For most people, achieving financial freedom is a significant life goal. They want to be free of debt obligation, manage expenses better, and improve their monthly budget.
So, how do you achieve financial freedom? Understanding money management is vital whether you are a salaried professional or a business owner, understanding money management is vital. Having a source of income isn’t enough – you need to understand the basics of financial freedom.
Take a moment to consider how you spend your paycheck.
How much do you spend on necessities and luxuries? While it is okay to splurge occasionally, spending hefty amounts on luxuries can throw off your finances. For example, using your credit card frequently without considering your spending can drive you downhill financially. And before you realise what went wrong, it may be too late.
This article will discuss some key points that will help you achieve financial freedom through proper budgeting, building a safety net for emergencies, and using personal loans smartly.
What is meant by financial freedom?
Having financial freedom means staying on top of your financial goals without having to be bogged down by debt obligations that eat into your salary. Of course, this can mean different things to different individuals, but having enough money for all life situations is at the core of financial freedom.
How to start unlocking financial barriers
#1 Create an emergency fund
Put away a part of your salary every month in an emergency fund. About 20% of your paycheck should go towards building this fund. You can choose a safe investment instrument that offers liquidity, such as a fixed deposit. Do not spend this money on anything else, but keep it locked away for emergencies.
#2 Maintain a monthly budget
Keeping track of your expenses is the simplest way to manage your salary. Knowing exactly where your hard-earned money is going allows you to understand your spending habits, curb making unnecessary purchases, and increase your savings. So, create a monthly budget and stick to it. It is also important to review it from time to time.
#3 Use credit cards judiciously
Misusing credit cards can have a strong negative impact on your finances. So, always use them with caution. Credit cards have the allure of “buy now, pay later.” However, it is crucial to be disciplined with credit card usage. If you fail to make timely repayments, you will have to pay interest. Credit cards have very high-interest rates, and late payments may snowball into considerable credit card debt. What’s more, not making timely repayments will also bring down your credit score. With a poor credit score, it will be challenging for you to avail of loans and credit cards in the future.
#4 Use a personal loan for emergencies
If you face a cash crunch, you may be tempted to use your credit card. But due to the high-interest rates on credit cards and tight credit limits, this option is not viable.
What you can do instead is take a personal loan.
Personal loans are unsecured and have no end-use restrictions. You can take personal loans for large amounts and pay them back comfortably in easy monthly instalments without compromising your monthly budget.
#5 Invest wisely
Don’t just park your savings! Put some of them in an investment vehicle and watch your money grow over time. Investing wisely can help you achieve your financial goals, whether they are short-term or long-term goals.
Decide how much you want your money to grow over a period of time. Then, choose investment instruments that are best suited to your objectives.
Financial planning benefits
Financial planning sets you up for long-term financial success in life.
- It improves your financial understanding and prepares you for demanding situations in the future.
- It empowers you to make your own financial decisions and reduce dependence on your employers or family members.
- Diligent financial planning can boost your savings. And by saving up for investments, you can make your money grow.
- When you know where to spend and when to save your money, you can build a retirement corpus and retire early with enough funds to enjoy your later years.
Do you have an immediate financial need? Don’t dip into your savings or liquidate your investments. Instead, opt for an easy personal loan from Tata Capital. We offer attractive interest rates, flexible EMI options, and no restrictions on end-use. To learn more and check your eligibility, visit our website today!