What is financial freedom and how to achieve it

13/01/2025
What is financial freedom and how to achieve it

Throughout our lives, there are a series of dreams that cross our minds. We want to live comfortably and even think about early retirement that allows us to enjoy life without having to work. However, to enjoy this retirement as well as a comfortable life, achieving financial freedom is essential.


Many dream of financial freedom, but what exactly is it? Many define it as "being able to live without worrying about money," and, in a way, it is presented as a state where you do not depend on a salary or active work to cover your expenses. In other words, being able to live off the income generated by your investments or assets. 


It is a concept that refers to the ability to make decisions without being limited by financial concerns. In fact, it is directly linked to autonomy as well as passive income. But what key points must be met to achieve financial freedom?


What does financial freedom entail?


We must consider that financial freedom goes beyond accumulating wealth. Being able to claim financial freedom means having control of your finances to make decisions based on your values and goals, not out of necessity.


For some, it means retiring early; for others, it represents the ability to live without being tied to schedules or specific jobs. However, what must be done to feel that financial freedom has been achieved? Or what key points should we understand to properly grasp the concept of financial freedom?


Levels of financial freedom


Before looking for strategies or understanding how to achieve financial freedom, it is essential to know the different levels of financial freedom as well as the requirements to overcome them. It is important to note that these levels vary depending on each person's economic situation and the goals they wish to achieve.


Being able to retire early, stop working, work part-time, or have additional income that allows someone not to worry during a period without employment requires surpassing certain levels of financial freedom. These levels range from the most basic to the most comprehensive, as outlined below:


  • Financial security - This is the most basic level, achieved when passive income can cover the essential needs required to live, such as rent, a mortgage, or utility bills.
  • Financial independence - The flow of passive income allows maintaining the standard of living you would have while working. This level enables temporary periods without working, as expenses are covered by passive income, although limitations such as the inability to save from this income base may remain.
  • Absolute financial freedom - Passive income exceeds the cost of living. In other words, not only can you maintain the standard of living you would have while working, but you can also save and invest. This represents an absolute level of independence where passive income is so high that even with significant expenses, they pose no issue.

How to achieve financial freedom


Before considering the keys or strategies to achieve financial freedom, it is crucial to understand that it is a long-term project. To achieve it, a lot of effort and consistency is required to obtain the desired results. But this also leads to the question: when is the best time to start?


There’s no excuse like being late for New Year’s resolutions or thinking that "you don’t have enough savings." The best time to start working toward financial freedom is now, regardless of when you read this: the sooner, the better. Therefore, it’s time to start planning:


  • Analyze your starting situation - Before setting your destination, you must know your starting point. We recommend creating a list of your debts and funds. Subtracting your debts from your funds will help you understand your financial baseline.
  • Define realistic goals and objectives - You may want to buy a house, retire early, or pay off a debt. Set your objectives to have a motivation that keeps you focused on your ultimate goal. Once your objectives are clear, detail short- and long-term goals, such as monthly or annual savings targets. Why? Because this allows you to evaluate periodically whether you’re on the planned path or need to make adjustments. It’s essential to ensure that your goals are realistic and achievable; otherwise, you may lose motivation.
  • Control cash flow and save - Create family budgets to monitor all your transactions and identify areas where you can cut expenses. Don’t forget to account for extraordinary or unforeseen income and expenses to avoid unpleasant surprises. A good approach is adopting responsible consumption and minimalism.

After defining your starting situation, objectives, and controlling income and expenses to maximize savings, the next step is generating passive income and studying strategies to achieve financial freedom.



Keys to achieving financial freedom


Achieving financial freedom requires good planning and consistency. Some essential steps to reach this goal include:


Create multiple sources of passive income


One of the pillars of financial freedom is generating passive income, which doesn’t require constant effort. How can you generate this? Some examples of sources that generate recurring income include real estate investments, stock dividends, and even platforms where crowdlending plays a key role.


Through Inversa, you can participate in lending to businesses. What does this type of investment offer? Portfolio diversification and maximization of passive income.


The importance of saving and investing


Saving is the first step toward achieving financial freedom. However, we cannot overlook the fact that investing your savings is what truly leads to financial freedom.


It’s not enough to keep money in a savings account; it’s essential for that capital to grow. Here, you need to assess your situation, determine the percentage of your income you can allocate to investments, and identify opportunities that balance risk and return.


Asset diversification


To minimize the risk of losses or challenges that hinder financial freedom, diversification is critical. This means spreading your investments across different asset types, such as real estate, stocks, bonds, or even crowdlending investments.


At Inversa, we offer secure opportunities to invest in projects with guaranteed returns, enabling portfolio diversification. Additionally, you can rely on advisors who provide guidance and inform you about the safest moves.


Investment strategies for financial freedom


After assessing your financial situation and determining the keys to success, the next step is finding an investment strategy that helps generate passive income. But what is the best option or the most suitable for your situation? Determining this depends on your experience, but here are some of the most effective strategies:


  • Real estate investments - Investing in properties is a classic strategy for generating passive income through rental properties or resale, and it remains one of the most effective over time. Real estate can offer attractive long-term returns, although it requires substantial initial capital.
  • Crowdlending investments - Crowdlending allows investors to finance projects or businesses in exchange for a return. Investing in platforms like Inversa can offer short- and medium-term returns, often exceeding those of traditional banking products. This investment model democratizes access to funding projects and fosters intelligent diversification.
  • Index funds and mutual funds - Index funds are suitable for those seeking a more passive approach to investment, replicating market indexes with low fees. Over the long term, they typically offer competitive returns. For those preferring professional management, mutual funds can help diversify capital without requiring extensive time commitment.

Challenges to overcome for financial freedom


Having a clear understanding of the keys, strategies, or even your level of financial freedom doesn’t guarantee success or that there won’t be challenges to overcome. Below, we outline some of the obstacles that must be tackled to achieve financial freedom:


Limiting beliefs about money


One of the greatest obstacles to financial freedom is the limiting beliefs held about money. Thinking phrases like "money is the root of all evil" or "investing is risky" can sabotage your financial progress.


Overcoming these mental blocks is key to making financial decisions that move you closer to your goals. At Inversa, we also promote financial education to help our users make informed decisions. This way, we help you overcome limiting beliefs about money and other obstacles that may arise.


Maintaining financial discipline


To achieve financial freedom, it’s important to maintain consistent discipline. This means following a spending plan, controlling debts, and ensuring a significant portion of your income is allocated to saving and investing.


An effective way to maintain financial discipline is to use tools that allow automating your finances. This helps you stay on track and avoid unnecessary expenses that could hinder your journey toward financial freedom.


Tools and resources to advance toward financial freedom


Thinking about achieving financial freedom might feel overwhelming when planning and evaluating your situation. However, there are tools and resources available to help you get started or stay on track:


  • Automating your finances - Automation is an effective technique to ensure a portion of your income is automatically allocated to savings or investments. This minimizes the risk of spending money before it is invested. Set up automatic transfers to your investment or savings accounts at the beginning of each month.

  • Investment platforms - There are numerous platforms that make diversified investments accessible. At Inversa, for instance, we offer the opportunity to invest in carefully selected projects with guaranteed returns. This is an excellent option for those seeking a hassle-free way to generate income.

Financial freedom: an ambitious but achievable goal


As we’ve reviewed in this article, we’ve shown that while financial freedom is an ambitious goal, it is also attainable. Of course, achieving it requires following the right strategy.


Generating passive income, making smart investments, and maintaining financial discipline will bring you closer to the economic independence you seek. With tools like Inversa, you can start taking your first steps toward a safer and freer financial future.

Ana María Belén Olmos López
Promoter, Founding Partner & CEO of Inversa Invoice Market

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