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To achieve your dreams and goals, you need to be financially fit and independent. Here are 6 tried and trusted ways to stay independent!
We all have certain dreams and goals we want to achieve. Whether it is to start your own business, take a trip to Europe or retire early, you must plan in advance to counter any obstacles that may come your way.
Wealth building largely depends on habit, the foundation of which is built on solid financial behaviour. Whether you have to plan for these yourself or have a sounding board in the form of a companion, here are some ways you can stay financially fit
The first step in the journey of becoming financially fit and independent, is to understand your own financial patterns. This means, it isn’t just important to be aware of your earnings. But also to be aware of what your major expenditures are.
Use a journal or an online spreadsheet to write it down and understand your own financial behaviour. Make sure you jot down all details as small details matter and will further help you make decisions accordingly.
It is important to make a note of how your income and spending has evolved. Review your financial goals and how far have you been able to achieve them.
Set financial goals from the very beginning, especially for short term plans like a trip or maybe buying a car. For the long term goals, you can consider investing in real estate or decide to use a different investment option to create wealth. This will depend on your goal. Keep aside at least 30 percent of your monthly income to fulfil these goals.
A systematic way to approach this, is to break down your goals into mini-goals. For example – you may be willing to pay off your car loan debt worth four lakh in the next three years.
However, paying off a debt of this size can take a lot of time and your progress will be slow. If you aren’t making enough monthly, it can seem to be unachievable and you may give up.
A mini goal is a very specific. Here, you could decide, ‘Every month I will keep aside INR 10,000 to pay off my debt,’ leading to a more targeted approach.
It is important to reach out to professionals like registered financial advisors. These people help you select and decide the best financial tools and investment avenues available in the market to achieve your financial goals.
Even though they charge a fee for their swan fiduciary services, the shortcuts they find and traps they resolve save your money long-term.
You could also consider joining a financial community where individuals, with a common goal, are willing to share tips and discuss their journeys. Such platforms help you be accountable and you can learn techniques to manage your money better.
Time-based investment tools like Systematic Investment Plans and incremental investment through lump sum help in building a healthy portfolio. The SIP is among the most effective tools to invest.
Automation is a great place to start and reach financial independence as fast as you can. The strategy is to make, save, and invest as much money you can. Try to increase the automation savings amount once every few months.
A good-paying job and a diligent saver also need to make sacrifices when it comes to paying off debt. Simple because debt only gets heavier with time if not duly paid.
Debts are of two kinds – good debt and bad debt. One can say home loan, education loan, etc as good debts. On the other hand a credit for travel, fun, or shopping are considered as bad debt.
Avoid bad debts by managing your finances well, and keeping aside certain money specifically for these expenditures. One must focus on eliminating existing debt before setting life goals.
It is advisable to have a debt-repayment strategy which is realistic and does not come at a very big cost.
Income is the base material to build up the infrastructure for financial freedom. Adopting other sources of income sometimes becomes essential and finding ways to monetise your other skills is a good way to begin. Re-invest in yourself when the time and need arises, especially through up-skilling.
If you have a full-time job, you can start a side business or take up freelancing gigs to earn some extra money. Someone with a full-fledged business too can diversify their income by expanding their business base to add more products, outlets, etc. A passive income is a must for financial growth and with easier access to internet has become a fairly accessible option.
A version of this was earlier published here.
Picture credits: Photo by Andrea Piacquadio on Pexels
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Priti Rathi Gupta is the Founder of LXME (Digital Investment Platform for women) and the
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