To achieve financial independence, set clear and realistic short-term and long-term financial goals that align with your lifestyle choices. Prioritise these goals based on your financial situation, monitor progress regularly, and seek professional advice when needed. With discipline and consistency, achieving financial independence is possible.
A prevalent financial mistake that many individuals make is that they prioritise expenses over savings. This approach entails indulgence in unessential and unplanned purchases, which could otherwise be directed towards investments for favourable returns.
As an alternative, it is prudent to adopt a proactive approach to plan your savings and expenditures. This involves creating a budget that outlines all expenses that focuse on essentials, allocate funds to investment opportunities with the remaining amount for indulgences. This strategy ensures your funds are well utilised providing financial stability.
To achieve financial independence, it is essential to manage your debt. It involves developing a well-crafted plan to repay debt while ensuring you have enough funds for other financial goals. Create a budget that accounts for all expenses, including debt payments, and stick to it. By managing your debt effectively, you can reduce your financial burden, improve your credit score, and move closer to achieving financial independence.
Start Investing At An Early Age
Historically, the financial markets have been known to provide favourable returns over extended periods. When you start investing early on, your investments grow exponentially due to the compounding effect on your retirement. Consult an expert to create an investment plan based on your financial goals, risk tolerance, and investment horizon.
Plan for Exigencies
We can have a great plan and stick to it. But, when emergencies arrive, do we have a plan to face them? If we do not plan, we might need to suddenly recalibrate our financial goals. Keep a certain amount of funds in liquid assets to meet emergencies. Financial advisors state that this fund should be at least three to six times your monthly expenses.
Having an emergency fund and a security plan could help you avoid falling into a debt trap.
Track Credit Score Regularly
A credit score is a 3-digit number that shows your credit history and how likely you are to be accepted for future credit. Before a lender agrees to lend you money, they need to understand how likely you are to pay it back. To do this, they look at your credit score, which is provided by a credit bureau.
You should check your credit score regularly to ensure that your loan repayments are reflected in the report, your personal and credit data is accurate, and it can help identify fraud in your account.
How to Check Your Credit Report?
A healthy credit score is an indicator of your creditworthiness. Hence, it allows you access to loans at competitive rates. With a strong credit score, you can get the best offers on loans. The credit bureau offers free credit reports throughout the year, which helps you see your credit score, which is also viewed by lenders while applying for a loan. If you have a low credit score, then you need to take steps to improve it before applying for a loan. You can check your credit report on the credit bureau’s website.
Also, while you boost your savings and investments, maintain a healthy credit score. This will give you access to credit on demand without dipping into your savings or investments.