If there’s one thing that’s common among most earning people across the globe, that’s to achieve financial freedom and have a peaceful life that is free from the hassles of financial worries. So what is the mantra to achieve this financial freedom? Well, the answer is not a standard formula or a one-size-fits-all solution. However, there are a few points to remember or steps that you can take that could lead you to financial freedom. Check out this blog to know these key steps and take charge of your finances.
Read More: Financial planning – All you need to know
What is the meaning of financial freedom?
We have heard the words financial freedom quite often. But do we truly know what they really mean? Let us begin with this basic concept before going any further. Financial freedom is the state where you have enough financial resources and security to lead the life you desire without being constrained by money-related worries. It means having the ability to meet your needs, save for the future, and pursue your dreams without being completely reliant on a fixed income or a job or even being stable in the eventuality of loss of one. Financial freedom also involves achieving a comfortable standard of living, supporting your family’s well-being, and enjoying financial stability and peace of mind.
Top tips to achieve financial freedom
The pathway to financial freedom is unique for every individual. It depends on their personal financial goals and their time horizon to achieve them. Some of the common and crucial steps that you need to be aware of are discussed hereunder.
Top tips to achieve financial freedom #1 Start with budgeting
Budgeting is the starting point for any kind of planning and when it comes to financial planning and stability, it is the key. Budgeting your finances implies chalking out all the expenses and the sources of income. Do not forget the primary expenses like rent, education fees, EMIs, groceries, etc. in this process along with the secondary expenses like your OTT subscriptions, expenses on your splurges, etc. This exercise allows you to know how much you spend and where exactly thereby leading you to trim your unnecessary expenses and use your funds effectively.
Top tips to achieve financial freedom #2 Set your financial goals
Attaining financial freedom implies meeting all your financial goals in a timely manner. This process starts by defining your financial goals and prioritising them. These goals could range from purchasing a home, funding higher education, or securing a comfortable retirement. Well-defined goals provide motivation and a sense of purpose to financial planning efforts, helping you stay focused on your long-term aspirations.
Top tips to achieve financial freedom #3 Keep track of your spending
Consistency is key when it comes to monitoring your spending. Regularly review your financial transactions to ensure you’re staying within your budget. You can find numerous financial apps and tools tailored to suit your needs and simplify expense tracking. This practice will empower you to spot any trends or habits that could be hindering your financial progress, allowing you to make necessary adjustments.
Top tips to achieve financial freedom #4 Focus on your career and keep upgrading
The job market today is quite dynamic and competitive. To secure your financial future, concentrate on your career development. Continuously seek opportunities for skill enhancement and stay updated in your industry. Attend workshops, courses, or certification programs that can enhance your qualifications and make you more valuable to employers. A flourishing career can substantially increase your earning potential over time.
Top tips to achieve financial freedom #5 Create an emergency fund
Financial stability is often measured by your ability to withstand unexpected financial crises. Most experts believe that you should have an emergency fund that can cover at least 6 to 12 months’ worth of living expenses. You should start building this fund at the earliest, preferably right from the beginning of your career as you have fewer responsibilities at this stage and can allocate more of your resources to this fund. This reserve acts as a financial safety net, ensuring you don’t fall into debt when facing unforeseen circumstances such as medical emergencies or job loss.
Top tips to achieve financial freedom #6 Plan your big-ticket purchases and assets
When preparing for significant expenditures like buying a house or a vehicle, it’s vital to approach it with thorough planning. Begin by researching the most favourable financing choices available, considering various loans, interest rates, and repayment terms. A key aspect of this planning is saving up for a substantial down payment. This serves to reduce the amount you need to borrow, making loan payments or EMIs more manageable and potentially securing better loan terms. Moreover, this careful preparation ensures better control over your overall financial well-being. It allows you to assess your financial situation, set realistic goals, and prevent impulsive decisions that may lead to financial instability.
Check out our EMI Calculator to know EMIs payable on your loans.
Top tips to achieve financial freedom #7 Invest in a retirement fund
Retirement planning is critical for every individual and the same has been highlighted multiple times in today’s world. This includes investing in popular retirement avenues like PPF, SCSS, NSC, NPS, retirement funds, etc. Make sure to contribute regularly to these funds to secure your retirement. It is important to diversify the investment options by considering mutual funds, stocks, or other long-term investment options and focus on aligning them with your retirement goals.
Top tips to achieve financial freedom #8 Look for avenues to secondary income source
A second source of income can help achieve financial freedom. Explore options like part-time jobs, freelancing, or starting a small side business. These supplementary income streams can boost savings and investments, leading to your ultimate goal.
Top tips to achieve financial freedom #9 Be debt-free at the earliest
Becoming debt-free as soon as possible is a key financial objective. High-interest debts like credit card balances and personal loans can hinder your financial freedom. Paying them off quickly is crucial for two reasons. Firstly, it saves you money by reducing interest costs. Secondly, it frees up funds for more productive financial pursuits, such as investing and achieving your financial goals. In essence, eliminating high-interest debt should be a top priority in your financial plan which ultimately contributes to achieving financial freedom.
Top tips to achieve financial freedom #10 Do not forget insurance
Insurance is a critical aspect of financial planning and should not be ignored. Insurance primarily includes health insurance and life insurance but one should also not forget about home insurance. Health insurance safeguards against escalating medical costs, providing peace of mind. Life insurance offers financial support to loved ones in case of your demise. Home insurance protects your property from unexpected events, preventing financial setbacks. Prioritizing these coverages ensures preparedness for unforeseen challenges and also helps you focus on financial freedom and achieving your short-term or long-term goals without any deviations from your plans.
Top tips to achieve financial freedom #11 Take the help of a financial advisor if needed
Managing your finances may seem like a cakewalk at the start but it is not always the case. If it seems to becoming overwhelming or complex, you can consider consulting a certified financial advisor. These professionals possess expertise in financial planning and can help you create a personalized financial roadmap. Their guidance can be invaluable in making well-informed investment decisions and achieving your financial goals in a timely manner. The charges for their services are usually nominal but are a key factor to consider while selecting one along with their reputation and expertise.
Conclusion
Financial freedom often seems like a mirage to most individuals but it is not actually the case. Through careful planning and allocation of resources, it is most definitely achievable. The key components for the same are focus and clarity of your goals and being realistic with them as well as your financial plan. So start planning today itself and make your financial journey a smooth and successful one.
