To live a stress-free life in your forties, you have to hustle in your twenties and thirties. It is quite necessary to achieve financial independence to guarantee the comfort of living well off without having to work full time regularly.
If you are wondering how to become financially independent, then here is a guide to help you with. Just like we can get enough water to survive our daily life by joining every drop, it is equally possible to achieve financial independence by joining every penny.
Although it is not possible to achieve it overnight, you can definitely make your retirement comfortable by taking smaller steps every day.
Invest in separate future goals. If you want to build a house and also have to save for your children's marriage, make sure you adopt separate ways for it. In this way, you will not have to compromise with the savings in either case.
Becoming Financially Independent
Track Your Expenses
Far before you achieve financial independence, you need to track your expenses on a regular basis. We often tend to spend much more than we are able to earn and save. This creates additional debts from our friends and family and makes it impossible for us to save anything at the end of the month.
The same process keeps on repeating and we tend to step back from planning financial independence. Hence, this is the first check you need to put on your daily routine.
Write down the extremely necessary expenses that cannot be avoided and plan your budget accordingly. Keep a margin of few bucks so that you do not have to dive into your savings later that month.
Avoid Getting in Debt and Taking Loans
Being in debt is probably the biggest deterrent to becoming financially independent. It is, however, directly related to the amount we spend. If we try to spend more than we are able to earn, we will keep on sinking in debts and loans.
The debts keep on adding up leading to more loans in the following month. You need to have patience and control on your desires. Wait and let the money pile up at the back of your locker. Unless and until there is an extreme urgency refrain from taking any kind of loan.
Fix a Monthly Amount to Save
There are various levels of financial independence. Complete financial independence can be guaranteed by starting early and approaching strategically. It also helps people retire early without having to work extra hard in their 60s to make a living.
However, many people tend to be partially independent and feel it necessary to work even after retirement to stay active and up to date. No matter what your choice is, you have to plan early and keep saving.
Also See – 20 Honest Ways to Improve Your Finances
The key to successful saving policy is to mark a fixed amount and deposit in your saving accounts before you start spending for the month. In this way, you will have an idea of the amount you need to spend and will not run out of savings later in the month.
If you are too weak to invest in policies, make sure you save and buy assets whose value will multiply. For example, you can buy gold or invest in real estate whose value will keep on increasing. In the future, when the value will keep on increasing you will have secured financial independence.
Don’t Just Save, Invest!
A number of people tend to include savings as their top priority in their financial independence plan. Nonetheless it should be your priority but investing is what will secure you in the future.
Make this a habit and start investing in long term plans so that you do not feel like spending the saving on maturity after three to five years. Long-term investments for a minimum of twenty to thirty years can guarantee you an early retirement.
There are several such investment policies which promise a lump sum with a huge profit margin that makes it possible for people to retire early.
Be Ready for Emergencies
There is no guarantee of what will happen tomorrow. We have all faced some kind of emergency in our lives and are aware of the consequences.
Any kind of health emergency or financial stress, loss of job, or accidents might take a toll on our lives. In such situations, we often tend to break our long-term policies and use the investments which interfere with our future plans and desires.
To avoid this, have liquid funds which can be reaped off during emergencies so that you do not have to dig on the better prospects.
Talk to your financial advisor and know the various plans and policies that might suit your requirement and help you with a better financial independence plan.
Go for SIP
It is not always possible for people to invest a lump sum for maturity. For this reason, a number of people fail to make a record of a proper financial independence plan. In such cases, SIPs are always recommended.
SIPs allow monthly investment policies with a minimum value of 1000 INR at a given period of time, usually minimum 3 years. Both the amount and the investment time is flexible and depend on the individuals.
These are also favored because of high return on maturity with an average rate of 12.5% interest. This means a minimum of 1000 INR invested might eventually result in 35.5 lakhs on maturity after tenure of 30 years. The amount is automatically deducted from the account at a particular date every month, which spares the customers from the hassle of manual deposit.
Track Your Investment Record
Though making a proper investment is the key to becoming financially independent, one should definitely keep a track of the records. It is not advisable to forget about the hard-earned money invested and simply let it multiply on its own.
A close look at the stocks and market rates should be kept to learn about the interests and monetary return. In this way, you will be able to have an approximation of the return on maturity.
Research before investing. If you want to invest in the stock market to be financially independent, make sure you research the market carefully and keep a track. Do not get tempted by frauds and compromise with your financial independence.
Wrap Up – Achieving Financial Independence
If we take small steps every now and then, we are destined to become financially independent before retirement.
Some years might not be as smooth as the others. In such hard times, make sure you are flexible enough to grab a part-time job so that you do not have to compromise with your investments and savings.