Updated: Jun 27, 2020
Achieving a financially independent life is a goal for so many people. Financial freedom generally means adequate savings, investment and cash at disposal to afford a comfortable and luxurious life.
Financial independence pertains to a growing nest egg that will allow an individual to retire earlier in his/her life or pursue the lifestyle he/she desires without reliant on the paycheck to paycheck.
Unfortunately, many of us fail in achieving financial independence in our life. As we reach a retiring stage, most of us are indebted with an insurmountable loan, financial emergencies, careless spending and other concerns that prevent us from achieving our desired goal in our life.
Here are 5 actionable steps that aid in achieving financial independence in life.
1. Set Life Goals
What does financial independence mean to you? You have to set specific goals in your life and focus on the goal instead of emphasizing too many things in your life.
For instance, Bill Gates once said the secret of his success is that he has very few goals in his life. Thereby, setting a specific goal in life is a key to success.
Write down how much money you expect you would have in your bank account, what kind of lifestyle you want and at what age you assume you can achieve that particular lifestyle.
The more specific goals you have in your life, the likelihood of achieving financial freedom quadrupled.
2. Devise Your Budget
Devise a monthly spending budget smartly and vehemently stick to it, is the most effective way to ensure all your bills get paid and you are saving adequate money from your monthly earning.
This monthly routine will assist you in getting rid of the habit of reckless spending that prevent you from the saving.
3. Pay Off Credit Card Loans Monthly
Credit card loans and other sorts of loans on a high markup inhibits wealth creation. Adopt a habit to pay off all your loans monthly and stay away from accumulating too much loan. As you might be aware of the fact “Loan is a curse”.
4. Start Investing very early
There is a famous saying “Never work for money, but instead put your money to work” Investing is the most effective way to harness the power of compounding. The money you’ve invested in an appreciating and lucrative asset like equities, CFDs, bonds, T-bills or cryptocurrencies will grow exponentially.
But before we start investing in the stock market or any other financial instrument, it is strongly recommended to acquire extensive knowledge about that particular asset class.
Don’t dream of becoming Warren Buffet in one single month or a year, but invest smartly.
Try to make an online brokerage account and start investing with a very small initial capital. Before selecting an appropriate brokerage account, it should be taken into account your brokerage platform provides you extensive educational material.
5. Consistent Learning
Review all the recent tax reforms and make your best efforts to ensure that all your tax deductions are at a bare minimum. Make yourself aware of all the political news pertains to the finance that could be beneficial or hazardous to the stock market.
For instance, if a government decides to give a subsidy to the construction sector then it leads to significant growth in the revenue of the companies that manufacture construction equipment such as cement or steel. Thereby the share price of these companies will go up.
It is quite evident from this analogy that by continuously educating yourself can boost your profitability. According to Warren Buffet “The best investment is to invest in your learning”.
These aforementioned steps will assist you in achieving financial freedom in your life. In the pursuit of implementing these highly practical steps, you need to develop healthy habits in your life that can get you on your path to financial freedom.