The new year is about to start two months. Have you made any financial resolutions for the new year 2020? If you haven’t made a resolution yet, you still have time. You can achieve financial freedom only through your financial determination. Financial freedom means living life on your own terms and having enough money to fulfill whatever you want, without worrying about your daily expenses. Managing money is an art that you can learn at an early age. So through this article we are going to tell you about achieving financial freedom.
1. Create a budget
Make a budget of yourself and keep an account of what you earn and spend. By making a budget, you will get an idea of where and how your money is spent. If you spend more unnecessarily, you can curb it through the budget. You should allocate money for each of your regular and urgent expenses, which will make it easier to save and help you achieve your financial goals.
2. Get rid of debt
If you want to take advantage of financial freedom, getting rid of debt is very important. If you have a lot of debt, first pay off personal loan and credit card dues. Banks charge 24-36% interest on a credit card in a year, while personal loan annual interest rates are 14-22%. If you do not repay the loan with high interest rate quickly, you will get stuck in the debt trap and then you will find it very difficult to get out of it. You can also take help of a financial advisor to get rid of debt.
3. Create an emergency fund
Create an emergency fund to avoid an economic problem in odd situations. If you are single, make a fund for at least three months. If you are married, create an emergency fund for at least 6 months of living. Keep money in an FD or liquid fund and break it in an emergency. Along with this, keep enough money in the savings account as well.
4. Invest for retirement
If you want to live life comfortably and without worries after retirement, then you should save and invest. Invest for retirement based on risk profile. If you are an aggressive investor, you can consider investing in equity mutual funds, ELSS, stocks and NPS for retirement. They are more likely to yield higher returns with higher risk. If you are a conservative investor, then you can invest in PPF, FD, NSC and Post Office Saving Scheme. The risk is negligible, but the returns are relatively low.
5. Invest more and more
Do not invest just to save tax. Invest for specific financial goals like buying a house, retirement etc. But before investing, study the investment proposal carefully. Check the interest rates, costs, tax benefits and investment security in the proposal. Invest in financial instruments that are suitable for your financial goals. Keep in mind that investment is for the long term, so make a decision only after examining all the aspects before putting your hard-earned money.
6. Save for Financial Freedom
The more you save, the faster you will achieve financial freedom. You can understand this through a simple example of how much you must save to take advantage of financial freedom. If you save 10% of your income, you spend 90%. Thus if you want to save your one year expenses, you will have to work for 9 years and save the same. In this situation you will be able to get financial freedom very late. If you want to get financial freedom as soon as possible, you should save more and invest more.
7. Insure yourself
If you do not have life and health insurance, you can never achieve financial freedom. Buy a term life insurance plan, which will provide protection to your family. Under this scheme, on the death of the policyholder within the term of the scheme, the nominee gets death benefit. This money can be used to pay off any debt such as a home loan or car loan, and for the daily living expenses of the family. On the other hand, health insurance will provide you cover against hospital expenses in case of any disease. If you do not have health insurance, then your money will be spent in the treatment of diseases and you will never get financial freedom.
8. Increase Your Income
If you depend only on your monthly salary then you will never get financial freedom. You should make other sources of income. This can be through house rent, book royalties or freelancing.