Achieving financial freedom is a goal for most people, but what does it really mean to be financially free? Although the definition of financial freedom can be different to each individual, the general idea is that you don't have to worry about your bills and any sudden expenses anymore, you don't have to work unless you want to, and you have a reliable cash flow that allows you to live the life you want and support your lifestyle. But there also many misconceptions about it, which we will discuss in this article.\n\n\\\n**Misconception 1: More money is the solution**\n\n\\\nMany people, unfortunately, believe that making a lot of money or having an abundance of it automatically means that you can be financially free. Yes, earning more money can help, but if you don't have the discipline, mindset and financial education to manage your finances in the correct way, you might still end up living paycheck-to-paycheck and not being financially free, no matter the amount of money you have. More money will not solve your problems if you don’t know what to do with it. You can have millions in your bank account and still not knowing what to do and control your finances, while another person can have much less than you and still being in a better financial position with better money management.\n\n\\\n**What is the solution?** Shockingly, today a big number of people do not comprehend basic financial principles and financial illiteracy is a serious problem worldwide. According to the Global Financial Literacy Excellence Center (GFLEC), only the 33% of adults worldwide are financially literate. Financial literacy is described as the ability to understand how money works and how to make sound financial decisions so you can confidently manage and grow your money. It includes financial topics such as budgeting, saving, investing and basic concepts such as inflation, interest rates and risk diversification. When you're financially literate, you're able to allocate your income toward various goals simultaneously, not just to ongoing expenses, but to savings, debt repayment and an emergency fund. You can navigate the financial marketplace with self-assurance, and you have the tools to thoroughly research things like loans, credit cards and investment opportunities. So the answer is financial education and building a good mindset.\n\n\\\n**Misconception 2: Retirement = Financial Freedom**\n\n\\\nEarly in life, many people are taught that they should go to college, get a good-paying job, get married, buy a house, start a family, make even more money, buy an even bigger house, send their kids to college and then miraculously, financial freedom will happen at exactly age 65 when they retire. Then after they retire, they’ will have an abundance of time for “financial freedom” type activities and all will be great. But that’s not how it works. Unfortunately, what people are finding is that the above path doesn’t lead to financial freedom, but to unending debt and lack of retirement savings.\n\n\\\nAchieving financial freedom requires constant healthy habits and mindset, good planning, continuous education and consistency. Here are some steps that can help you with your path to financial freedom:\n\n\\\n1. **Set goals**\n\n\\\nWhat is financial freedom to you? Get specific. Write down your goals, the more specific they are, the higher the likelihood of achieving them. Why do you need money? Do you want to get rid of debt for good? Do you want to start your own business? Is there a place you’ve always wanted to travel to? Do you need to save for a wedding, kids, or retirement? Write them down and track your progress.\n\n\\\n2. **Create a budget, track your spending and live within your means**\n\n\\\nYou can’t achieve financial freedom without knowing your starting point. Looking at how much debt you have, how much savings you don’t have, and how much money you need is a valuable step in the right direction. Budgeting isn’t about restriction. It’s about reality. If your goal is financial freedom, you need to know how you’re going to do it. It won’t just magically happen, you need to plan for it. A budget will help you outline your income and expenses so you can figure out what you can put toward your goals to meet them and which expenses you want to reduce or cut out entirely. Living within your means requires discipline and sacrifice. However, if you stick with it, you will find yourself being less stressed, avoiding debt, building wealth and having more freedom and financial security.\n\n\\\n3. **Avoid unecessary debt and try to eliminate it**\n\n\\\nRemaining in debt or continuing to accumulate it in the future will hinder your ability to build wealth. Debt is stressful, costs you more money and it consumes a large part of your cash flow. Credit cards and similar high-interest consumer loans are toxic to wealth-building, so use them responsibly and pay them off on time. Maxing out your credit card, when you can’t pay off the balance, or to buy things you don’t need, will lead to bad and unecessary debt that will cause many problems and will be an obstacle to your financial freedom. Paying off a big debt lifts a massive weight off your shoulders. After paying off your debt, you see that it’s easier to grow your wealth and focus on more important things.\n\n\\\n4. **Build a good cash reserve and emergency fund**\n\n\\\nAn emergency fund is money that's set aside for unexpected expenses, such as a medical bill or loss of income. Although many people don’t think about it, it’s important to set aside an amount each month for your emergency fund. The ideal is to have an emergency fund of at least 6 months (measured in overall monthly expenses) that you will only use in case of a financial emergency. Having a cash reserve gives you peace of mind and it helps prevent you from getting buried under debt.\n\n\\\n5. **Invest**\n\n\\\nHistorically, there has been no better way to grow your money and wealth than through investing. The magic of compound interest will help it increase exponentially over time. One big mistake many people make with investing is thinking they are too young to worry about saving for retirement or that it’s even too late. Investing is a tool to build wealth. Retirement is an inevitable phase of life that requires wealth. In this digital era, it’s very easy to open an online brokerage account and start investing. But you should have a long term mindset and focus on long term value investing, not gambling and trading. There are countless resources on the internet to learn how to invest, create a manageable portfolio, and make weekly or monthly contributions to it automatically. Otherwise, the other option is to talk to a financial advisor, planner or coach that can guide and help you according to your needs.\n\n\\\n6. **Create additional income streams**\n\n\\\nOne of the main keys to financial freedom is having multiple sources of income that can create a reliable cash flow and eventually support your lifestyle without having to work. You can also use the additional cash flow to pay off your debt or put it towards your savings and investing accounts. But the key is passive income that can earn you money without a lot of effort. There is active income, which is trading time for money, and passive income, which is money that can keep coming in, even while you sleep. If you trade your time for money, you’re limited by the hours of the day. You could have a side hustle, but the goal is to create passive income streams like dividends from stocks, rental income, affiliate marketing, selling online content and more. In the internet era there are endless opportunities.\n\n\\\n7. **Expand your financial education**\n\n\\\nIt can be intimidating and overwhelming when entering the world of finance and investing. But, if you want to become more financially stable and manage your money properly, then you need to continuously educate yourself on topics ranging from tax deductions to investing to retirement planning and more. In the investing world, keep up with financial news and developments in the markets and do not hesitate to adjust your investment portfolio accordingly. You can read books, take online courses or be in touch with a financial coach.\n\n\\\n8. **Take care of yourself**\n\n\\\nThe principle of proper maintenance also applies to the body. Invest in good health with regular visits to doctors, and follow health advice about any problems you encounter. Health care costs money, and making money and doing things you enjoy is a lot simpler when you’re healthy. You may be thinking you just don’t have time to focus on healthy habits like a balanced diet, exercise, or sleep, but you might change your mind if you consider the many financial issues that can occur if you don’t take care of yourself.\n\n\\\nAchieving financial freedom can be very difficult in the face of growing debt, cash emergencies, medical issues, and overspending, but it is possible with discipline and careful planning. It’s not going to happen overnight, but if you’re able to determine your definition of financial freedom, it may remove the stress of not knowing your path.\n\n\\\nThe truth is that money is essential in our life. Money is and should not be seen as anything else but a tool - a tool that we all must learn how to use it in the right way. Money is a tool that enables you to protect yourself and your family, build a better life, and give back to your community. It enables you to have more control over your life, more freedom to carve out your own path, and fewer constraints on your choices.\n\n\\\nFinancial literacy is not a luxury, but a necessity. Understanding money management will help you feel in control of your finances. Ideally, with strong financial literacy, you'll be confident in money management to the point where you can focus your energy elsewhere: on family, your hobbies and the things you enjoy doing most, and the parts of life that money can't buy.