The term financially independent is looking very much familiar to all of us. Everyone in this world wanted to be independent financially. First, let’s understand what financial independence is, what it actually means and how to become financially independent as well.
Financially independent is the state where a person has enough amount of money in his/her savings and investment as well as he/she does not really need to work they are free to buy anything they want or they can fulfill any of their materialistic goals. The person who is able to cover almost all of his living expenses without having to work is financially independent.
The question here is that the amount one requires to live the rest of his life must be different from one another. One can be financially independent by having some crores in their bank account while one may be independent after having a million dollars in their bank account. So, it differs from person to person. Now, it’s important to try to get an idea about the amount from which you can be independent financially.
Here are some of the steps which will help you in your journey to being financially independent
Calculate your financial needs
As mentioned above, calculating your future financial needs can be a key factor in setting your financial goal. Without having any idea of one’s financial needs, it became impossible to have a financial goal. Both things are co-related to each other. For most people, it might be difficult to calculate it so for them here’s a short tip. Try to calculate your expenses in the near future and also calculate your future income by multiplying it by 30.
Hold an Emergency Fund
It’s very important to have an emergency fund in case you or your loved ones need it in the near future of course, without having an emergency fund preserve for themselves how one can think that he/she is or can be financially independent. This will also protect you from making wrong financial decisions or making them in a hurry.
If one wants to be financially independent, savings are a must, one cannot be financially independent without savings. One cannot earn and only spend and can be financially independent, no, it’s not possible. “saving provides a safety net for unexpected expenses, investing is a strategy for building wealth”.
Investment is an act of distributing some money or some resources into something which helps the person to gain more money. It sounds interesting right and it’s a vital part of being financially independent. Saving does not make more money but the investment can. Investment in things like mutual funds or stocks, cryptocurrency or in real estate, etc. is all the sources in which we can invest money. Although, some risk is definitely involved in investments that are not there in savings.
Avoid Loans & Debts
In the short run, it might look good that we can easily have money on loan and can easily swipe cards, can buy things, and can pay very later. But in the long run, these things only gonna create problems in your journey to financial independence. This level of ease can cause things to spiral out of your control, and it resulted in unintended consequences.
Also Read – ” Common Mistakes First-Time Home Buyers Should Avoid “
Use cash frequently
It’s a small tip to all the people out there, in today’s world, all we do is just a right click and it’s done and we then forget about where we have spent this money and this will cause us to spend money recklessly. So, try to use some cash as well as this will definitely have a positive impact on your savings as well this way you can easily track your expenses, you are more aware of where you will spend your money, and a lot more.
Most financially independent people have some passive means of income as well. So, try to develop multiple passive means of income, not only active income. Passive income is an income that regularly comes without your presence there. There is no need for you to always be there for your income.
This is also very important to be financially aware of what is happening around you in the financial world and also to be more knowledgeable about all these things related to your financial journey. It’s very important to be knowledgeable financially to achieve financial independence. It includes having the knowledge of simpler things like saving to a thing like what is debts, what is crypto and mutual funds etc.
Budgeting is an important thing to learn and to apply in daily life as well. Most people do all the things in the right place but forgot to do the right budgeting and this is where they felt a major setback. A budget helps one to create financial stability. Not only as an individual but having the right budgeting will definitely help you in one’s business as well. A budget puts a person on a very strong financial footing. In financial literacy, this can be a stepping stone for a lot, start by learning to budget yourself first. This is a basic financial skill.
Remember that Taxes do matter a lot – As a responsible citizen of our country, it’s very important to be aware of our responsibilities as well. Filling out the taxes won’t take your money and that doesn’t mean that you will lose that money. In the end, that money will also help you to become financially independent. The government collects this money and also uses it to finance social projects. Improvement in the country’s finances is also a win somewhere. Through this money, the government contributes to different sectors of the economy i.e. education, health, transportation, etc. and these also do have a positive impact on our businesses consequently. Taxes help raise the standard of living in a country. The higher the standard of living, the stronger and higher the level of consumption most likely. Businesses flourish when there is a market for their product and services. With a higher standard of living, businesses would be assured of higher domestic consumption as well. Taxes are essential and every citizen is meant to reap the benefits of these taxes. This is why it is important that citizens endeavor to pay taxes and understand that it is meant to be more than just a “money grab” from the government.
Being financially independent might seem very difficult to most of you but it’s not that difficult at all. With the right goals and with the right mindset one can gain financial independence at whatever age one wants it to be. Keeping in mind the above points which will be highlighted and have been mentioned above will definitely help to achieve financial independence and you will be financially independent. But being focused on your financial goals and not just working constantly to achieve your financial goal is the most important thing then only you can be financially independent. Probably not all cannot be financially independent because not all will be able to remember and not only remember but also to implement all these things and points to become financially independent.