Financially Independent does not mean that you become free or have early retirement but create wealth and do not be dependent on others for finance or even not depending on a high paying job for the rest of your life.
Does it mean that when you are financially independent, you do not have to work? Actually the meaning of financially independent means you are no longer earning to pay for your living. Achieving financial freedom or financial independence is the goal for many; however every one cannot reach their goal just because of lack of discipline in keeping their plan ahead. The other reasons that are a hurdle in achieving their goal of financial independence are increasing debt, financial emergencies, profligate spending and other issues.
How should you plan for enough funds so that you do not have to worry about a constant source of income? Because life is uncertain and planning a good amount of wealth depends on your financial obligations to family, health, emergencies, social privileges and your life circumstances.
Here are some ways which can help you to start your journey to be financially independent.
Set Goals – You should have a clear picture of your goals about your finances such as how much you have in your bank, how much you should spend on lifestyle. Beside this, you should write down your financial goals for short term, middle term and long term.
Make a Budget – Making a budget for your household and sticking to it is a great way to track your savings. You can follow 50/30/20 rules to create some manageable budget and savings according to your income.
Start with Small – Start with a small amount of savings like recurring deposits or time deposits. You can go for SIP but you have to be constant and disciplined in terms of regular savings. Only saving is not important but investing in the right place is more important to create wealth.
Multiple Source of Income – Due to the digital era, there are unlimited earning opportunities so one can take advantage of multiple income sources to add extra income which will help you to achieve your financial goals faster.
Get a Financial Advisor – If you are not so good at managing your financial planning so well then it is good to get some help to manage your financial portfolio from a financial advisor.
Diverse Your Savings – Do not keep all savings in one place. Diverse your funds to different saving schemes and plans so that you have a limited chance to lose on return for example, one investment will give you 10% return and on the other side you may lose 5% then also you have balance in return and you are not likely to lose totally.
Be Debt-Free – Avoid taking on too much debt in the form of loans or credit cards. If you are not in need then do not go for it so that you do not have to pay interest on loans or unnecessary charges on credit card so you can have a manageable amount for saving rather than repayment.
Manage Finances – You need to keep track of your each and every spending so that you can avoid unnecessary spending. You can follow minimalism so that you spend on things which create value in your life.
Emergency Fund – Covid-19 Pandemic has taught all of us to create an emergency fund to help to avoid any sudden jolts to your finances. Based on your average monthly income and expenses, ensure that you have an emergency fund that can allow you to survive without income for at least six month.
Insurance Cover – Create some fund to invest in insurance cover especially health insurance so when in need of health emergency, that will help you without disturbing you saving and investment. Beside this you can also have some other insurance plan that will help you build wealth.
We hope these all ways will help you to create wealth to make you financially independent. It is in your hand how to save, how much to save and where to save because you know better about your finances and income sources.
