As soon as one becomes an adult, independence quickly becomes a goal to achieve in life. This also includes financial freedom which simply means having enough investments and savings to afford the lifestyle that you desire.
With the right type of financial planning, you can turn this dream into a reality, whichever stage of your life you may currently be in.
Tips to Set Yourself Up For Financial Freedom
While wanting financial freedom is the first step on your journey, it is important to create an achievable and concrete numerical goal that you can work towards. Depending on your household and family size, you may have different sources of income and a varying number of dependents. Take into account any loans, possible salary hikes, extra income and come up with an amount that is both realistic and that will allow you to live the way you want to.
Being financially free also involves some compromises and will include living a disciplined life. Use an app, Excel or even just a notebook to create a budget that takes into account your regular monthly expenses like bills and fees and also has a little leftover for miscellaneous fun activities like the occasional movie or nice dinner. Being disciplined doesn’t always mean it has to be boring, it just means choosing a cheaper option like going to the park instead of taking the children to a games arcade.
Interest paid on borrowed money can be a big drain on your finances, so when you’re in the process of financial planning, ensure that all your debt is paid off first. This could include student loans, house loans, car loans and credit cards and make paying these off your priority so you can ease into your financial goals more efficiently.
Even when you’re choosing which of your liabilities to pay off first, track which ones have the highest interest rates and choose to clear those off first. Credit cards and high-interest consumer loans will need to be cleared off before student loans and house loans which may come with a lower interest rate.
While financial freedom may be your long-term goal, it is also prudent to have short-term goals that will work towards improving your current liquidity and leave you better prepared for emergency expenditure. Choose to send a small percentage of your income into an emergency fund or a savings account so that you have it readily available if the need arises, this will help you feel more secure to make bigger spends later.
A key part of financial planning is investing in insurance plans that can secure your future and that of your family. When you have multiple financial goals, a dynamic scheme like a Unit-Linked Insurance Plan (ULIPs) could be a smart decision for you. Taking a dual-pronged approach, ULIPS take the premium paid and divides it between investing it in market-linked funds and in a term life insurance plan. This ensures that in the event of your passing away, your loved ones are still able to fulfill their ambitions thanks to your life insurance policy.
If you find yourself blowing through your budget each month, an auto savings option from your bank could be good to look at. This way, a certain amount gets cut from your account each month without you having to do it manually. You can also consider a recurring deposit to earn better interest on the amount, but it typically comes with a lock-in period.
Very often being financially free means carefully considering all your options and constantly asking yourself, “Do I really need this?”, especially when buying big-ticket items. If there is a serious event that is coming up in your future like a wedding or the birth of your child, less is always more. Don’t give in to the pressure of being extravagant and blowing through your budget, keep your eye focused on the prize: financial freedom.
Investing in the stock market can be a smart way to grow your wealth as part of your financial planning. If you aren’t well-versed with stock trading or don’t have the time to track your investments, ULIPs could be a convenient option for you. There are fund managers to manage your investments and thus, spare you of the hassle of tracking your individual investments.
Apart from being an investment instrument, ULIPs also provide insurance. With this two-pronged approach, ULIPs become one of the most versatile financial instruments you could opt for. Moreover, each investor’s risk appetite will differ based on their financial goals. With ULIPs like Bajaj Allianz Future Gain, available on Finserv MARKETS, the amount is
invested in various debt and equity funds according to the investor’s risk preference and to match their financial aims. Bajaj Allianz Future Gain available on Finserv MARKETS also comes with the benefit of allowing you unlimited free switching of funds so you can adjust it according to how your goals shift. You can choose from a variety of ULIP plans, including Child Plans, Retirement Plans as well as Investment plans. With such a plethora of options at your disposal, you have the flexibility to choose one that aligns with your needs and capabilities.
One of the best ways to ensure you’re financially free is to constantly keep yourself updated on financial information. Whether its government schemes or new investment instruments, knowing what your options are keeps your options open. Reading and learning about financial strategies can help you to optimize your planning for the results you desire.