Eight steps you can take this Independence Day to achieve financial freedom
Everybody speaks about financial freedom nowadays, but is it possible to achieve it? To find it out, you first have to understand what it is.
In its truest sense, financial independence is all about reaching a stage where you have enough money to take care of your life goals. All you need is basic financial literacy, prudent savings and smart investing moves to be financially free. If you want to understand how to plan your finances to be financially independent, here is your quick guide.
Buy adequate life insurance coverYou can achieve all your life goals by working hard but what will happen to your family if you are not around?
This is the biggest risk you have to secure your family against. Having a term life insurance cover can act as a safety net for your family in your absence. In case of death, your family members can claim the benefits of the insurance to secure their financial needs.
Further, if you have debt and liabilities, your family can use the claim money to pay off those outstanding debts.
If you want to prepare for financial emergencies such as periods of income loss caused by illnesses, disability or job loss, you can start building an emergency fund. Without an adequate emergency fund in place, you may have to redeem investments earmarked for crucial financial goals to deal with financial exigencies, or avail credit at much higher interest rates
Based on your income, fix a practical saving target and save that money no matter what. Meet your expenses using the rest of the income.
This is a better way to go about than using your income to first meet all the expenses and then using the rest to save. It ensures that your savings are not enslaved to your expenses.
For instance, you can start with a target of saving 20 per cent of your monthly income. This approach helps you to manage your expenses within a limit so that your savings are not disturbed.