5 Tips for Achieving Financial Freedom at a Young Age

The concept of retirement, which used to be only attainable at the age of 50 years and over, has now shifted slightly since the trend of young retirement has been widely discussed by the general public, especially young people. This trend is known as financial independence.

Having sufficient income without having to work very hard or even overtime every day is a dream worth fighting for. Maybe at first, when you were in your early 20s, being financially free was just a dream and not easy to achieve. Curious and interested to know how you can achieve financial freedom? See the review in the next discussion.

5 Ways to Achieve Financial Freedom at a Young Age

Maybe for some people, achieving financial freedom feels unrealistic, let alone just working as an employee or freelancer. But that's not entirely true, as long as you know how are willing to work hard to make every effort to become financially independent, these goals can be achieved. The following 5 tips you can apply if you want to achieve financial freedom at a young age. Here are the tips!

1. Know the 7 Levels of Financial Freedom and Your Current Position

Reported from the CNBC Indonesia Instagram account (12/5/2022), the author of the book "Financial Freedom", Grant Sabatier. In his book, he states that there are 7 stages in achieving financial freedom. You need to know it to know where your current financial level is. Here are seven levels of financial freedom that you should know:

Level 1: Clarity

The first level, knowing your financial situation, how much money and debt you currently have, and determining what goals you want to achieve.

Level 2: Independence

People at the second level can be said to be no longer economically dependent on their parents. They already have enough independent income to meet their needs every month. But his financial life is still stuck in a paycheck-to-paycheck cycle (income from salary to salary is always used up for needs without any money remaining).

Level 3: Financial Slack

People at Level 3 are already off the paycheck-to-paycheck earnings cycle. People at this level have already determined their financial goals, the rest of their paychecks are allocated to several instruments for emergency funds, investments, or pensions.

Level 4: Financial Stability

The people at Level 4 were arguably one step ahead of the previous level. They have no credit card debt, pay later loans, & other types of debt. And the best part, they have an emergency fund to live on for 6 months. Even if they get laid off, they can still live because there is an emergency fund.

Level 5: Financial Flexibility

A recognizable characteristic of Level 5 is having an emergency fund for two years of living expenses. They can also be free from worrying about being laid off, recession, disease outbreaks during a pandemic, and other unexpected events.

Level 6: Financial Independence

This level is a coveted goal for everyone, including you who are still young, of course. At level 6, people can live without working and can retire early because they already have enough income for living expenses from their investment income. The investment can be in the form of property rentals and investment portfolios (stocks, bonds, P2P mutual funds, and others) that continue to generate income.

Level 7: Abundant Wealth

People at level 7 are no longer concerned with money because the number of liquid assets and investment portfolios is very large. You are free to enjoy your life and time to do whatever you want.

2. Determine Financial Goals & Time Targets to Achieving It

After knowing all the levels of financial freedom, you must set your financial goals, whether it is enough to level 4, 5, 6, or even 7. And last but not least is to set a deadline to achieve financial freedom at what age. It can be at the age of 35 years or 40 years, you decide.

3. Reduce Living Costs & Change Your Financial Vehicle

To be financially independent, your living expenses must be lower than your income. Furthermore, to accelerate your financial goals, you can change your financial vehicle, if your current job has a low salary, you can try to replace your job with a high-paying job.

4. Have Passive Income That Is Larger Than Active Income

The fourth formula, besides the cost of living, is lower than the monthly income. Other variables are no less important, namely; have passive. If you have passive income which is greater than active income (income earned from work). You can start selling products, and quality freelance services in foreign marketplaces with dollar payments, or even build a business. If you are interested in building a business but don't know where the capital will come from Ethis.co.id is the best place to get monetization in your business.

5. Investing in Stocks in the Long Term

In the last 30 years, the instrument with the highest profit iinstocks. For this reason, starting to invest in the Indonesia Stock Exchange (IDX) is the right step. You can also invest in foreign stocks such as America or invest in P2P Financing platforms to fund Sharia-based business owners in Indonesia through Ethis.co.id. Whatever stock instrument you choose, it's clear, start as early as possible and target the long term to get the benefits of compounding profits for decades to come.

Conclusion / Closing

The 5 tips that we have reviewed in this content you can apply to achieve financial freedom at a young age. Let's achieve financial independence as early as possible by applying it directly and continue to enrich our financial literacy by reading articles on Ethis.co.id.

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