If you aspire to achieve financial independence in your retirement, now is the perfect time to implement financial strategies to reach your financial freedom goals.
Here are the five signs of financial freedom:
No Monthly Cash Flow Issues, Those who have achieved financial freedom can meet various living needs without actively working. Every month, they can cover all routine operational costs such as buying food, drinks, transportation, phone credit, internet, school fees for children, and other needs without waiting for payday. Creating a monthly household budget by dividing it into three different accounts: 50% for living expenses, 30% for savings, and 20% for discretionary spending ensures a consistently positive cash flow, meaning income exceeds expenses.
Free from Consumptive Debt, Almost all generations, from millennials to baby boomers, agree that they feel financially free when they no longer have to worry about repaying loan installments. Being stress-free about finances and debt burdens is crucial. It's important to consider whether an expense is a necessity or a desire. If there are still loan installments, ensure that the total loan repayments do not exceed 30% of your income.
Prepared with an Emergency Fund, Emergency situations are unplanned and can significantly impact your financial situation, such as accidents, serious illnesses, theft, or job loss. Therefore, financial freedom means being prepared for various emergency situations. If your emergency fund balance is sufficient, you'll feel more at ease facing unexpected circumstances. Single individuals should have an emergency fund of at least three times their monthly expenses, while married individuals with two dependents should aim for six times, and those with more than three dependents should have twelve times their monthly expenses.
Owns a Permanent Residence, For those who are financially free, having their own dwelling, whether it's a house or an apartment, is essential. If you are currently renting an apartment or house, you are not yet considered financially free. If you are still planning to buy a house or an apartment, a general guideline is to aim for a property price that is within five times your annual income.
Savings and Future Investments, A financially free individual has savings and investments for the future that will ensure their financial security. To achieve financial independence, it's necessary to have a proper investment strategy, allocating funds to generate adequate returns while aligning with your risk profile as an investor.
So, when you successfully achieve your financial freedom target in retirement, consider placing the returns from your previous investments into government bonds, which are low-risk and guaranteed safe. The interest from bonds becomes a passive income every month for you."