10 Best steps to achieve Financial Freedom :
What is Financial Freedom:
Financial freedom is a stage in life where you have enough passive income to cover all your family expenses. At this stage of life, you need not work for money but money work for you.
In general words – financial freedom means freedom from money worries.
Remember the childhood day when you were a child, during the school day, on the pretext of not going to school, having fun with friends, complaining by neighbors and everything new during the new day, which was the last. More importantly, there are some things that remain in our memory for a long time – in fact, sometimes they are with us forever.
You want to live that life back but the biggest hurdle is money, you work for money all day, you work hard to earn money, but in the end, you feel that money is not saving.
When we ask the common people about their financial freedom and retirement planning, they have only one answer, how to save money for the future when the current expenses are not fulfilled.
It has been proved in research that no one has become a millionaire by saving money, millionaires are made only by investing money.
Investing is a lifelong process. It’s best to start saving and investing as soon as you start earning money, even if you have Rs.1000 invest them immediately to achieve the goal of financial freedom.
Worlds famous investor Warren Buffett’s was started investment when he was 11 yrs old.
Here we will learn about how to achieve financial freedom.
Below are 10 Step to achieving Financial freedom in Life :
Set your financial goals.
Setting a financial goal is an important step to achieve financial freedom, you should determine your short term goal, medium-term goal, and long term goal.
Goals should be specific like after 3 years you want to purchase a new car, buy a home after X year, X amount requires for kids higher educations in X year and retirement plans, etc.
A lot of things that you should keep in mind before setting goals are:
- Goals should be specific.
- Goals should be measurable.
- Goals should be realistic
- Goals should be achievable.
- Goals should be in time-bound.
Keep your saving aside first :
We all know that there is no limit on expenses, so first set aside your savings and then spend the other expenses, at least 20% of your income should go towards savings, 50% towards necessities expenses, 30% towards discretionary items.
In the financial market, this rule is called 50/20/30 rules.
Invest to achieve future goals
Once you start saving then immediately invest this money in different financial instruments like FD, mutual fund, shares, NCD, NPS, etc.
Before starting investment you should keep your goals in mind and accordingly do proper assets allocations.
Pay loan EMI and Electricity bill on time
You should pay your loan EMI and electricity bill on time so that you will not incur a penalty and this will save your money. Avoid the minimum amount of payment of credit card.
Start making your own monthly budget.
You must prepare your monthly financial budget, preparing monthly budgets is key to gaining control of your money. Let’s start it you might be surprised after that how much extra money you accumulate.
Start increase extra source of income.
If you want to retire early then you must increase another source of income, there are some secondary income idea areas :
- Taking Paid Surveys at Home
- Website Design.
- Start an Online Business.
- Make youtube video
- Write an ebook
- Rental income
- Part-time tuition etc.
Start investment immediately if not yet started.
The earlier you begin planning for retirement, the greater your potential return on investment because times allows to take high risk and compounding interest build your wealth over a period of time.
Let us see an example of early started: if you save Rs.5000/- per month from age of 25 till the retirement age 60 yrs. Then you save 420 months or 35 years.
You invested in Rs.21 Lac (5000*420 ) and you will get approx Rs. 3.10 crore. We assume an annual return rate of 12.5%. (Please calculate the same in any compounding interest calculator ).
Now, what happens if you start at the age of 35 then you save 300 month or 25 years. Your total investment will be 15 Lac ( 300*5000) and you will get approx Rs. 92 Lac.
(Please calculate the same in any compounding interest calculator ).
Take term and health insurance.
Adequate term insurance and health insurance must be taken. Term insurance financially helps a family member in case of death and health insurance reimburse your hospital bills.
Always be learning financial instruments.
You should always learn about financial products which help you in your financial planning as well as help to get higher returns.
Take the advice of a financial advisor before investing.
If you are not aware of the financial market then you should take advise of a financial advisor before investing. Don’t invest your hard earn money blindly.
If you want to achieve early retirement or financial freedom, then you have to follow the above ten things, it will help you in financial freedom.
Please keep in mind this is a long term process and to achieve this you will have to monitor it from time to time and be patient.
Nothing is impossible if you do it honestly and keep patience then you will get financial freedom.
Disclaimer: This article is for education purpose, please consult your financial advisor before investing
Thanks for reading…..