Financial freedom is where you have enough money to spend, your regular expenses for life and fulfill all your financial goals in the future. Earning salary or income from the business is not enough. One should not struggle accumulating money over their lifetime to achieve their financial goals. How about achieving financial freedom faster say at 50 years of age? Whether you would get excited if you are able to achieve financial freedom at 45 years of age? In this article, I would detail 10 solid tips that would help you to achieve financial freedom faster than you ever thought.
What exactly is financial freedom I am referring here?
Financial freedom is not just becoming rich (don’t ask me how much to earn to become rich). For me, achieving financial goals faster than we ever though even in our absence is a financial freedom. Here are some examples:
1) Buying a dream home
2) Giving quality education to kids (including foreign education if they wish in the future)
3) Accumulating money for daughter’s marriage
4) Accumulating money for retirement, etc.,
All above financial goals have a tenure to achieve. If you are able to achieve those financial goals faster, then you have achieved your financial freedom. E.g. if you think you would need Rs 10 lakhs for child education in next 10 years, if you are able to achieve them before that period, you are free from those financial goals.
1 – Have adequate life insurance + Health insurance
The first step in financial planning is to have adequate insurance.
Earning member in the family should consider taking a good term insurance plan (that comes with low premiums and high sum assured) to secure their family’s future even in their absence.
Life is uncertain. If you or your family member is sick and hospitalized, such hospitalization expenses would kill your savings. To avoid this risk, one should consider a health insurance plan for the entire family to safeguard their savings. If you are a job holder, your company would have provided health insurance plan. It’s time for you to review the sum insured and take a top up plan or an additional health insurance plan if required.
This step ensures that all your financial goals are achieved even in your absence or even if one is facing high medical bills due to hospitalization.
#2 – Set financial goals
What are your financial goals? It could be buying your dream home, kids’ education or retirement planning, etc., First set these financial goals which you wanted to achieve and then go over it. These goals should be SMART (Specific, measurable, attainable, relevant and timely).
Incorrect financial goal – I want to earn Rs 10 Lakhs for child education.
Proper way of defining the financial goal – I want to earn Rs 10 Lakhs for child education in the next 10 years (SMART financial goal).
#3 – Follow the rule: Expenses = Income minus savings
It is immaterial how much you are earning. You should analyze, how much you are saving. Here are a couple of examples.
Mr.Ramesh earns Rs 60,000 and spend Rs 50,000 towards expenses. His savings are Rs 10,000 per month.
Mr.Rajesh earns Rs 50,000 and spend Rs 35,000. His savings are Rs 15,000 per month.
The best way to have higher savings is defining how much you want to save. Spend balance.
It is not difficult. This is how I planned in 2010 and became Crorepati in 5 years (3 months ahead of time).
#4 – Create multiple sources of income
Are you doing a 9-6 job and depending only on salary income? Then achieving your financial goals might go on a slower pace. How about creating multiple sources of income. It could be getting rental income, part-time jobs, interest on fixed deposits, earn through blogs etc., Such regular income would help you to achieve your financial goals faster.
