For many, financial independence is an aspiration. Self-determination and savings are crucial components, outweighing early retirement aspirations. Imagine the freedom of not being bound to a 9-to-5 job.
Despite financial obstacles, attaining financial freedom is feasible. This comprehensive guide encompasses budgeting, goal-setting, saving, and investing. If your aim is to exit the rat race sooner, this guide will aid in crafting a plan for financial independence.
How to attain financial freedom?
Achieving financial independence requires time and patience, demanding consistent effort and discipline. Follow these steps to learn how to achieve financial independence:
Set life goals
What does financial independence mean to you? Everyone has a wide objective, but it needs refinement. Define specific limits and deadlines, enhancing the precision of goal-setting and improving success probabilities. Consider the following three objectives:
- What holds the utmost significance in your life?
- How much money is required to achieve your objectives?
- At what age do you aim to reach your savings target?
Create recurring monetary targets for different ages of your life. Small steps will help you track your progress and reaffirm your belief in reaching your goal by the desired age.
Create a monthly budget
Craftingand adhering to a monthly budget is the simplestmethod to manage expenses and save money punctually. Daily practice keeps you focused on your goals and motivates you to resist overspending.
Disciplined investing and planning
Investing saved funds promptlyand for extended periods facilitates growth. However, saving and spending money requires careful preparation.
Risk mitigation
If you are new to the practice of investing, it may make more sense to choose low-risk assets. Instead of investing all your money in stocks, you can diversify into safer assets to accomplish your financial objectives.
Consider investing in growth assets like diversified equities or equity mutual funds. You should gradually invest your money in safer assets. This strategy allows you to reduce risk and attain financial independence more easily.
Save aggressively
Active saving is indispensable for attaining independent financial freedom. Balancing saving and investing are pivotal for forging a robust financial future. Cultivate a savings habit early and persistently contribute to savings.
Health Maintenance
Preserving physical well-being bolsters financial health. Prioritize health investments before pursuing independence. Regular visits to healthcare professionals and adhering to their advice mitigate health issues. Simple lifestyle adjustments, like regular exercise and a balanced diet, prevent health complications, averting long-term financial repercussions.
Engage a Financial Advisor Seeking guidance from financial experts when uncertain about investment decisions ensures progress in the right direction.
Stay Informed on Financial Matters stay abreast of tax law revisions to optimize deductions and adjustments annually. Remain updated on financial news to fine-tune asset allocation and investments accordingly.
Watch your credit score
Creditworthiness influences loan interest rates and insurance costs. Higher credit scores enable negotiation of favourable loan terms, reflecting positively on lenders. Regularly review credit reports to rectify discrepancies.
Settle Credit Card Balances
High-interest credit cards impede wealth accumulation. Prioritize monthly budgeting to settle balances promptly, improving credit scores and securing lower interest rates on loans.
Follow the aforementioned steps to acquire financial freedom and realize your goals. Diligent effort can expedite the achievement of financial objectives and early independence.
Harness the power of compounding
For financial independence, compounding is key to growing your savings over time. It's easy — just make profit from your victories. This increases your wealth.
Consider the following example: X and Y commenced their careers in Bangalore at age of 25. While X neglected saving until the age of 35, and from his 35th year started investing ₹5,000 a month, Y diligently saved ₹2,000 monthly since her initial job. By age 45, Y amassed ₹20 lakh, surpassing X's ₹11.6 lakh (assuming a growth rate of 12%). Starting early accelerates savings growth, facilitating goal attainment.
Also Read: 8 ways Personal Loans are transforming finances
Conclusion
Learning how to become financially independent isn't a walk in the park; it demands dedication and perseverance. Financial independence takes time and can be likened to a marathon, rather than a sprint. This path will be simpler if you save money, make sensible judgements and care for your physical and financial health. Losses are expected, but the outcome will be favourable with dedication and perseverance. Remember that saving and investing for your future is as important as making money in the present.
It may not seem easy, but every little bit helps achieve financial independence. Today's start brings you closer to deciding whether to work in the future or not. Axis Bank can help you achieve this dream of attaining financial independence at an early age. Check out the various products offered by Axis Bank and start growing your wealth today!
This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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