In order to achieve financial freedom, you must demonstrate certain financial behaviors and knowledge, and acquire specific personality traits as you go through a number of stages toward achieving financial freedom. There is no way you can achieve financial freedom overnight. It is a journey that you must be committed to taking, no matter how painful it is, all while making sacrifices along the way.
The U.S. Consumer Financial Protection Bureau’s definition of “financial well-being” is a very good starting point. It lays the right foundation in your quest to being financially free. This definition will help us identify a number of pre-requisites for achieving financial freedom.
Financial well-being is defined as a state of being wherein you:
1. Have control over day-to-day and month-to-month finances and cash flow. (You can cover your expenses and pay all your bills and loan commitments on time. You do not worry about having enough money to get by.)
2. Have the capacity to absorb a financial shock when it suddenly comes your way. (Emergencies do appear, and having spare money to pay for these unexpected expenses will be vital to your financial well-being.)
3. Are on track to meet your financial goals. (Whether or not you have a formal financial plan, you have financial goals that are important to you. You want to work hard toward achieving those goals.)
4. Have the financial freedom to make choices that will allow you to enjoy life. (You are able to do things without worrying whether you have the money or not. “Just do it” is your financial mantra!)
