Five Steps to financial freedom

The phenomenon of financial freedom is quite common these days. You ask every next person to you what they want in life, and in most of the cases you would hear “I desire to achieve financial freedom!”

No wonder, as most of our lives are spent in worrying about meeting ends.

Let me ask you what does financial freedom mean to you?

The question would sure make you daydream about how it feels like to never having to bother about money. Is having sufficient money to meet all your financial obligations financial freedom?

Might be for some; though the irony of life is no matter how much money we have, it's never sufficient. The key is to not have all the money in the world, but to manage effectively whatever amount of money you have.

Financial planning is something we all keep doing subconsciously all the time. Though taking a planned approach towards it and having a comprehensive plan in place is something, most of us keep delaying or avoiding.

Not to worry, it's never too late to start planning, be it life or your finances.

Here we have listed down few steps for you, which would make your road towards financial freedom easier:

Have a budget

‘Oh dear….where has my entire salary gone, I have nothing left in my bank a/c!!!!!!' Isn't this a very common feeling at the end of every month followed by a long eager wait for the credit in your salary a/c?

We all know the benefits of having a budget but very few of us actually prepare one. We keep spending here and there, and then are left wondering where all the money has gone.

Start your month with a detailed list of your incomes and expenses. You would be amazed to see how this simple exercise helps you keep a check on your unnecessary expenses and leaves with a surplus.

Maintain an emergency fund

“Hope for the best but be prepared for the worst.”

In life, any situation can arise anytime. You should always have liquid funds to suffice your living expenses for 3-6 months.

Start putting money in your retirement kitty

If you are in your early 30s, you might not even be thinking about your retirement, which is quite understandable.

Though if you start early, you would be surprised to know how easy it becomes for you to have an adequate retirement corpus. Let's say you start investing today towards your retirement. The approx. amount you would need to put in would be:

*Assuming you are 30 and you plan to retire at 58.

Interest rate has been assumed @15% p.a. Approximation of numbers has been done for simplification.

You can see how delaying investment can impact your retirement. Also if you start early, it is quite easy for you shell out money as responsibilities are lesser when compared to your later years in life.

Cover your life adequately

Life insurance-----it's highly unfortunate that it still is seen as a tax saving instrument by majority of people. Life insurance in it's purest form is a cover on your life which would ensure financial security of your beloved ones, in your absence in their lives.

Emotional loss can never be compensated, though we can make sure that at least for their day to day living expenses they don't have to worry.

One more important thing to ponder upon here is to pick the appropriate type of insurance cover. Insurance is not investment; hence don't get fooled by agents who show you hefty figures of money which you would receive at the end of tenure.

We will discuss this concept in detail in upcoming write-ups.

Say no to personal loans

Last but not the least; never get into trap of personal loans or credit cards.

I don't blame you if you find the offers of zero fee cards or alluring options of repaying in low EMIs. But trust me on this; this is too hazardous for your financial health.

Start acting on these today and see the difference in your life…..not just financial but personal as well. As if your finances are in place your personal life goes much smoothly, I can bet you will agree with me on this point.

Happy investing……keep visiting J