Dreaming of a life free from financial worries? Achieving financial independence, where you can pursue dreams and secure your family’s future, often feels out of reach amidst debts and expenses. But fear not. This guide offers actionable steps to help you break free from financial constraints and embrace true freedom.
Financial freedom is the power that allows you to live life on your terms, fulfilling dreams for yourself and your family without the pressures of a job, with the freedom to choose any path. But this dream remains out of reach for many. Growing debt, and unwanted expenses, there are many paths that lead us away from financial freedom.
But worry not. If you are about to take your first step towards financial independence, we are here to support you.
Let’s dive in.
What is Financial Independence?
The definition of financial independence can vary for everyone. For some, it could mean a debt-free life. For others, it could be having a stable job that meets their daily needs. However, we want to tell you that financial independence is more than that.
Financial independence refers to a situation where you have enough resources to handle any situation that comes your way. Having enough resources means having enough money to cover all your expenses throughout your life.
How to Achieve Financial Independence?
Financial independence involves comfortably living without relying on a salary to meet your obligations, including sufficient income, savings, or investments. Achieving this goal is a long-term process that can be attained with proper guidance. It encourages personal growth, facing challenges, and providing the freedom to live securely and enjoy life.
So here are some steps for you to achieve financial independence:
Define Your Goals
Think deeply about what financial freedom means to you. What does your freedom look like? How much money do you need in your bank account and by when?
Remember, the clearer your goals, the quicker you can achieve them:
Let’s start with these three questions:
1- What does your ideal life look like?
2- How much money should be in your bank account to live it?
3- What’s the deadline for accumulating that amount?
Now, subtract your current age from that date, and set small milestones at regular intervals. Write down everything clearly, from the amount to be accumulated and by when.
These goals will serve as your inspiration, and you will see how they are helping you achieve financial independence.
Calculate Necessary Funds
Prepare a list of all your current expenses. Estimate future expenses. Include everything from EMI for the next 10 years, medicine, clothing bills, etc.
According to the FIRE rule, you should aim to save at least 25 times your annual expenses. Don’t forget to include inflation (the inflation rate) at 7% per year.
Set Saving Goals
After calculating the necessary funds for financial independence, you need to save that amount. Now you have to save for it. Make a plan where you save a certain amount directly.
You can also consider cutting some expenses. For example, if you have joined a gym but rarely go, consider working out at home instead.
Invest
Remember, there is no shortcut to earning money quickly. To achieve financial independence, you need to earn, save, and invest. Also, turn that invested money into a source of income. All these efforts will bring you closer to your goal of financial independence.
Diversify your investments according to your time frame and risk tolerance. Also, if you don’t understand finances well, you can seek advice from a financial advisor or start spending time understanding the financial market gradually with investments.
Invest in Tax-Saving Schemes
It is said that ‘saving a penny is earning a penny’. So pay attention to saving tax. Invest a small portion of your portfolio in tax-saving schemes like ELSS funds or tax-saving FDs.
Keep an Eye on Investments
Don’t be a coffee-can investor. Keep an eye on how your investments are growing over time. If you are investing in stocks, don’t forget to gather information about the company by reading annual reports and balance sheets. Keep an eye on your investments.
Don't Ignore Health
There’s a saying, ‘Health is wealth’ because if your health is not right, then wealth doesn’t matter. Investing in your health is not a difficult task – regular doctor checkups, visiting the dentist, and treating minor illnesses before they become serious. Remember, many diseases can be prevented with just diet and a little exercise.
But if health is ignored, financial troubles won’t be far behind. The biggest thing, poor health can be the cause of early retirement, which means spending more years with less income.
So start taking care of your health today. Remember, a healthy body will help you walk strongly on the path to financial freedom!
Conclusion
Achieving financial independence is not just about reaching a specific monetary goal; it is about embracing a mindset of empowerment and taking proactive steps to secure your financial future. By defining clear goals, managing your expenses, saving diligently, investing wisely, and prioritising your health, you can pave the way toward a life of financial freedom and abundance.
