When fresh graduates or the younger crowd start earning, they aim to spend lavishly on what they want. As great as this approach is, and as much as we appreciate you are spending your hard-earned money on yourself, there should be other goals.
Once a person sets foot in the corporate or working world, they need to understand the concept of financial independence. If you got a gist of it early on, but need help understanding how to become financially independent, then we got you. Hop on below to learn how to plan for financial independence to secure a better future.
What is Financial Independence?
Financial independence refers to having enough wealth or income to live a stable life without worrying about cash flow or employment. While being financially independent and not having to work eight hours a day to make ends meet sounds like a dream, achieving it takes work before you settle into an easy life. Want to know how you can do this? All you have to do is follow the six simple steps below.
The Six Important Steps Towards Financial Independence
Are you someone who wants to become financially independent but do not know how you can do this? Well, the road towards becoming financially independent isn't hard, and all you need to do is understand the six essential steps mentioned below:
1.Spend Less than You Earn
The road to financial independence begins with the understanding that you must initially save what you have. This will be hard for beginners in this journey or those who love to tap 'buy now' on every item they find cute online. However, taming down your urge to overspend is the only thing that can help you drive right on the path of financial independence.
Hence, when an individual is trying to maintain financial independence and aiming for financial freedom in their lives, having a clear idea of your priorities and dividing your income into essential and non-essential spending is always a great idea.
2.Keep a Savings Mindset from the Start
Taking up the saving approach is relatively easy for some people who find it easy to save a certain amount every month. However, for a large majority, this is one of the hardest jobs to carry out each month. If you fall into the latter category and want to save to create a path of financial freedom, then hear us out.
Make a rough estimate of all your monthly essential and non-essential expenditures. Once done, set a specific amount aside from it, and from the remaining amount, save a particular percentage. You can save this money directly into your current account alone. However, if you take it out and spend it later, try opening a savings account and transferring a specific amount each month.
3.Control and Pay Off Debts
One of the significant aspects which can become a reason for your financial doom is debt. Fresh graduates often have student debt, so stay on top of your loans. Make paying off your student loan slowly and gradually each month a priority. This will help you pay it off quicker and help you pave your path on the road to financial freedom more effortlessly.
Moreover, make sure not to use your credit cards free-handedly. While credit cards may feel like the best thing that happened to you, you must remember that what you are purchasing now must be paid off in the future. Hence, only use your credit card for convenience or items you need. However, make sure that what you purchase falls within the range you can afford to pay it off later.
4.Live a Simple Life
The extravagant lifestyle may feel like a dream but tuck that dream away for later. This is because you need to create a financially independent life before you bring that dream to reality in the long run. The best way to do this is by living a simple life.
Limit your lifestyle to basic expenses only for a few years and save and invest the remaining amount. At the same time, it may seem like the most complex job to do initially because there would be so many things you'd want to spend on. It would help if you remembered that all this would only be for your benefit and would help you secure a better future.
5.Invest
While saving is a significant aspect, investing your money is even better. With savings, your money would remain the same amount even after years. However, proper investments allow you to double or even triple the amount you invested initially. Who doesn't want that, right? Before investing, consider the amount you will put in, your long-term goals, and how you plan to use it. Once you have answers to all these questions, choose the best investment strategy. However, if you need help making the right choice, we suggest seeking help from a financial advisor.
6.Get an Insurance
If there is one aspect the younger crowd and even many others hesitate to do, it's to sign up for insurance. However, while it may look daunting to some, having insurance is one of the safest aspects of walking in the world of financial independence. Insurance will provide you with security in many areas of life, which is one aspect we strongly advise our readers to take up.
Conclusion
Becoming financially independent is a dream for many. However, only some are ready to put in the hard work it takes in the initial years. If you want to become financially independent and have set your mind to it, we hope this article was of help. Following the six essential steps above, you can easily reach your financial freedom end goal in the coming years.
(Images from the internet)
