How to Achieve Financial Freedom: a Comprehensive Guide

Overview

The path to financial independence often feels like a maze—a jumble of ideas, strategies, and conflicting advice. It's easy to get lost in the sheer volume of information available. So, how do you cut through the noise and find the path that's right for you? This article breaks down some key principles that can guide you toward financial freedom and offer a fresh, human perspective on achieving it. Let's dive in.

Setting Your Sights: The Goal of Financial Freedom

What is the core motivation behind your desire for financial independence? As Ali Abdaal emphasizes in his video, money is just a construct - a psychological and social one at that. Consequently, financial freedom, like happiness, is also a construct. Understanding what "financial freedom" would look like for you is paramount. What specific outcomes do you envision that you don't currently have? Are you hoping to gain more time, pursue new interests, or retire comfortably? These are the kinds of questions worth exploring.

Defining Your 'Why'

Financial freedom, at its core, is about the freedom to choose. When that freedom is directly linked to specific needs and wants, then the goal of becoming financially free becomes far more tangible. So, if you want to maximize the chances of happiness and fulfillment, then it is useful to know what specific freedom means to you. As an example, Ali explains that early in his career, what he specifically wanted was the ability to go part-time in his job.

For many, financial freedom is about controlling time, eliminating money worries, and having the resources to support a family. But there can be more specific goals that you want to achieve. Maybe you want a house, maybe it's a private jet, or even the freedom to just spend more time pursuing your passions.

Charting Your Course: Mapping the Path with Knowledge

The path to financial independence requires knowledge. It cannot be overstated how much relevant knowledge shapes your financial progress. So, rather than simply pursuing an arbitrary financial goal, take a moment to evaluate your financial literacy. If you are unfamiliar with any of the paths to making money, then your focus should first be on understanding the map. As Ali says, you should understand, “What does financial freedom get you that you do not already have?”

The Importance of Consuming Relevant Information

Money, in a sense, is psychological. Financial freedom is also psychological and social. Ali recommends reading books about entrepreneurship, noting they can truly change your perspective on wealth accumulation and how to make it a reality. However, it's important to not solely rely on books. Expand your horizons to include podcasts and other online content from experts in the field. You can look to people who've “made it” for a wealth of knowledge.

Recommended Reading List for Aspiring Entrepreneurs

Ali shared several core texts that serve as a great base for financial independence. He notes that it's vital to actually engage with the material - do not merely listen or read it passively. He notes that at minimum, you should at least make sure to consume all of these:

- The Millionaire Fastlane by MJ DeMarco

Note that you'll need to take action on all of this information as you go. Financial freedom isn't about reading and passively listening. It's about actively applying the knowledge. You need to integrate theory into your daily actions.

Moving Forward: From Knowledge to Action

Having relevant knowledge is useful, but it's just the first step. You'll need a tangible plan to achieve your goal. How will you execute your plan to become financially free? This is the point where it's time to start asking more pointed questions. For instance, what are viable options for you to actually get to where you want to go?

The Importance of Systematized Action

The most successful people in the world do not just rely on inspiration. Rather, they incorporate systems that propel them in the right direction. So, consider implementing a systematic approach that ensures consistency and continuous movement toward your goal. The system is what takes you from talk to results. It's what puts your plans into action. It helps you make progress on a daily basis. Ali notes that for many people, the system might involve a single job. For others, the system might involve a job plus other income streams.

As you evaluate your plan, take a look at the things that are working against you. For instance, are you spending your time in ways that are counterproductive to your goals? As an example, consider how you use your time on a daily basis. In a world of constant distraction, it can be so easy to get caught up in watching TV and scrolling through social media. But if you really are committed to financial independence, perhaps it's time to re-evaluate how you use your time.

A Note on Happiness & Fulfilment

You want to make sure that you are taking the proper actions that increase your chance of overall happiness and fulfillment. Ali notes that, after all, the goal is not just financial freedom, but also personal fulfillment. So, ask yourself if you are taking action that leads to true personal fulfillment. For example, are you making choices that are truly satisfying or are you simply striving to gain more for its own sake? Are you taking good care of your physical and mental health as you take action? What about your social life? These are all useful questions to consider as you chart the path toward financial freedom. If your plan is not working for you, don't hesitate to change it. It's better to adjust your plan to your personal needs than it is to remain on a path that ultimately leaves you unsatisfied. As Ali says, it's better to be “financially free, rather than financially chained to a day job”.

Understanding The Context of Your Goal

It's also important to recognize that financial freedom is relative. It means different things to different people based on varying circumstances. For instance, the amount of income required for financial freedom in Pakistan is wildly different than the amount required in London or in New York. Thus, it's crucial to understand the context in which you have defined your own financial goal. Ali notes that it's important to understand “what specifically do you want that financial freedom will buy”.

A Few More Thoughts on the Journey

Financial freedom is as much about the journey as it is the destination. It's about self-discovery, skill acquisition, and personal growth. It's important to look forward to what can be, but you also need to enjoy where you are right now. So, how do you manage both the planning and the journey? Ali recommends that you keep in mind his model: "GPS", which means Goal, Plan and System.

The GPS Model

First comes the Goal, which is to first figure out "what do we want to achieve". Second comes the Plan, which is "How are we going to get to the goal?" Finally, there's the System, which is to determine, "How are we going to stick to the plan?"

But if your goal is to be financially free, but your day-to-day is not reflecting that goal, then it might be time to make a change. Start by defining the specific outcomes that financial freedom will buy you that you don't currently have. Then, decide if your daily plan will ever get you to your goal. If there's a discrepancy between your goal and plan, then it's useful to either refine the goal or refine the plan.

Final Thoughts

The journey to financial freedom is never linear and is often very individualized. What works for one person may not work for another. Ali uses the example of someone he knew who made $35k a month from a software business after engaging in the steps discussed in this article, but notes that these results are “atypical”. It's not just about getting to the end goal. Rather, the real goal is a mixture of both the plan and the journey. He notes that “the happiest doctors that he knew were the ones that worked three days a week, rather than six days a week”.

So as you take steps towards financial freedom, consider incorporating these key pieces of advice. As you navigate this journey, make sure to choose a goal that is tailored to your values, create a systematic plan that will bring it to life, engage with other like-minded people, and always prioritize the present moment. In this way, you're taking active steps towards financial independence, all while learning to enjoy life to the fullest, and that can lead to true financial freedom.