It may be the ultimate goal of every teenager to become financially independent. There may be a constant thinking in your mind what you do to save money, how to do it and when to do it. Becoming financially independent is not easy and takes time.
Tips to be Financially Independent
Get your budget under control Save for your retirement
Make a list of your income and expenses. It is important to include your health insurance fees, car insurance and life insurance under the expenses category. These expenses are quite helpful as you already know that you and your family are protected in case of emergencies. Now you need to find ways to cut down on your other expenses like eating out, watching movie in a theatre, buying groceries, doing online shopping, buying clothes, etc.
This is the most important factor of becoming financially independent. As you grow older you can’t go out and earn money. So, you need to put some amount of money on regular basis into your retirement savings account.
Make your money work for you Leave your credit cards at home
You can’t work for a lifetime to earn money. But you can put your money in best investment plans that will make your money grow and help you lead a secure financial life in the future. You can have plenty of cash when you need it by saving and investing your money on a regular basis. You can consider putting your money into mutual funds, stocks, bonds, fixed deposits or by investing in a property or business. Do some research and find out the best investment plans for you.
Credit cards can be an apt answer to overspending. Be careful about your money and if you can’t hold yourself from using credit cards for your purchases, leave your credit cards at home and rely only on cash if you want to go out. This would definitely save you from overspending and help you leave more money in your bank account.
Spend your money wisely Don’t buy more than you can afford
Stop visiting electronic stores when you don’t need a latest phone or gizmo. You don’t need a pair of shoes, so don’t stop by visiting a store by seeing discounts. Don’t temp by seeing a new car in the market when your car is already in good condition. Just be careful with your money and don’t let high-pressure sales tempt you to buy. If you can pay something with cash, then buy it. If not, you will have to wait for another day or for your next paycheck.
Be an exceptional saver Keep a crossover chart
It is better to save 20% of your income. Go for automatic saving option that will automatically transfer the set amount of your income into your savings account.
Crossover chart is a line graph that lists your income, expenses and your investments. Once monthly investment income has crossed over monthly expenses, you can become financially independent. You can keep this chart on a monthly basis.
Earn side income Know what you can control
Find ways to earn extra income like doing a part-time job, getting income from doing online surveys, etc. By investing 100% of your extra income into investment or savings, you can become financially independent. Learn what you can control and do not worry about the rest. Your expenses, savings rate and asset allocation are some things that you can control.
Monetize your passion Think about relocating
Think about what you would like to do once you become financially independent like going on a holiday, starting a travel blog, buying clothes, taking a cricket or football coaching, etc. This will motivate you to become financially independent. It can be favorable and much cheaper option to live outskirts of a city where you are currently residing or moving to nearby city, another state or even another country if you would like to work towards becoming financially independent.
Take care of your health Stop impulsive buying
Medical bills can be a biggest cause of bankruptcy and debts. You can avoid that by taking care of your health and investing your money into a best health insurance plan. Impulsive buying can be very dangerous and can put a big hole in your pocket. Therefore, you need to understand how importance is to avoid and stay away from impulsive buying if your want to become debt free or financially independent. Stay away from tempted offers and discounts.
Don’t let your weakness rule over you Just be patient
According to a financial planner, people need to address personal financial management concerns. So, if you want to turn things around for your benefit, you should have the ability on cut down on unnecessary spending.
If you are new to financial planning process, understand the fact that you can’t go from zero to sixty overnight. It would take time to apply advance planning techniques in the first week, but as gradually grow all will be sorted.
Be ready for heart-to-heart talk with yourself
In order to become financially independent, you have to have heart-to-heart talk with yourself. You need to clear about what financial independence means to you and you also need to have realistic picture of your current financial situation. You need to develop a series of goals you will help you to become financially independent.
Becoming financial independent is not a single goal but a series of sub-goals. Your financial life has several facets and in order to reach your goals, you will have to establish goals in several areas of your financial life such as increasing your income, cutting back on unnecessary expenses, paying your loan on time, understanding your saving patterns, determining your financial goals and purchasing best insurance cover for you and your family.
It is one of the most crucial steps that you need to understand while learning how to become financially independent. Get comfortable with whatever you have and just make sure to not spend money more than you earn. You will only need to cut unnecessary expenses in your budget. There are some sacrifices that you need to make now to build your savings for future.
Always keep your career and business moving forward
It is important to keep steadily increase your income while keeping your spending level as low as you can. This is how you can reach all of your financial goals in a quicker way. Keep your working skills sharp, increase your value to your employer, work hard and put in your best efforts to keep your career and business moving up to the highest level.
Vow to always save money, no matter what your income is
No matter what your income is, just make sure to save money. If you don’t have room in your budget to save money now, then try to increase your income, lower your expense, or both. You should always be saving money no matter what is happening.
Create a safety net Diversify your investments
If you have been living paycheck-to-paycheck, your first savings goals should be to create a safety net. You can do that by creating an emergency fund. It is a separate account for cash that can be used for unexpected emergencies.
The best way to protect yourself from unexpected surprises that the markets will do in the future is to diversify your investments across several different assets classes. You should have certain amount of money invested stocks, fixed income investments, peer to peer lending, real estate and natural resources.
Save your income from taxes Get out of debt ASAP
The easiest and safest mode to shield your income from taxes is retirement plans. If your employer offers 401(k) match at work, put as much of your income into it as you can. The employer will get you the maximum matching contribution.
It’s hard to become financially independent when you owe money to banks or other financial institutions. You should be ready with the goal of getting out of debt as soon as possible. You can commit to eliminating your credit card debts in five years, eliminating your student or personal loan in 10 years and your mortgage in 15 years. Set a different time horizons for getting out of debts.
Buy assets that generate income do not take another loan
Whether you invest in stocks, real estate, cash investments or anything else-no investments is foolproof. You will see all ups and downs in the market. Therefore, it is necessary to understand everything you invest in and focus on assets that will help you make money over the long haul.
Commit to refocusing on your goal at regular interval
It is necessary to be fully committed to your plan if you want to become financially independent. You should be having a written plan that includes goals for each financial category and review them annually. Make sure your goals are on track and keep focusing on your ultimate goal of becoming financially independent.
No matter how the situation is, just make sure not to take any other loan. Even though you make good money, taking another loan means a liability and you can never become financially independent if you keep taking up loans.