10 practical ideas to achieve financial freedom

While the pandemic has resulted in unprecedented tragedy and suffering, it has also reinforced the need for us to be not only healthy and fit but also independent and free when it comes to our finances and careers.

When you are in good health, financially and mentally free, amazing things happen. New doors, ideas, and opportunities open up.

Everything that is really great and inspiring is created by the individual who can labour in freedom - Einstein

Based on more than 2 decades of deep work, a lot of experimentation, and a ton of mistakes, here are a few thoughts and ideas that can help realize, appreciate, and achieve the freedom we all deserve.

1. You are already free but might not be appreciating it enough.

We are all born free and die free. It is just that sometimes in between life happens and we tend to believe that we have lost our freedom of choosing the work we enjoy, and freedom from financial worries.

Well, while we all have to work hard and smart in order to achieve the kind of life we deserve, it is possible to achieve the freedom and independence we desire.

This is true for financial freedom as well as work-related independence. And as conventional wisdom says we need not always have to wait our whole life (retirement) to achieve the same.

If your expenses are less than what you earn from your investments after adjusting for "individual" inflation, you are most likely already free.

One of my close friends who has done well in life used to say this to himself whenever things got complicated. He would say - "I am a farmer's son. My needs are very few. I can always go back to my village to work on our farms and make a good living. Besides have got good skills to help others. So I am already free and nobody can take me for a ride."

This might sound a little utopian, self-serving, and not very useful in the practical world, but has helped him in many situations in a good way.

2. Know your data.

In god we trust, everyone else brings data used to say one of the smartest executives I have known. All of us can have our own stories and opinions but we can not have our own data.

In the context of financial freedom, here is how this helps.

Like established companies, once you build your own balance sheet (with assets and liabilities), profit & loss, and cash flow statement, you get amazing insights. Then you can assess whether you are already free from financial worries or build a roadmap to get you there.

3. Learn from others who have already done it.

All you have to do is ask for help from those who have already achieved what you are trying to achieve. I prefer to learn from practitioners rather than preachers.

Not everyone helps you but if you reach out to enough experts, someone does. And that can save you from a lot of mistakes.

As they say, fools learn from their own mistakes while smart folks learn from other people's mistakes.

4. Do not get fooled by so-called experts.

It is important to understand the motivations of the so-called experts who are helping you with your plans.

Are they interested in their own rewards (commissions) or are they truly interested in creating significant value together with you and then share with you fairly?

Most folks fall in the first category where they are more interested in their own benefit and hence sell you the products and ideas that may not be in your best interest. You need to develop the aptitude and skills to identify such behavior.

For example, all the experts kept telling us that gold is not a good investment, but if you look carefully, gold has performed better than equities over the last 20 years. This is just an illustrative example and in no way an attempt to recommend gold as an investment.

It is better to focus on growing the overall pie and then sharing the value rather than fighting over whatever is available. Most of the time, there are good possibilities to create significant value with a long-term and win-win approach but not everyone has got that kind of temperament and patience.

5. It is not just good quality assets but also the right asset allocation that matters

Not only just great assets but also smart and strategic asset allocation is important in order to achieve financial freedom.

"All-weather portfolio" suggested by Ray Dalio from Bridgewater Associates is a good reference here. Have noticed similar recommendations by many other experts and have personally benefitted from this approach.

6. Stay away from problematic assets.

Do you really need to buy that 2nd real estate and then deal with builders, brokers, tenants, and tax folks?. The answer here is not "Yes" or "No" but one has to think through this deeply.

Do you really need to work with people who do not appreciate your contribution and are not fair to you?

7. There are better alternatives to protect and grow your investments without taking undue risk.

"High-risk high reward" is not always true. Rather many times it is the opposite.

If you carefully study how huge fortunes were made, a lot of thought also went into managing the risks. Large and successful businesses hire Risk and Compliance officers with significant investments and costs. Who is playing that role for you and your family?

8. There is no one size fits all.

If someone has made a fortune in say equity or cryptocurrencies or startups, that does not mean that everyone else gets the divine right to the same.

While you may be lucky sometimes, it might be prudent to take a strategic, data-driven, and personalized view applicable to your own context, situation, and plan.

9. You need a systematic and long-term approach.

The power of compounding unfolds only when you systematically do something over the long term. Malcolm Gladwell talks about the 10000-hour rule that is the time required to achieve true mastery in a particular skill.

We live in a highly complex and super-competitive world. And odds of your success can increase significantly if you take a strategic, focussed, long-term, and win-win approach.

10. Are you the best CFO/CIO for you and your family? Partner with experts but don't trust blindly.

Whenever our loved ones need to be treated for health issues, would we compromise on the experience and education of the healthcare professionals?

Then how come while managing our financial well-being, we tend to do it ourselves without the necessary expertise, experience, and qualification?

At the same time, having worked with many finance professionals, have noticed that if you completely leave it to them then, many times, they don't mind focusing on their own rewards and risk perceptions.

Hence this needs to be done with an approach that can be termed as "strategic co-creation".

In summary, it is definitely possible to achieve your freedom as relates to work and finances. You need to be systematic about the same with a long-term and smart plan and approach.

Please stay safe and positive.

About the author: Mahesh Dumbre enjoys working with entrepreneurs, investors, executives, and learners around the world, helping them achieve true growth potential. 

He is an ex-Tata Group executive who enjoyed building businesses globally (over 17 years in 8 countries across 11 industries, 80+ million USD value addition) as well as teaching and writing. He can be reached at Mahesh.jd@gmail.com.