Everyone needs money for their day-to-day requirements. Spending lavishly without thinking of the future needs would lead to financial struggles. So everyone should be Financially Independent within their means!
Meaning of “Financial Freedom”–
Financial Freedom is nothing but living within your means by not falling prey to the debt-trap. Many corporate companies, NBFC’s are trying to lure customers by offering attractive offers which will indirectly lead the customers to fall in their debt-trap.
In simpler words, Having sufficient money to face any kind of unfortunate event and not having any higher-interest loans is Financial Freedom.
Everyone wants to have Financial Freedom, but in practice, it is not possible for every one! If you are one among them, follow these 10 simple steps to achieve Financial Freedom
- Evaluate your current financial Situation– Do estimate your current situation and project your future goals on a sheet of paper. Stick the paper where you used to use frequently. On seeing the futuristic goal daily, you will be motivated to save money instead of spending lavishly. Try this once!
- Fix the goal amount and the time period– After evaluating your present financial situation, Determine the goal amount and set the time period to achieve that goal. By setting a time period, you will definitely look after the ways to achieve that goal amount by saving/investing money.If you are not familiar with the investment avenues, don’t hesitate to consult a good financial advisor which would guide you in financial planning at all times.
- Focus on achieving the goals– After determining your investment horizon and investment vehicles, stick to the investment strategy you thought at the time of fixing the goal. Don’t get over-excited when the market is at peak levels and get panic whenever the market slips. If you can’t control your emotions, take help of your financial advisor and he will guide you in those tough times
- Control Your Finances– Just like sticking your financial goals list on a paper, list down all your inflows(incomes)as well as outflows(expenses).You should track them and check where the unnecessary expenses are being done and try them not to repeat in the future.
- Try to Pay-off your debts as early as possible– As various organisations are offering debts with amazing deals,many of us tempt to take loans. But do remember this is a debt-trap and you have to pay your debts otherwise your CIBIL Score would be impacted. So try to repay your debt whenever you have surplus! Ignoring the bill amount and paying late would lead to huge interest burden.
- Differentiate between Good Debts and Bad Debts– Good debts are those which would benefit in the future besides availing tax exemptions.Example Housing loan, Education Loan etc. Bad debts are those which depreciate value in the future besides huge interest burden.Example- Vehicle loan, Personal loan etc. So before taking a loan, differentiate whether is a “Good loan” or “Bad loan”
- Automate your savings– It is not possible for everyone to save/invest money for future. This is because, they follow- “Income-Expenses= Savings”. But if you follow this rule you can’t reach your goal at any point of time. So to save money follow- “Income-Savings/Investments=Expenses”. This is only possible by “Automating(setting auto-debit from your bank a/c)once your salary is credited”. If you automate your savings, you will definitely reach your financial goal
- Reviewing your Portfolio periodically-It is not over to invest some money and forgot the proceeds thereafter. Review your investment portfolio from time-to-time and make any changes, if any to achieve your financial goal. If you have a finance coach, be in touch wiith him frequently.
- Create Emergency Fund– It is not only important to save money, but also important to set aside 3-6 months of your monthly expenses as “Emergency Fund”. This emergency fund can be used to meet unforeseen medical emergencies,job loss, accident etc.
- Taking Health and Life Insurance as early as possible– Though achieving huge corpus is your financial goal, never neglect health and life insurance policies. They act as a saviour in case of health issues thereby protecting your health and wealth simultaneously. By taking Insurance policy at an early age, the premiums would below and covers all the diseases when you grow older(Subject to renewal of the policy)
By following the above 10 steps, you will definitely ensure good financial health and achieve financial freedom at always!.