17 Ways to Make Financial Freedom a Reality | SoFi (2024)

Ever dream of walking out of your job, free to pursue a project you’ve always dreamed of starting? Or going back to school without taking out student loans? Or having the financial freedom to leave an unhealthy relationship or location?

What about the option to retire at age 45 or 50 instead of at age 65 (or 80)? And upon retiring, dedicating your life to humanitarian work, raising your family, or tucking yourself away in your mountain cabin with hundreds of books?

Each of these opportunities could be afforded with financial freedom. Just as it sounds, financial freedom is typically defined as having the resources to do exactly as you please.

Below we highlight 17 ways to make financial freedom a reality.

What Is Financial Freedom?

While everyone’s financial freedom definition will be slightly different, it’s generally understood as being in the financial position to step away from traditional work. This is usually done by creating income streams from investments or a business.

Essentially, the notion of having financial freedom implies you’ve achieved financial independence to live for the rest of your life without traditional income.

Currently, there is a movement that is gaining in popularity called FIRE, which stands for “financial independence, retire early.” Self-proclaimed members of the FIRE movement often dedicate a great deal of energy to creating the terms of their financial freedom.

Whether or not you associate with the FIRE movement, the idea of financial freedom is useful for anyone who is curious about ditching the traditional 9-5 work schedule, who wants to stop living paycheck-to-paycheck, or who wants to step up their money game.

Even those who simply want a traditional retirement will probably want to become familiar with the concepts of financial freedom, as most people will be investing for their retirements themselves.

Financial freedom is generally achieved through amassing income-producing assets or creating income streams to cover your cost of living expenses. Another word for this is “passive income,” or income that is generated without you having to exchange your time for that dollar. The goal is to stop trading your time for money.

While it is feasible to save enough money simply to live off that cash into perpetuity, this means saving an incredible amount of money — and not running out. While you can aim for this, you may feel more comfortable building out one or more income streams, especially as you take into consideration the erosive powers of inflation.

17 Ways to Achieve Financial Independence

Achieving financial freedom will not happen overnight. It is certainly possible and it is within your capability, but it requires putting together a financial freedom plan and budgeting with financial literacy.

1. Determine Your Needs

A good first step toward financial freedom is determining how much money you’ll likely need to cover your costs once you achieve financial independence. Determining what you need can feel like a moving target, but this is important for planning the next steps in your journey.

2. Explore New Income Streams

You can explore opportunities to create new streams of income. Any property you own, including real estate, cars, tools, and appliances, can serve as money-making assets. You may sell these items, or you may explore opportunities to rent them out for a steady source of new income.

3. Consider Stocks

Whether you own individual stocks or diversified stock funds (mutual funds or exchange-traded funds), the stock market can be used to generate income. It helps to understand that a stock can make money in two ways.

First, through price appreciation, which is a stock growing in value over time. Second is through dividend payments, which are cash payments made by some (but not all) stocks and funds.

Though stocks have experienced a high historical rate of return, stock market returns are notoriously volatile, so you may want to gain some comfort before diving in headfirst as a strategy for financial freedom — whether through your own research or by consulting a licensed financial advisor.

4. Consider Bonds

You can consider investing in bonds as a strategy for growing wealth. Bonds are investments in the debt of a corporation or government, whether federal or local. You are essentially loaning them your money, and they pay you a stated rate of return, called interest, to use that money.

How much you earn in a bond will likely depend on interest rates in the prevailing economy. Bonds generally pay interest at regular intervals, such as twice a year, which can provide investors with a steady stream of income.

5. Consider Real Estate Leasing

Investing in rental real estate — such as single-family homes and multi-family units — is another way to create a stream of income. Generally, the goal with rental property investing is to collect rent payments that create cash flow beyond what is needed to cover all of the costs of owning a home, like a mortgage, property taxes and maintenance of the property.

This method of generating passive income often relies on leveraging your financial position — taking on debt in order to generate a profit on borrowed money. Paying cash for rental properties may give added peace of mind if you experience a period without renters in your property.

In this way, rental properties can be a risky endeavor and require plenty of research into the process, best practices, and into finding the right properties.

6. Generate Passive Business Income

Though passive income has become a catchall for all sorts of different income streams, it can also be used specifically to describe wealth you may generate as a silent partner in a business venture. For example, you can earn passive income by providing private financing to a private company in exchange for an equity stake in the venture and a share of its profits. This leaves you invested in a company without having to oversee or manage its day-to-day operations.

You may invest in private companies while still engaging in active work elsewhere. Active businesses could fall into side gigs, which we’ll highlight below as a way to bolster your income in the journey toward financial freedom.

7. Understand Financial Literacy

Financial literacy is having competence or knowledge in personal finance. This involves understanding debt and knowing how to budget. The path to financial freedom goes through financial literacy, and this runs the gamut of how you save, spend, earn, borrow, invest, and protect your money.

8. Conquer Mental Barriers

If you can’t envision yourself untethered from traditional employment, you certainly aren’t alone. This is not something that we are taught in schools or even by our parents by and large.

One of the first steps in your journey toward financial freedom may be to explore your beliefs about money and work. This may mean digging deep and learning about your relationship with concepts like worth, scarcity, and abundance. Such an exercise may help you conquer any mental barriers holding you back.

9. Reduce Bad Debt

A bunch of debt can make it very hard to become financially free. Debt not only reduces your overall net worth by the amount you’ve got in loans or lines of credit outstanding but also increases your monthly expenses.

To reduce debt, you may want to focus on expediting your payment of high-interest sources like credit cards and student loans. To make the process move faster, you might try to get a lower interest rate on your debts.

It’s worth noting that, typically, a lower interest rate may mean that your loan term will be extended. With student loans or a home loan, you could look into options like refinancing. For instance, with credit card debt, it may be possible to lower your interest rate by calling your credit card company and negotiating better terms.

Additionally, you’ll likely want to take on any new debt strategically. Debt can certainly be a useful tool for a future goal of building wealth, like using loans to finance an education in order to get a higher paying job or as an outlay on a business. But debt can also be misused, so be careful not to take out more debt than you absolutely need.

10. Seek Higher Wages

You can clip coupons all you want, but if you’re not earning enough to cover your bills, you aren’t going to be able to save enough to retire early and pursue your passions. For many people, figuring out how to earn more money in order to increase savings will be a crucial step in the journey toward financial freedom.

There are many ways to increase your income. First, you might want to think about ways to get paid more for the job that you’re already doing.

Many ask for a raise or more responsibility at work, or have a conversation with managers about establishing a path toward a higher salary. Earning more now can help you save more for your future needs.

11. Consider Side Gigs

As mentioned earlier, active businesses could fall into side gigs — small work endeavors that may help you on the journey toward financial freedom. You can consider picking up a “side hustle” or another way to earn money outside of full-time work. You can explore the gig economy as an independent contractor and generate supplemental income to your bread-and-butter job. This can help you build up savings for retirement or extra earnings to invest in stocks, bonds, and other securities.

12. Start Your Own Business

You could create your own full-time job by starting a business. Going into business has its fair share of risks, but a successful enterprise can generate wealth and pave the way toward financial freedom. Business owners can step aside at any moment and recruit new managers to run their business. Building and selling a successful small business can also catapult you into financial freedom.

13. Track Your Cash Flow

Using cash-flow management to monitor your income and avoid late payments on bills can build wealth. Borrowing money and having the available cash on hand to make any required interest and principal payments is known as debt service. You could implement a cash-flow management plan to pay off loan obligations early, which can move you closer to financial freedom.

Tracking your cash flow is critical to establishing a healthy budget. You can’t set a budget that you can reasonably expect to stick to if you don’t even know how much you’re spending in each category.

14. Minimize Costs

Buying things you don’t need can deplete your savings and make it harder to achieve financial freedom. You can maximize your savings by minimizing your costs. This doesn’t mean sacrificing your right to “life, liberty, and the pursuit of happiness,” but it does mean embracing frugality where sensible.

15. Live Within Your Means

One of the teachings of financial literacy is to live within your means. As mentioned earlier, having a bunch of debt can make it very hard to become financially free. Borrowing money makes sense when it advances your goals, but buying things you cannot afford is generally a recipe for disaster.

16. Consider a Savings Account

Achieving financial freedom means you have sufficient wealth or savings to live comfortably to your satisfaction. Opening and maintaining a savings account can get you accustomed to saving and introduce you to the concept of earning money on top of your money.

Depositing money into a savings account earns you interest, and a high-interest savings account can help you in the journey to financial freedom.

💡 Learn more about how high-interest savings accounts work.

17. Consider 401(k) Retirement Contributions

Employees can consider making contributions to a 401(k) retirement plan. A 401k is a type of tax-deferred retirement account sponsored by your employer, and you can begin withdrawing these funds without penalty once you turn 59 ½. Building a 401k nest egg can help you plan a future with financial freedom as your reality.

The Takeaway

Living life to your fullest satisfaction may require a degree of financial literacy. Paying bills, covering general expenses, and constantly managing a budget can feel like a burden, but saving money and generating wealth can provide much-needed relief.

If you are thinking about early retirement and achieving financial freedom, SoFi Invest® could help. This investment app allows you to trade stocks with no commissions and offers other tools that can help you build a savings nest egg.