71 Years ago today, we became Independent. But today, are we really independent in all sense? Specially the financial sense?
Well, if you didn’t answer YES, maybe you need to go through these 5 steps to get you started towards financial wellness & independence.
1. “Decide You Want It; And that you are not afraid of It”
A brilliant and an important point too. One of the main reasons more people don’t reach financial independence is they’re afraid – not of being financially independent, but of the changes in their lives they’ll have to make to get there.
If you are new to the financial planning process, it’s important to remember you don’t need to go from zero to sixty overnight. Pick a reasonable goal; a small amount- maybe Rs 100 per week- and increase it as you get more comfortable with the process.
Starting out slow will help you build the confidence needed for long-term success.
2. Create a Series of Steps that Will get You Where You Want to Go
Becoming financially independent isn’t a single goal, but a series of several smaller goals. To reach your overall goal of financial independence, you’ll have to establish goals in the various areas of your financial life;
• Increasing income
• Controlling spending habits
• Paying off loan and credit card debt
• Understanding savings patterns
• Determining investment objectives
• Defining long-term financial goals
• Purchasing the best life insurance for your family
• Implementing a legacy plan for your heirs
3. Commit Now that You Will Live Beneath Your Means for the Rest of Your Life
If I can pick one step out of this list 15 that’s more important than the rest, it’s this one.
The reason it’s so important is it’s the single step that will provide most of the spare cash you will need in order to accomplish most of the other steps. Learning to live beneath your means is one of the central costs of learning how to become financially independent. And if you have not mastered this technique in the past, doing so will range anywhere from uncomfortable to downright painful.
It could include passing of the annual family vacation, driving your car for years after paying off your car loan, living in your current home even though most of your neighbours traded up, and buying your clothing in thrift stores while everyone else you know shopping at the mall.
That’s just a short list of the sacrifices you’ll have to make. But in making them, you’ll be clearing money in your budget to build savings, to get out of debt, and to invest for the future.
4. Vow to Always Save Money- No matter how much you earn.
Don’t be one of those people who says “I’ll start saving money when…”
The better position? When is now! When is always. You should always be saving money no matter what’s happening. If you don’t have enough room in your budget to save money now, then the answer is to increase your income, lower your expenses, or both.
Never let excuses stand in the way of saving money. It’s a long-term goal that starts today – and never stops.
5. Creating a Safety Net- Start Saving
If you have been living paycheck-to-paycheck up to this point, your first savings goal should be to create a safety net. You can do that by creating an emergency fund.
An emergency fund should be held in a perfectly safe account – like a savings account, money market account, or a short-term certificate of deposit. It’s not for investment, because investment involves risk, and that’s not the purpose of an emergency fund.
Your first goal should be to accumulate a sufficient amount of cash in the account to cover 30 days worth of living expenses.
Once that’s achieved, your goal should be to add another 30 days worth of living expenses. The account should have between three months and six months of living expenses if you’re a salaried employee, and between 6 and 12 months if you have a self-employed job or paid entirely by commissions.
Starting off with these steps should set you on a journey, and we’ll soon come up with the next five steps towards ultimate financial freedom.
Meanwhile, have a look at this video we made with two young women and pick their brains on ‘Financial Independence for Women’.
“Though small was your allowance, you saved a little store, and those who save a little shall get a plenty more.” On this savings note, we wish you a very happy 72nd Independence Day ahead!