Salesforce Error: 'Can't change the data type because it's referenced in the following Flows'

This error occurs because Salesforce prevents changing the data type of a custom field that is actively referenced in one or more Flows. The only way to resolve this is to remove the field reference from the Flow before changing the data type.
To avoid re-creating the complete Flow, follow these steps:

1. Open the Flow referenced in the error message.
2. Search all elements to locate the affected field.
3. Remove the affected field from those elements.
4. Save the Flow as a new version.
5. Delete the older version where the field was referenced.

After completing these steps, you can change the data type of the affected field without error.
Important Note
Deleting the entire Flow would also resolve the issue, but is not recommended unless the Flow is no longer needed.