Being financially independent is not ‘early retirement’. What we are going to talk about today is creating ‘wealth’ and not being dependent on a paying job for the rest of your life.
What is the meaning of being financially independent?
It simply means not having to work to pay for living expenses. Does It means you don’t have to work to pay for your living. You work because you want to or you like to work and not because it is a compulsion.
How to become financially independent?
How to have enough funds so that you can retire early or do the work you love without worrying about the source of income? Life is unpredictable. Building a certain amount of wealth depends on your financial responsibilities to family, health and contingencies, social privileges, and your own life circumstances. Your journey to financial freedom will not be easy. You will choose the future most people are afraid to even think about.
The beginning of your financial journey
If you plan to be financially independent, You must start preparing for it as early as your first job. My parents pushed me into saving through RDs and FDs right from the beginning and When my friends were using their first paycheck to go out for dinners, buy new clothes, gadgets etc. I had to be mindful and disciplined. Several years down the line, I’m now happy to splurge my hard-earned and saved money .My friends are being mindful. If you envision a free future for yourself, I suggest you start early as your first income.
How much do you need and by when?
Calculate the target amount based on the kind of future lifestyle you have envisaged. Will you be at home with family members and friends ? Would you need seed money to pursue your passion? Answer the all above questions and calculate the amount that you would need. You can Add inflation rate for those many years and another 20-25% to cater to any unforeseen events.
Save and invest aggressively
Low-risk investment options like SIPs in equity funds and index funds should be chosen. If you are saving aggressively, you also need to keep an eye on your expenses and your current lifestyle.
Avoid bad loans
If you need to take a loan, make sure it is easy and short-term with small instalments. It can be paid if you are still earning. Loans create a nasty trap of EMIs for you and you have to keep working to pay the EMIs. So, this can make your financial freedom a distant dream.
Create a distribution plan
You are close to your target amount, the next step is to draw up a distribution plan and more importantly, stick to that plan.
Achieving any kind of freedom is not easy. Maintaining that state of freedom is the challenge. And for that you will need a strong will, a meticulous plan and a determination to stick to the plan. By following the above guidelines, if you are able to achieve financial independence. By the time you are in your 40s and 50s, you will surely redefine retirement for the youngsters around you.