What is something everyone wants to attain but no one puts enough effort to turn that into reality?
No, no! Don’t be mistaken. We are not talking about shedding weight and achieving a perfect shape and size. That’s an attainable dream. (No offense intended!)
Here, we are talking about financial freedom. Yes, we have read enough about planning and managing finances. We have heard sufficient Gyan by financial gurus. We are not adding our notable remarks to the list, but the reality is – attaining financial freedom is still a dream for the majority of us.
Don’t get us wrong because living paycheck to paycheck, battling loans, hardships in making both ends meet, bad credit score, rising credit card bills, and dwindling bank accounts are speaking loudly that your life is not devoid of money worries.
The tricky part is no one can escape money-related issues. However, the silver lining is you can attain financial freedom. If want to get your finances on track, follow the checklist mentioned below. Keep knocking off the list and you’d get closer to financial freedom and will start living life fully.
Here you go!
Table of Contents
1. Make a realistic budget
Can you lose 20 pounds in one week? Not a chance. Reason? – You have set an unrealistic goal. The same goes true with the household budget. It is easy to set goals but what’s easier is to get carried away. Setting an impracticable, nose-to-the-grindstone budget will leave you to burn out quickly. It is advisable to write down the numbers on paper that resemble your life and stick to it.
2. Where does all the money go?
A never-ending mystery. Isn’t it? It is not uncommon to know where your money sneakily disappears every month. This is why making a budget is so important. You get an idea of what happens to your money. A clear picture ultimately helps you to curb unnecessary expenses.
3. Pay off bad debt
It goes without saying that debt is the biggest hurdle on the way to achieve financial freedom. But debt is also a powerful financial tool that enables you to pull off many crucial financial goals. Understand the difference between good debt and bad debt. Get rid of bad debt and pay off good ones. After all, debt is debt be it good or bad!
4. Build an emergency fund
Time and again financial gurus have stressed having an emergency fund. The thumb rule is to save a minimum of six months of expenses in hand. Unforeseen emergencies would keep knocking at your door. It is challenging to cope with during tough times but an emergency fund can undeniably save you financial troubles.
5. Don’t keep up with the Joneses
We repeat DON’T. Constantly trying to impress others can push you into an abysmal financial crisis. Whether you are 25 who wants to own a luxury car or 35 who wishes to own a home, everyone wants to keep up with someone else. The process is never-ending and makes you buy things you don’t need. Understand the difference between wants and needs and keep your financial condition under control.
6. Generate a passive income
Not everyone earns a fat salary. The majority of people live paycheck to paycheck. You may be working like a Trojan in a 9-5 job, but it cannot stop you from earning extra money through the second stream of income.
There are more than one hundred and one ways to earn money. You can turn your hobby into a paying gig. You can write an e-book, sell photographs online, or rent your vehicle to name a few. A passive income would make it easier for your family to attain financial freedom.
7. Save for your dream retirement
“I saved too much for the retirement” – Have you ever heard someone saying that? Of course not. Everyone understands the need for retirement savings but only a few successfully build a corpus for the retirement they had dreamed of.
To have a nice nest egg, you should ideally start saving from your first paycheck. Keep a clear picture of your retirement and align this with realistic planning. Not understanding the retirement numbers is what causes most people to save meager amounts for the golden period of their lives.
8. Insure yourself
Insurance is an indispensable element of foolproof financial planning. Don’t mistake insurance with investments – both financial tools are poles apart albeit both will help you attain financial freedom. Insurance saves you from uncertainties in life. Medical bills and unwanted emergencies in life can push you and your family members into a deep financial crisis.
To earn peace of mind and financial security for rainy days, you pay a small price in the form of insurance. Be cautious while choosing a plan and ensure you have basic coverage for health, life, and children’s education.
9. Spend your bonus wisely
Most people are too careless when it comes to spending bonuses. It needs to be said that a lot of individuals often mistake bonuses for lotteries and spend a lion’s share of it to fulfill their insatiable wants. Spend your bonus in the right avenues, like paying off debt, beefing up your insurance coverage, buying a child plan, investing in the appropriate plans, and so on.
10. Do you asset allocation judiciously
Let your money grow by judicious asset allocation. Understand the power of compounding and divide your assets by accounting for the risk factor and your financial milestones in mind. If you are clueless, consult a financial planner. Every asset class, like debt, equity, real estate, and gold has a nature and is defined by risk, return, and liquidity. To invest smartly, you need to be clear on your personal requirement, and risk-taking ability.
To accomplish financial freedom is a step-by-step, logical process. Don’t expect an overnight result. This checklist won’t make you a millionaire but will surely drive you to a happier financial life.
Always remember what Confucius said, “When it is obvious that goals cannot be reached, don’t adjust the goals, adjust the action steps.”