Financial Freedom: How to Achieve Financial Independence
Who does not want to be financially independent? While everyone has this goal, individuals take different paths towards it. Some people are willing to work hard above and beyond their capabilities to become financially independent while others might just want to invest their savings and use the gains for the same purpose. Being financially independent has its own perks which include planning out your own finances, deciding your own pace to reach the financial goals and having the ability to withstand financial crunches. If you have planned to achieve financial independence and don’t know where to start from, below are some points which will help you get the way to your goal, straight.
Drawing out a Budget
Identifying the inflow and the outflow of your money is essential when planning your finances for any reason. If you have multiple sources of income, take out the percentage of which source brings in how many funds and compare it with the percentage of the income which goes out in different types of expenditures. This will help you identify the necessary expenses rather than the ones which can be avoided to help you stay away from being extravagant and overspending.
Keep your Expense less than your Spending
The trick is to be able to earn more than the total amount you can spend. If it’s the other way round, you will always find yourself struggling with budgeting and also might end up in debt. To keep things on track, cut down on the unnecessary expenses like dining out, shopping and going on vacations and save up will you can afford the said luxuries without emptying your bank account.
Remember your goal if saving up is a pain for you sometimes. Your long-term goal is to be financially stable in the future and that will require some sacrifices initially. The more you save up presently, the sooner you will be able to reach your goal. The sacrifices you make are not permanent but the perks of being financially independent will be.
Make Investments based on Research
If you have a goal of being financially independent and want to reach it fast, you have to work smart and start investing. However, to invest you first need to get your options in order which requires extensive research. You could possibly invest in stocks, real estate or companies as long as the gains are maximized and don’t decrease your purchasing power. If you don’t have the time to research for investment options, you could seek professional help to do the work for you.
Payment of Debt
When you are prioritizing your expenses, give importance to the debts if you have any. The repayment of debt and increase in interest rates can cause a major strain on your financial planning, thus, try to get them out of the way first and foremostly. Relieve yourself of this pressure and then start planning ahead.
Build up on an Emergency Reserve
While we all want our financial conditions to always be secure, unexpected circumstances and emergencies are always a part of life and can occur anytime. The best way to deal with such situations is to have a pool which has extra funds for such incidents. This will help you tackle such uncalled-for situations without causing disturbances in your regular income flow.
How about a Side Hustle?
While your regular and primary income source may be enough for you to reach your financial goals, there is no harm in starting a side hustle to expedite the entire process of increasing your financial independence. Graphic designing, freelance writing, becoming a translator or renting out your property; possibilities are endless. With this additional income, you can not only increase your financial stability but can also give yourself a financial cushion in times of crisis.
Hustle for a better Pay-scale
If you have certain financial goals, you just cannot get comfortable with your current income. You can always find ways to make it better by either negotiating for an increase with your current employer, looking for better paying jobs if you’re unsatisfied with the current one or quitting working for someone and starting your own business that has chances of high profits.
You might underestimate the efficiency of automating your transfers from your main account to your savings account but trust us, it’s a game changer. This gives you now time to ponder over and rethink your savings decision every month and helps keep you on the right track for a better financial health.
While planning out expenses, you will realize that a big chunk of your income will be going to the taxes which is a necessary expense and cannot be cut down. The best way to manage this is by learning more about tax deductions and credits that help you reduce your tax bills.
Financial Literacy for the Win
When it comes to finances, just know that you never have enough knowledge. This is because your investments and financial plans are likely to keep on shifting according to the market trends. Thus, keep on educating yourself on how to invest more efficiently to increase your gains and improve your financial skills. Also, it is important to keep up with the economic updates that might directly or indirectly affect your goals.
You might not be able to reach your goal smoothly if you don’t connect with likeminded people who seem to have similar goals to you. Being in such a company will always teach you something new and provide you with ideas for better financial performance towards your goal of financial independence. Moreover, more experienced people might be able to mentor you for better financial health.
Patience is the Key
Do not let yourself fall in the trap of achieving your goals overnight. Even if you are going everything right, there is no chance that you will be able to make it big quickly. Since your ultimate goal is based on so many external factors, it will take time and constant monitoring of your financial activities to get there. While it is very easy to become hasty in the process and mess things up, we would suggest you to hold on to the patience for slow and steady wins the race.