Financial independence is the status of being able to pay for your day to day needs and living expenses without having to work for money. It is the peace of mind that you can live for the rest of your life without having to worry about your financial condition.
Many people feel that achieving financial independence needs a lot of hard work and a fat pay check. But in reality almost anyone can achieve financial independence if they handle their finances/expenses properly and have a but of financial education.
Here are a few steps that will help you get closer towards financial independence
- Committing to live below your means for most of your life
Most people spend more of their salary , wasting it on partying and purchasing items they don’t need. Instead developing a practice of saving most of ur salary and wasting very little of it can help increase a person’s financial position and get him closer to financial independence.
- Create a list of your income and expenses
Even though this sounds like common sense, most people do not follow this practice. They do not have a clear idea on how much percentage of the salary they have spent and how much they are in dept. Creating a simple list of all of your income and expenditure can help you understand where you are losing most of your money and which unnecessary items your buying.
- Saving
Saving before you spend goes a long way when we talk about financial independence. Most people tend to save after spending most of their Salary.Thid means that they have barely anything left to save.
Saving a certain percentage before spending the rest will help reduce your spending and keep a steady increase in your savings.
- Make money work for you
Investing money in stocks, index funds, Bonds, high yielding bank accounts or in real estate can make your money grow exponentially over a long time. For eg. If you invest 1000$ every month for the next 30 years in the stock market ( Avg. interest rate 8%), you would have a net worth of 1.5 Million.
Unlike a human being who can work around 8 hrs a day, money can work for you 24 Hrs a day, 7 Days a week. This means that you can wake up every morning knowing that you are slightly richer compared to when you went to sleep.
- Invest regardless what the market is doing
You should never try to time the market. The market fluctuates on a day to day basis, so do not worry if you are going to make a small loss over the next month or two because the stock market over a long period of time has always gone up. Trying to outperform the market by timing it has usually led to people losing alot of their hard earned money.
- Dont buy a new car
You should never buy a car as its value depreciates quickly. Just after purchasing a new car its value goes down by around 30%. That is a complete waste of a lot of hard earned cash. Instead you can buy a second hand car that is 3-4 years old for a way lower cost and in a almost perfect condition.
- Repay loans
Credit card dept,student loans etc can seriously affect the time it takes you to reach financial independence. Mainly loans like credit card dept have a very high interest and if not paid immediately can’t cause you substantial loses in the future. Therefore you should always pay your loans as soon as possible.
- Learn the concept of credit card churning
Many people think that credit cards are evil and put a person in dept and charge high interest rates but tht is a big misconception. Yes, if u don’t pay ur credit card dept on time it does have a huge interest rate but if a credit card is used properly it can give u great benefits. When you learn to use a credit card and always pay of any remaining dept immediately you would easily be able to increase your credit points and be able to collect free plane tickets, hotel rooms,cash etc. This can drastically reduce your expenses in things like travel.
- Invest in yourself
This is one of the most amazing investment that one can do, it has the potential to increase your investment by few 1000times very quickly. The concept of investing in your self is giving urself the time and a bit of money to buy books, attend webinars and join classes so that you can get a better salary , learn how to invest efficiently, improve in your field or mabe even start a business.
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