7 Steps to Financial Freedom and Security in the 21st Century

Are you prepared for the future that’s already here?

“May you live in interesting times.” — Chinese curse

We live in interesting times indeed.

On the one hand, statistics on earnings and living expenses show that people can’t even afford the lifestyles they had 20 years ago. While on the other, the social media and advertising industry want us to live increasingly lavish lives.

Then as if that was not enough, the accelerating pace at which our world evolves means stable careers might soon become a thing of the past. Mass layoffs do not surprise us anymore, and experts believe the gig economy will play a more prominent role in the future of work.

So how do you take charge of your finances in such a reality? How do you make sure you are not ill-prepared (like the world was for the pandemic) for the challenges of the future? Or that you always have the financial freedom and security necessary for a good life?

I wish I had all the answers. But I have learned a lot in the past seven years, during which I transitioned from being a full-time employee to a freelancer to a small-business owner. During this time, I even got to see how quickly your life can go downhill.

At age 26, I had a permanent job that paid well, a house, and a retirement plan. Only two years later, through a series of mistakes and unfortunate turns of events, I was living in poverty. Thankfully, that experience was short-lived.

Anyway, based on what I have learned from others and from my own experiences, here’s how you can achieve financial freedom and security in the twenty-first century.

Put a floor below your earnings

The most reliable source of wealth is one that is most difficult to take away, and that serves you even if you have lost everything else. That can only be said of something intrinsic to you — your knowledge and skills.

Now you might say — who doesn’t possess that? That’s how people get their jobs.

Right, but you don’t want to be just good enough to get a job that can be done by anyone with short-term training or with a decent set of instructions. Otherwise, you will soon be replaced by a machine or someone willing to work at the cheapest rates.

You want to be as valuable and indispensable as you can be. Not only to your current employer but the world. Not just today but for as long as you would like to work.

For that, you will need to become competent at things that are difficult to learn (require significant amounts of time, effort, and/or talent), are valuable to the world, and are likely to remain relevant in the foreseeable future. Some examples would be programming, digital marketing, digital animations, creative story-telling, coaching (personal, professional, and business), etc.

Also, our world is not static. So you must be willing to adapt and learn new things to keep up with it.

The good news is — learning something new or upgrading your skills has never been easier. You don’t need to spend tens of thousands of dollars or several years of your life at some university. There are numerous free or affordable courses available online to help you.

You can learn almost anything you want at your pace from the comfort of your home. What matters is whether you have the will and determination.

Fill Your Reserves

Savings in an emergency fund are critical to your financial health, especially early on when you are completely reliant on one source of income and have not yet got the other pillars of security in place.

Who would disagree with that?

Yet, as Vicki Robin and Joe Dominguez write in their book, Your Money or Your Life —

“A 2015 US Federal Reserve Board report found that 47 percent of Americans would have to borrow money or sell something to cover a $400 emergency expense.”

That’s scary.

Anyway, one obvious benefit of having an emergency fund is that they provide you with a cushion against any unforeseen circumstances or an unexpected setback to your primary source of income. But that’s not all.

Research says, “having a buffer of money available in checking and savings accounts confers a sense of financial security, which in turn is associated with greater life satisfaction.”

Besides, if you are not happy with your present employment and want to shift careers, having an emergency fund that can support you for 6–12 months makes it much easier to do that. So you feel confident and more in control of your life.

Add More Engines to Your Ship

In an economy prone to changes, crises, and disruptions, it’s not wise to depend on a single source of income. For several reasons, that source can stop serving you well-enough and leave you in a bad place.

Having multiple sources of income not only addresses that problem but it also helps you in several other ways.

• Under normal circumstances, it boosts your earnings.
• If at any point in time, you don’t feel happy continuing with your primary source of income (maybe you don’t like your job anymore or something like it), you have great options ready to be explored further.
• Through a combination of smart play and luck, one or more of your sources can turn into potential goldmines and make you very rich.
• Trying to develop different streams of income, you will learn many new things. It will make you smarter and more creative. Going back to the first point, it will raise the floor below your earnings.

But how do you do it? Until a couple of decades ago, it used to be difficult to create an additional income stream. Today, it’s much easier.

“The Internet has massively broadened the possible space of careers. Most people haven’t figured this out yet.” — Naval Ravikant

Here’s what you can do.

Turn your hobbies, skill, or knowledge into digital products (books, articles, podcasts, videos, courses, software, etc.). Build a tribe by giving away a lot of what you create for free. Charge for premium products and services.

It will take time. But better late than never.

Flip Through The Rule Book

Considering everything people do for money and how it governs different aspects of their lives, it baffles me how little they care about the principles that govern it.

Why would you not learn the rules of the game that’s so crucial to your life?

Here are a few things you must familiarize yourself with.

• Rules of money
• Inflation
• Passive income
• Different investment options and risk management

Having at least a basic understanding of these will prevent you from making blunders that can ruin your financial health and help you make the best use of your time and money.

Grow Your Circle

Only after I found myself in the abyss of poverty, I realized how important your circle of friends and relatives is to your financial security.

Sure, not everyone was equally helpful or helpful at all, but some of them played important roles in my staying afloat and bouncing back. They helped me not only with my immediate financial needs but also with opportunities for income and growth.

Don’t fall for the hype of a “self-made man” or Ayn Rand’s individualism. We all need healthy communities around us.

So invest in your relationships. Have some resourceful and honest friends. Help others when you can. Also, don’t hesitate to seek help when you need it.

Remember, if you have a group of people who want to see you do well, and if you are sincere and diligent, chances are you will bounce back, no matter how bad the situation appears to be.

Don’t Trap Yourself On an Accelerating Treadmill

I often talk about lifestyle inflation — allowing your living expenses to rise in tandem with your earnings. It’s probably the greatest enemy you need to be careful of.

Here’s how it comes in your way of taking control of your money life.

1. When your expenses expand to fill your growing income, you will not be able to save much. That means you won’t be able to grow your assets.
2. When your lifestyle is always matched to your peak earning potential, one slight hiccup could bring you significant trouble and humiliation.
3. Over time, your baseline for a decent life gets unreasonably elevated. Plus, you get used to pushing it higher and higher. So in good times, you are worried and, during tough times, devastated. But happy? Never.

So strive to keep yourself free from the trap of consumerism.

If you have mastered the art of living a happy life with limited means, the thought of not making a ton of money will never make you anxious. You will be happy and free.

Have The right mindset

You will only ever be as free and secure as your mind allows you to be. I know many people who have got almost everything right and yet feel perplexed and anxious about money.

The thing is, people with a strong sense of financial security do not derive their confidence and peace of mind from their jobs, businesses, or material assets. Instead, their assurance comes from the belief that they have what it takes to create wealth even if they had to start from square one. It comes from their resourcefulness.

It’s also critical to realize that money is an enabler or a means to some end. It is not a purpose unto itself. What you want most is a happy and fulfilling life. And you don’t need a ton of money for that. It’s fine if you intend to become a billionaire. Just don’t lose everything else to that desire.

After all, money is supposed to serve you and not the other way round.

In a Nutshell

Money is the major factor behind the stress in people’s lives. That will only get worse with the world becoming more complex and unpredictable.

Here are seven steps that will help you stay on top of your finances.

1. Work on growing your knowledge and skills relevant to the economy.
2. Have an emergency fund.
3. Create multiple sources of income.
4. Educate yourself on how money works and how to manage it.
5. Grow your network of friends who help each other.
6. Guard against lifestyle inflation.
7. Have the right narrative about money in your head