What is financial freedom?
Financial freedom is when you have enough savings, investments, and cash to live well and provide for your family. It means having enough money to cover your expenses and not being forced to work because you need the cash. Financial freedom allows you to attain a work-life balance that you feel comfortable with, so that you can enjoy your life without stress.
Components of Financial Freedom
The amount of savings, investments, and cash that’s necessary to achieve financial freedom differs on an individual basis. John, who’s 30 and single, will have a different definition of financial freedom than Jen, who’s 40, married, and has two young children. But while the amounts may differ, the concept is the same.
There are two main parts of achieving financial freedom:
Debt is one of the main reasons people have a hard time achieving financial freedom. According to CNBC, Americans are riddled with debt from the age of 18. Gen Xers have the largest average debt from any other age group at $135,841. Baby Boomers are next with an average debt of $96,984. Millennials are not that far behind, with an average debt of $78,396. The average debt for people aged 75 and over is $40,925. Gen Z has the smallest average debt at $9,593.
If you already have debt, don’t worry, it’s not too late. There are ways to pay it off, even slowly. One of the best, but hardest, ways to do it is to stop using credit cards. Credit card interest is one of the highest types, which makes paying off debt much harder. If you can’t stop using credit cards, at least try to pay the whole bill each month. Consolidating debt in some cases can minimize interest and help you pay it off faster. A mortgage won’t be able to be paid off as fast, but eliminating whatever debt you can means you’re moving in the right direction.
Term life insurance plays a role in your goal to become debt-free. If you’re concerned that you won’t manage to pay off your loans before you die, getting term life insurance will at least make sure that your debt won’t pass on to your loved ones. Term life insurance is purchased in increments of 5 years, so you would need to calculate how long it would take you to be debt-free. If you estimate that it will take 18 years, then you should buy a 20-year term life insurance policy. This will cover your loved ones from shouldering your financial burden and help them in their own journeys toward financial freedom. It will also give you peace of mind.
Investing is a time-tested way of increasing your funds, and doing it when you’re young means your money has more time to grow. Since it can be hard to determine where and how to invest, it’s worthwhile getting some guidance from a trusted professional.
Buying whole life insurance allows you to invest and get coverage for your loved ones at the same time. It does this by offering a death benefit to listed beneficiaries, but it also accrues cash value over time. The cash value can be used during your lifetime to take out loans at low rates, create an investment portfolio, supplement your retirement income, or pretty much for anything you want.
Life Insurance as a Gift
While life insurance policies do come with a price tag, the gift is invaluable. It can help your loved ones achieve their dream of financial freedom and also give them the peace of mind. Before purchasing life insurance as a gift, it’s important to discuss with your loved ones what kind of policy is best for them and how much coverage they need.
Sproutt insurance advisors are available to help determine what kind of life insurance is best for each situation. Simply answer a few questions and we will find the best-value plan for your lifestyle, needs and budget.