We are free to have dreams and make plans to achieve it, such as buying a house, providing for your family, or simply living your life without worries. You may also want to travel the world and experience extraordinary adventures. More often than not, it is money that is preventing you from doing these things. Hence, having financial independence allows you to choose your paths and make decisions without having to worry about how much money you have.
However, to sustain a standard of living throughout your life without solely relying on a regular salary requires you to achieve financial freedom. Although some people relate financial freedom with retirement, you don't have to wait until the age of retirement to be financially independent. Put simply, financial freedom means the ability to pursue your passions without relying on a 9-to-5 job. For parents, it could also mean spending some quality time with their kids or supporting their partner while he or she works on building a business they love.
First, it may seem unattainable to you but with some level of self-discipline and personal responsibility, it can turn into an achievable goal. You should begin your goal to reach financial independence by understanding your total net worth, which is a combination of the value of owned assets and your liabilities. Let's dive into some of the steps that you can take to get closer to being financially independent.
Minimize your use of credit cards
You might be tempted to use credit cards to buy everything from gadgets to groceries because of the available discounts, offers, and cashback. Credit cards make it easier for you to buy whatever you want within the credit limit as you can pay the amount later. Additionally, you can even miss the payment dates, given that you the due amount with interest. Altogether, if you have a credit card, you are likely to spend on things that you don't need urgently. You can avoid this by using credit cards at a minimum or only for emergencies.
Invest before you spend
Make an investment plan that helps you take advantage of all the applicable tax deductions like Section 80C before you spend the money on your expenses. If you have a habit of investing, it not only helps you save but also accumulates wealth. Contrary to leaving money on your bank account which can be spent easily, you should put it into investment schemes like a mutual fund.
Buy insurance plans for you and your family
Medical mishaps are often unexpected and expensive which can burn a big hole in your savings and put your behind on your finances. The best way to stay ready for such emergencies is to buy a health insurance plan. You can get a health insurance policy for yourself and your family members by putting forth a small annual premium. This will not only take care of any medical accidents but also the amount you pay as the premium can be claimed as a tax deduction.
Keep track of your expenses
Although it may seem obvious, the easiest to increase your savings is to spend less. One way to overcome your struggle to prevent unnecessary expenses is by coming up with a list of where you spend your money. In other words, create a budget with categories such as rent, groceries shopping, gas, & more and then decide how much you want to spend on each.
Being financially independent might depend on an individual's personal goals, values, and standard of living. However, knowing how you can achieve is the first step towards turning it into a reality. The road to financial freedom is a tough one and takes time. But, it will all be worth it in the end and you will be free to pursue your passion.