Let’s find out how you can be financially free.
How to achieve financial freedom?
To understand and appreciate the many ways with which you can achieve financial freedom, you need to first get a good idea of what financial freedom really is. Financial freedom is simply a state of being where you have enough financial wealth to sustain you for the entirety of your life, without having to work or be dependent on other individuals. In other words, you have enough money to meet all the needs and wants you may have over the course of your life.
Now that you know what it is, how do you achieve it? Fortunately, there are some ways that you can follow to do it. Here’s a quick look at 6 of them.
1. Discover yourself and set your priorities
The first step that you need to take towards achieving financial freedom is to know who you are and what you want in life. Determining your priorities can help you make plans in a much better and a more efficient manner.
For instance, let's say that your priorities are to own a house, have your own car, and possess a bank balance of Rs. 50 lakhs by the time you touch 50 years of age. Once you’ve laid out your priorities, you can then move on to planning your savings and investments accordingly.
2. Set up a second source of income
Once your goals and priorities are set, the next logical step is to set up a second source of income as soon as possible. Take the previous example. Achieving all of the above-mentioned goals and priorities may not be possible with just a single source of income. However, with a supplemental income source, you can accomplish them more easily and in far less time.
One of the good things about establishing a second source of income is that there are multiple options for you to consider. For instance, you could invest in dividend yielding stocks, or in real estate. Choose the investment plan that fits your goals and requirements, so you can get closer to your dream of achieving financial freedom.
3. Keep an eye on your expenses
There’s a saying that goes ‘A penny saved is a penny earned.’ And to save money, you need to cut down on unnecessary expenses. This is one of the many ways to achieve financial freedom in a short period of time. And to help you do that there’s a practical and useful technique that’s also easy to learn - budgeting.
By simply recording and tracking your expenses for a month, you can easily identify the costs that you can reduce or cut down. This increases your savings, and the more that you get to save, the closer you get to satisfying your goals and priorities.
4. Be prepared for contingencies
You can plan all you want, but despite all of your efforts, life may throw you a curveball and a financial contingency may crop up. However, while you may not be able to control these things, you certainly can plan for these contingencies. One way to do this is by investing in insurance.
A life insurance plan can not only help you provide your loved ones with financial protection but can also help you save up or create wealth over the long term. Similarly, a health insurance plan is also a good option that you should consider, since it can take care of the majority of medical expenses if you were to fall ill unexpectedly.
5. Invest more and invest wisely
If you wish to achieve financial freedom, it is absolutely essential to invest - and to invest right. Consistently putting your money in the best investment plan that’s tailored to your needs is one of the many ways to meet your life goals and achieve financial freedom.
Also, the earlier you invest, the better it is, since you can utilize the power of compounding. Compounding is a cascading effect that allows you to earn returns from your returns. So, instead of having funds lie idle in your bank account, invest your money instead.
It is also important to invest in inflation-beating products, so you can earn returns that outperform the inflation rate. One such option is market-linked investment. Real estate and gold may also be ideal. However, keep in mind that these investments also carry a higher level of risk.
6. Be patient
And finally, when it comes to becoming financially free, you need to be patient. After all, Rome wasn’t built in a day. Investments, whether they’re market-linked or not, take time to generate the returns you seek. Compounding takes quite a bit of time to show its potential. And so, it is important to continue investing regularly and consistently, and to stay invested for the long-term to enjoy full benefits.
Conclusion
Contrary to popular opinion, achieving financial freedom is not impossible. All it takes is a good financial plan and proper execution. If you follow the above-mentioned ways, you can get a good head start and begin your journey towards financial freedom. Remember to seek expert help if you need to at any point, so your road to financial freedom is smooth and effective.
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