Last Updated –
If you checked this article hoping to find a scheme that would make you financially independent in a week, stop reading right now.
However, if you’re looking for an actionable method to achieve financial independence, you’re on the right page.
Despite knowing how important financial independence is, not many Filipinos have actualized it. In a survey of more than 1,000 netizens, we found out that a staggering 75.8% do not have an emergency fund with more than Php50,000, and 60.7% do not have the cash to cover an unexpected Php20,000 expense.
Although the road to achieving financial freedom is not easy, you can get there if you know the steps you need to take.
What is Financial Freedom?
Financial freedom is a catchphrase you may have heard a few times, but what does it mean?
To put it simply, financial freedom means you have enough cash, savings, and investments that will allow you to afford the lifestyle you want for yourself and your family.
Financial freedom will become your gateway to pursue any business or career path without worrying too much about earning a specific amount of money per month.
Financial freedom is also key to a happy retirement life.
What is Financial Independence?
Financial independence entails having enough money to live a comfortable life without needing to work. However, it can mean something different for every person.
For instance, 57 percent of the younger generation views financial independence as having enough money to meet all their financial obligations without asking for money from their parents or family.
Many people also refer to financial independence as having the ability to spend for an unexpected event or emergency without going into debt or a state of financial instability.
20 Ways & Habits to Achieve Financial Freedom
Here are some useful tips to help you get started on achieving financial freedom.
1. Understand your financial status
This is a very important starting point you shouldn’t miss. Examine how much debt and savings you have, as well as how much you need to live your desired lifestyle.
Add up your debt which includes your car loan, credit card bills, mortgage, loans, and borrowed money from friends and family.
For your savings, add up your stocks, retirement programs, and savings account, as well as other investments. All these will tell you what your current financial standing is.
2. Do not think negatively of money
Did you freak out when you added your debt?
This is understandably discouraging for many people, but always remember that money should be viewed positively. Do not feel guilty for wanting it because you use it in your everyday life.
You won’t achieve financial freedom if you look at money in a negative light because this will only sabotage your chances of managing it well.
3. Have a goal in mind
Why do you want to achieve financial freedom? Do you want to help your parents, or move to a beach house? Maybe you just want to get rid of your debt and resign from your job. Whatever the reason is, have a goal in mind.
When your journey to financial freedom is tied to a goal you feel strongly about, every milestone you achieve will be more rewarding.
4. Manage your money well
You may have a high-paying job now, but you are still far from financial freedom if you are clueless about managing your finances.
No matter how young you are, you must be knowledgeable in learning how to save and letting your savings work for you.
To do this, identify the spending that will help you grow in the long term. For instance, putting money on your business will soon increase your profits and grow your customers.
Recommended Reading: Financial Planning: How to Manage your Personal Finances
5. Check interest rates
If you have multiple loans, prioritize paying the one with the highest interest. The same goes for your savings account.
Knowing different interest rates will enable you to maximize your money, and focus on more important commitments.
6. Make a budget
At the start of the month, make a realistic budget and follow it well. This is the ultimate way to manage your bills and savings. This routine will also help you discipline yourself.
7. Be wary of unnecessary purchases
Do you often find yourself scrolling through Shopee when you’re feeling anxious or restless?
If you keep buying unnecessary things as a habit, you need to stop this unhealthy way to handle your money.
One key aspect to achieving financial freedom is self-awareness. This will enable you to stop yourself from impulse buying.
If you want to go the extra mile, keep an expense diary and write down how much you spend in a day, as well as the reason for your purchase.
8. Treat yourself every once in a while
You may be confused – we just told you to stop your unnecessary spending, and now we’re saying it’s okay to treat yourself.
The thing is, working all the time can lead to burnout so you have to do activities that make you feel better.
This can be buying make-up, or going to your favorite restaurant. Treating yourself will minimize your unnecessary splurging and allow you to enjoy your earnings at the same time.
Allot a certain percentage of your monthly earnings for this expense and make sure not to go over it.
9. Try to negotiate
A lot of Filipinos are very good at negotiating. If you haven’t tried this before, now is the best time to do it.
A lot of landlords and businesses are surprisingly open to negotiating prices especially when you are a repeat customer.
Thanks to negotiating, you can walk out the door with amazing discounts.
10. Network with people
Ask any successful entrepreneur how they achieved financial freedom, and they will tell you to not be afraid to get help.
Accept that there are people who are more experienced than you and use this to your advantage. Do not be afraid to build relationships with them and ask them for advice.
Luckily, technology has made it easier to get in touch with experts in different fields.
11. Save per month
Whenever you get your salary, deposit a specific amount of money in your bank before taking care of your bills.
This method will enable you to get closer to achieving your financial goals. This trick may seem hard to do if you’re working with limited means but it’s the most practical method you can try.
For instance, if you save Php5,000 a month, whatever is left will be used for your groceries, rent, and other expenses.
If you don’t have enough money to spend on your needs, you will be forced to have a side hustle to cover these costs.
12. Buy meaningful experiences
Your goal should not be to hoard money until your retirement. Ultimately, what will help you live better are experiences, not products.
Whenever you’re spending, assess if it could help you in the long run.
Instead of pretending you have money and living a lifestyle that you can’t afford, seek meaningful experiences instead.
This could be spending more time with your pets, finding an exercise you love, or splurging on an online class you’ve always wanted to attend.
13. Read the news
Every year, make sure you are updated with tax laws so you can maximize your finances.
Read up on different financial developments and news, especially if you’re keen on investing in the stock market.
Checking the news from time to time will also encourage you to diversify your investment portfolio.
14. Do not be contented with one income source
Achieving financial freedom is not a walk in the park. You need to sacrifice for it, and unfortunately, a single job may not cut it for many people. If you are not earning enough, look for a side hustle.
According to experts, you should have seven streams of income which you can look at in two ways: active and passive. Your active income can be your regular job, while passive income will help you earn more money even when you sleep.
15. Maintain your assets & properties
If you have a car or you’re a homeowner, make sure you take good care of your property well.
Even your clothes and appliances need your attention. This way, you can immediately fix minor issues before it turns into something major and you wouldn’t have to get a replacement.
16. Do not be intimidated to invest
Let’s say you are finally debt-free and you’ve grown your savings. Then, an emergency happens. Will you be financially prepared to handle it?
Have money for rainy days to ensure you or your family won’t be burdened in the future. To do this, invest in health insurance, have a retirement plan, and set aside money for personal emergencies which should be three or six months’ worth of your living expenses.
If this seems too hard to attain at the moment, start with a simple goal, and work from there.
17. Stay healthy
Not all companies will pay you during sick days, and this loss of income can be immensely upsetting.
Ailments can also lead to more expensive insurance. Considering this, make sure you are taking care of your health and body.
18. Talk to your spouse
If you’re married, talk to your spouse about your life goals because chances are, some of your expenses are shared especially when you retire.
If your partner has not been saving yet, try to see whether your finances can cover your entire family. If not, encourage your spouse to save money and invest.
19. Be patient
Unless you win the lottery, you won’t become financially free overnight. Being patient is hard especially when you’re struggling with saving, but it will be worth it.
Even if you’re only saving a small amount per month, remember that it will add up. Just make sure you are on the right track.
20. Get an advisor
Once you have a sizable amount of money, the next step is to educate yourself to make more informed decisions.
This can be achieved by getting a financial advisor to walk you through smart investments and how to manage your money well.
Benefits of Financial Independence
It’s so easy to push having savings to the bottom of your to-do list.
After all, you haven’t experienced any emergencies, right?
However, that will not do you any good in the future.
Although enjoying what you make in the present is important, you also need to make sure your future is secure. We’ve rounded up the benefits of having financial freedom below.
1. You can achieve your goals sooner
Unless you want to rely on money from your family, and trust us – they are probably less happy about this than you are – you need to learn how to stand on your own.
Being financially independent will help you have the savings you need to achieve all your dreams.
2. You’ll be prepared for emergencies
Whether it’s an unexpected trip to the hospital or a sudden job loss, you need to cushion yourself from the financial impact of emergencies.
When you become financially independent, you can still be comfortable without drowning in debt even when emergencies occur.
3. You’ll retire comfortably sooner
The benefits of savings are not just short-term. One of the most important impacts of financial independence is it will enable you to retire sooner.
A lot of retirees who simply rely on their monthly pension do not have enough means to continue to travel, grow their business, and enjoy their life.
The earlier you save, the more comfortable your retirement life will be.
4. You’ll be freer
Among the most vital reasons to work towards achieving financial independence is even if you don’t know what you’re currently saving for, you may find something that you’ll want in the future. This may be a house, a new degree, or a family.
The thing with financial independence is it doesn’t center on money. Instead, it revolves around giving yourself the flexibility you need to enjoy your life.
When you have enough funds, you can do whatever you want without having to wait for your next paycheck.
5. You can follow your passion
Millions of Filipinos work until they are old just so they can have the money to cover their expenses.
So when they finally start earning more, they immediately think they have an excuse to spend more.
However, lifestyle inflation is a very dangerous cycle. The sooner you understand this; the sooner you’ll be financially independent.
When you work hard to save money and invest now, you can have more time to enjoy your passions in the future.
Whether you want to travel across the country, collect cameras and lenses, or open a non-profit organization, financial independence will allow you to live a passion-filled life to the fullest.