As we are celebrating 75th Independence Day; it’s time to be financially Independent too.
The Word “Financial Freedom” differs from person to person as every individuals income levels, expenses and goals are unique.But to be Financially Independent, one has to save and plan for their future.
Living within your means and not having debts is what Financial Freedom meant for. To achieve this, one has to follow these “Golden” Rules-
1.Pay Yourself First– Once the salary is credited, You should set aside at least 30% of your income for your short-term goals.
For this, you have to “Save in Debt instruments”(Fixed Income avenues) for your “Short-Term”Goals
For your long-term goals invest in equities and real estate(if you have lumpsum money)
By Paying Yourself First and by investing you can achieve financial freedom easier
2.Evaluate Your Current Financial Position– By Estimating your current assets and liabilities, You may get an overview on your current financial position. Analyse it and project your future by working towards achieving your goal
3.Control Your Expenses– Everyone have expenses. But who keeps them in control would achieve financial freedom faster. This would not possible in one-go, but gradually decrease your expenses by following “Wealthy Habits”
4.Set Financial Targets-Every individual should set financial goals and work towards them. Identify the ways/avenues to reach your targets
5.Using Expense-Tracking apps-In this digital world everyone are using apps. Select one good expense tracker app to analyse your monthly spendings.
It’s better to use apps which categorise each expense automatically. For example-Groceries category, Milk, Fuel Cost expenses.
The money you spent would be automatically updated into each category.
6.Be Debt-Free-It’s better to be debt-free at all times. If it is not possible to live within your means, differentiate between “Good Debts” and “Bad Debts”
Good Debts are those which would help to gain value in future. For Example, Housing loan, Education loan which increases the value of the asset besides availing income tax exemption
Bad Debts are those which depreciate the value in future. For example- Car Loan which decreases the value of car year-on-year
7.Focus on Your Career Growth-To be financially independent, one must focus on their career. He/she should grow in their career by setting a goal and working towards the plan.
8.Don’t Neglect Investments-Investments are to be done in order to secure their financial future. With the “Active Income”(Which they earned by salary/profession)they should create “Passive Income”(2nd source of income which doesn’t require much effort repeatedly)
9.Set “Auto-Pay” For Your Investments– You may over-spend if you didn’t set “Auto-Pay” for investments from your bank a/c. By setting “Auto-Pay”, you are forced to save/invest rather than spending.
As banks levy penalty for non-maintenance of sufficient balance, you are forced to maintain the “Auto Pay”amount. This is the best way of saving
10.Buy Adequate Health and Life Cover-To avoid unforeseen events in future, one must take adequate life and health insurance. If you take health and life insurances at an early age the premiums would be low and covers the risk without any restrictions in the latter age.
These are all the 10 Golden Rules to achieve Financial Freedom. Follow this guidelines and be Financially Independent.