Everyone wants to be financially independent, but how does one get started on it. There are various personal finance blogging websites like Finshastra that can help you gain knowledge on the subject and take that first step towards achieving financial freedom. Nowadays there also numerous Fintech websites and budgeting apps that facilitates checking your credit score, planning your monthly budget and investing in right financial instruments. Following advices through so many platforms can be overwhelming for many. Hence, those starting out on their journey towards financial freedom should first focus on establishing these key areas first to build and ensure a strong financial foundation.
Lay Out a Financial Plan
To reach a goal, it is important to lay out a well-thought plan. To create a good financial plan, one must start with identifying their long-term and short-term goals. Once you have done that, consider various aspect of your finances starting with their income to help you identify the actual amount of monthly cash inflows, especially in case you have multiple sources of income. Next aspect to consider would be your expenses, fixed and variable to identify where your money goes and if there is a chances of reduce it. Once you have figured out both, you can create a monthly budget. For those having long-term goals, Also, However, financial planning is not just about budgeting. You should also set clear and attainable financial goals. It is a smart move to set smaller goals to begin with, as they are easy to achieve and keep you motivated.
Create an Emergency Fund
Achieving financial freedom also includes being prepared for any sort of unforeseen situations such as sudden job loss, medical emergency, etc. To sail through such tough financial situations, it is crucial for everyone to have an adequate emergency fund in place. This emergency fund should be big enough to cover at least 6 months of your necessary living expenses such as your utility bills, child’s tuition fees, insurance premiums, house rent, etc. To build an emergency fund, start contributing small amount of your monthly income. Even if you start with a small amount, staying disciplined is crucial towards building the fund. As this fund will be useful during financial emergencies, one should build this fund from where it can be easily withdrawn such as in a savings account. Moreover, as you progress in life, your income will increase and so will your expenses. Keeping this in mind, keep revising your contributions towards emergency fund to accommodate increasing living expenses.
Invest for Wealth Generation
Any amount above your contributions towards building an emergency fund or fulfilling your short-term financial goals should be used in building wealth. For this, one should invest smartly in different investment options such as mutual funds, stocks, bonds or real estate. To make an investment, it is not necessary to have a lump sum amount. Investment can also be made through Systematic Investment Plan (SIP). Once you start investing, monitor your earnings regularly and adjust your strategy, when required.
Practice Good Financial Habits
To achieve financial freedom, practising good financial habits such as avoiding impulse purchases, paying loan EMIs and credit card bills on time, etc. is necessary. One should look for ways to save money by tracking their spending and controlling their purchasing impulses. Practicing good financial habits will not only help you in channelising your money better but will also help in avoiding debt trap and building credit scores, which further would lead to better credit opportunities in future. Those finding hard to reach balance between their cash inflows and outflows can consider living below their means till their financial situation improves.
Also Read: Navigating Financial Management in Today’s Challenging Economic Climate
