Freedom doesn’t come easy, and when it comes to financial freedom, it is “earned”, literally. Financial freedom has a different meaning for different people. For some it may mean being debt free, for others, it may mean having sufficient cash flow.
Whatever the case may be, financial freedom is achieved when you have enough money in the bank to take care of your life-long needs or have cash flows in the form of interest or dividends or profit from businesses that will take care of your monetary requirement.
One cannot talk of achieving financial freedom by hoping to earn in the future. Without a plan, the dream of achieving financial freedom will remain a dream.
So, here are some ways to manage your finances that will help in achieving financial freedom:
Keep a check on your indulgence
Lifestyle changes may help enhance your quality of life and retail therapy can make you feel good about your spending ability. But keeping a watchful eye and a thorough check on both can help you avoid being trapped in debt and lead you towards achieving financial independence eventually, said Anil Pinapala, CEO & Co-Founder of Vivifi India Finance while talking to CNBC-TV18.com.
Time your purchases well
When it comes to making decisions of purchases and going shopping, plan on the things you have to buy instead of making impulsive purchases as you may end up paying a heavy price for emotionally based buying decisions when you go overboard, Pinapala said.
With a budget set aside, planned purchases help you spend responsibly and account for your buying behaviour efficiently.
Plan investments and savings
To achieve financial freedom, it is extremely vital to plan investments and lay a lot of emphasis on savings.
“Investments planned and rightly timed can prove to be the game changers in your way of financial freedom. The power of compounding should never be underestimated,” said Vikas Garg, Co-founder & CEO, Paytail.
Make a strategic plan
If you’re traveling the path to financial freedom, strategic financial planning is a must, Garg told CNBC-TV18.com.
"One major example that is evident from the recent past is how the pandemic disrupted all the plans by revealing all the additional holes in your safety net of finances. However, this acts as a wakeup call, to take the charge of the present, and the future. It all starts with a financial plan and constantly updating yourself with a lot of financial knowledge on what’s right and what’s not right for you. Since this term is subjective, it also becomes extremely important to have a clear set of financial goals in your mind," he said.
Buy protection
When you are young you do not realize the importance of having an insurance policy. One mishap or an untoward incident can ruin your life as well as of your family.
The only way to protect you is to take comprehensive medical insurance and a term policy. Premiums are low when one starts early, said Vikas Singhania, CEO at TradeSmart while talking to CNBC-TV18.com.
Start early
According to Singhania, achieving financial freedom early in life is all about learning and living the formula of compounding. There are two components in compounding your wealth – time and return on investment. The longer you stay invested in a quality investment, the higher return you will get.
It is therefore important to start saving early in life.
"One should start saving before they start spending. There are many mathematical tools to help you achieve financial goals. For example, the 15-15-15 rule says that in order to be a crorepati (have Rs one crore in your account) you should save Rs 15,000 every month for 15 years in an instrument that gives a return of 15 percent. A return of 15 percent is possible only in equities. Investing early in quality stocks or good mutual fund schemes can help achieve the target," Singhania stated.
Monitor your plan
Most plans start off on a promising note but fail on account of various reasons. In the corporate world, regular monitoring and taking course correction helps one to stay on course, the same is true in personal finance.
Investors need to monitor their finances regularly, especially those who rely on equity investments to meet their financial goals. Making adjustments to their investments by tweaking wherever necessary is an important part of meeting your goal.
Conclusion
So in a nutshell, anyone who wishes to achieve this freedom can take on the path of skillful planning and strategic execution. There will be hurdles, but at the end of the day, what are the contingency funds for?
Hoping everyone who wishes to achieve financial freedom gets one step closer to it this Independence day.
