Money advises: 7 habits that can help you achieve financial freedom

Money Tips: 7 habits that can help you achieve financial freedom© Provided by Business Today

Achieving financial freedom is a dream that many people strive to realise. It is about taking control of your finances, eliminating debt, and becoming financially secure. However, a significant number of people are unsure of how to begin the path towards financial liberty. Here are seven useful tips that can assist you in attaining financial indepe

1. Define your goals: The first step towards managing your finances effectively is to understand what financial freedom means to you. It could indicate a debt-free lifestyle, the ability to retire early, or the freedom to quit your job and start a business. Identify your financial goals and put forth clear, actionable steps to achieve them.

Once you identify your goal you will be able to start saving towards the goal based on your risk profile. If you are a conservative investor, you can put a large portion of your portfolio in fixed income instruments and if your risk-taking abilities are higher, you can take the advantage of higher return given by equities over the long term.

2. Live within your means: It’s vital to spend less than you earn. This sounds simple, but many people struggle to achieve this. Make it a habit to create monthly budgets and stick to them. Avoid impulse buying and unnecessary debts, and always strive to save a portion of your income, no matter how small.

The golden rule is to first save and then spend rather than spend first and save later. By saving at least 10-20 per cent of your salary you can take the right step towards financial freedom.

3. Build an emergency fund: An unforeseen financial crisis can easily jeopardize your financial freedom. Emergency funds can be a safety net during such periods. This fund should ideally cover at least 6 months of living expenses. You can invest in fixed deposits or liquid funds for maintaining emergency funds.

4. Diversify your income: Relying on a single source of income can be risky. Cultivate multiple income streams, including investing in real estate, stocks, or starting a side hustle. Diversification reduces the risk of financial insecurity as a single income source can be compromised.

5. Reduce debt: Debt is a significant barrier to achieving financial freedom. Plan to pay off your debts systematically, starting with high-interest ones like credit card debts. You should avoid taking loans for vacations or buying an expensive mobile or phone as it can lead to overleveraging and causing you trap in a debt spiral.

6. Invest wisely: Investing is one of the most effective ways to grow your wealth. Take the time to learn about the different investment options available and find what suits you best. Remember, it’s not about following trends, but about making informed decisions that align with your financial goals.

The first right step is to start a Systematic Investment Plan or SIP in a long-term mutual fund. Doing so you can unlock the value of higher return by investing for a long term in equity market.

7. Financial discipline: Educating yourself about personal finance is essential. Understand the basics of financial planning, investing and taxation. Also, cultivate financial discipline: consistently save, invest, and avoid unnecessary debts.

Moreover, you need to review and monitor your portfolio at least a year, so that if there is any divergence in your asset allocation strategy you can rebalance your portfolio.

In conclusion, achieving financial freedom is a gradual process that requires planning, discipline, and consistency. These tips provide a roadmap that can navigate you towards financial independence. Remember, every step, no matter how small, is a step towards financial freedom. So, begin today!