Achieve Financial Freedom in 5 Simple Steps

Financial freedom

Financial freedom is the state that allows you to continue in your desired lifestyle without the need of a regular paying occupation. In other words, it can be termed as a retirement phase where one can live off of one’s savings and investments (both, liquid and assets).

Financial freedom can come easily to those who have inherited wealth or assets from family. But even for the homme ordinaire (common man), it is an achievable dream with some planned and strategic investments done over long term. Here is a step-by-step guide to what needs to be done to gain financial freedom early on in your life:

1. Set up your own ledger and balance sheet

It all begins with keeping a close track of all your expenditure- big & small. It may seem trivial when you begin but it will form a habit (and a good one) once you start doing it repeatedly month over month. This monthly ledger will then give you an idea as to where your money goes. And thus, it will help you categorize your expenses- needs, wants & extravagance.

2. Adopt a personal budgeting principle

No man can ever become financially stable without balancing his income and expense ratio. While there’s not much to be done about needs, take immediate steps to limit your wants and eliminate your extravagance. One simple way to do this is to adopt a personal finance algorithm like the 50/20/30 rule.

3. Plan your financial goals

Much of our economic perils are attributed to poor or lack of planning. Thoughtfully plan your major financial goals- vehicle, home, marriage, kids, education. It would be even more strategic if you could quantify them in monetary terms and define their respective time horizons. Sincerely avoid getting into major debts or financial liabilities as they might seriously jeopardize your well-being and quality of life.

4. Build your financial portfolio

The next and the most important step towards financial freedom is building a strong financial portfolio. This includes your tax rebate, savings as well as investments. Seek the guidance of a professional financial advisor  who could help design your personalized portfolio. A financial adviser is a credible financial institution or even an experienced SEBI registered private individual with expertise in stock markets. Ensure your financial portfolio should have clearly defined and balanced buckets of savings, trading stocks, mutual funds or bonds and SIPs (Systematic Investment Plans).

5. Monitor your investment and manage risk

Though some short-term volatility is to be expected in investments, but keeping track of investments will prevent you from any major setbacks or downfall. You must also define a contingency fund to mitigate such risks and to meet any financial emergency.