Achieving financial freedom is an important life goal for everyone. Financial freedom has many definitions, but the essence of the term is to attain enough savings, investments, and cash on hand to afford the lifestyle you want for yourself and your family. It enables you to have a prosperous retired life or pursue a career without being driven by the objective to earn a living.
However, most people fail to achieve this in their lifetime for various reasons. You may be undone by the burden of debt, expenses, excessive spending habits, unforeseen events, or health problems that can eat into savings and derail your plans. Fortunately, the solution is not too complicated. Financial freedom can be achieved by building sound financial awareness.
What is Financial Literacy?
Financial literacy is a collection of financial information and skills that empower you to make educated financial choices to help your money grow. Gaining financial awareness about the available financial instruments and relevant financial topics makes you financially literate. Financial literacy improves your ability to manage your money effectively. It equips you to make the best choices to enhance your finances through better budgeting, insurance, investment, etc.
What Happens When You Are Financially Literate?
Being financially literate opens up a world of choices to enhance your financial capital. It helps you find the best possible avenues to invest, grow your money, and improve your financial well-being. Understanding financial matters help you be more disciplined with your money and learn how to invest fruitfully.
10 Tips on How You Can Be Financially Independent
- Learn to Budget –Budgeting is the science of allocating a pre-decided amount to your monthly expenditure and tracking where your money is going. It also helps you determine if your expenditure is in accordance with your income. Budgeting can help you save every month and build your financial capital.
- Get Rid of Debts – Debts can make financial management difficult for you. Interest rates on debts cause your balance to grow faster than you can pay it off. It leads to a lack of control over your finances. Living debt-free puts you in the driving seat again and helps you gain financial independence.
- Open a Savings Account or Mutual Fund SIP to Save a Set Amount Every Month – Start small by opening a savings account and schedule a monthly deposit in it from your checking account. With regular savings, you will save a significant amount of money over the years. You can also start a SIP in mutual funds for better growth.
- Set Financial Goals & Stick to Them –Set actionable and measurable financial goals, and define deadlines to achieve them. Setting goals will give your financial planning a sense of purpose and allow you to make a steady progress towards financial independence. The more specific and clear your goals are, the easier it will be to achieve them.
- Understand Credit – Credit is an essential aspect of financial management. When used effectively, credit can help you enhance your financial health. Make efforts to understand credit better. Know your credit score and understand how to improve it over time.
- Watch Your Credit – Keep track of your credit and the factors that determine your credit score. Your credit score is a deciding factor in loan approvals. Maintaining good creditworthiness can be helpful in times of an emergency if you need a loan urgently.
- Understand Debt & Loans – Learning about debts and loans is essential for financial literacy. Knowing the terms and conditions of your loan will enable you to be careful about managing it and paying it back.
- Learn About Money Matters – Keep up with the financial news, applicable changes in the tax laws, and regular developments in the stock market. Learn how to adjust your investment portfolio according to recent developments and manage your savings well.
- Live Below Your Means –Living a modest life and avoiding excessive expenditure is not too difficult. Many wealthy individuals live below their means for decades before gaining affluence. Live your life to the fullest without spending too much, if you wish to achieve financial independence later in life.
- Take Care of Your Health – Health problems can drain your savings and force an early retirement. Take good care of your health and lead an active lifestylethat enables you to prevent health problems through good habits such as regular exercise and a balanced diet.