need to know your freedom number. Your freedom number is how much money you should have in your stock portfolio to generate enough dividends so you don’t need to work and instead your money can work for you.

To determine your freedom number – multiply your monthly income by 12 and then divide it by 5% (5% represents the typical dividend yield on stocks). For example, let’s say you earn $2000 per month, it would be…

Step 1: $2000 x 12 = $24,000

Step 2: $24,000 / 5%

Freedom Number: $480,000

Now, apply this calculation to your own life and determine your freedom number. Do the calculations now before you read any further?

Before you start to panic about how large your freedom number is, take a step back, breathe and know that the journey of a thousand miles begins with a single step. Rome was not built in a day, so by consistently investing you can and most definitely will reach your freedom number.

Here are a few simple and practical strategies to assist you in reaching your freedom number:

1. We all have skills and talents. Put these skills and talents to work and you can make some good money. It is time to start that side-hustle.
2. Are you getting rental income? If so, put it towards your investments. Don’t spend it on meaningless fads and fashion trends.
3. Do you get any bonuses from your job? Think about putting it towards your freedom number instead of spending it.
4. Lastly, if you are already investing, you can take the gains from your current investments and reinvest them towards your freedom number.

Now, remember I said earlier, that you need to take notes, but you also need to implement. Every detail I have shared will work for anyone who is willing to be consistent. The research shows that we are great investors; so, let’s use this innate talent to reach financial freedom.