Abstract: As personal financial decisions become increasingly complex in the digital era, it has become vital to explore not just what people know, but how people think and behave about money. This article explores the psychological basis of Financial Freedom by investigating the effects of four behavioral constructs – Overconfidence Bias, Financial Self-Efficacy, Self-Control Bias, Herding Bias – with Financial Literacy as a mediating variable. Based on Behavioral Finance Theory, Social Cognitive Theory (Bandura, 1997), and the Financial Capability Framework, the study adopts a quantitative explanatory research design with 207 working professionals in Chennai, India. Standardized Likert-scale instruments were applied and the data was analyzed in SPSS by correlation, multiple regression, and mediation analysis. According to the findings, Financial Literacy is a strong mediator of the relationships between Overconfidence Bias, Financial Self-Efficacy, and Self-Control Bias and Financial Freedom; Herding Bias has no mediation effect. Financial Self-Efficacy displayed the most indirect and total influence by far of the predictors, suggesting a central role of knowledge and confidence to financial freedom. The results confirm that effective financial behavior is a function of belief, discipline, and self-regulation, not just information. The result of this study helps to deepen behavioral finance research and explains that biases and literacy among individuals in a behavioral finance theory jointly determine financial freedom through this psychological model.

Keywords: Behavioral Finance, Financial Self-Efficacy, Overconfidence Bias, Financial Literacy, Self- Control Bias, Herding Bias, Financial Freedom, Social Cognitive Theory, Financial Capability.

Downloads: | DOI: 10.17148/IARJSET.2026.13130