It all begins with savings. When you are earning, it is tempting to spend it all.
All of us would like to attain financially freedom. How do we get there? The mantra is simple: savings, investing, and get your money to grow. You will become financially independent. How does one work to ensure that this mantra is fulfilled? Read on to know!
Step 1: Save!
It all begins with savings. When you are earning, it is tempting to spend it all. Refrain from the temptation! Save as much as possible. Ideally at the start of your career you should be saving at least 50% of your income and later on at least 20-30% of your monthly earning.
Curtail expensive purchases which are more for luxury than for essential living. Track your expenses on a daily/ weekly/ monthly basis so that you know on what you have spent your money. It will help you gain a better perspective about how much money you can be saving.
Step 2: Plan and Invest
Once you know how your savings are on a monthly basis, it is time to plan and invest the money that you are saving. List down the big expenses which you are likely to incur in the course of your life: think matrimony, childcare, buying a house etc. Make a note of the likely time frame in which you will need this money.
Then come up with an investment strategy to attain your financial goals. Your investment portfolio should be a mix of equity and debt investments. It should include insurance plans, mutual fund investments, FDs, investments into metal such as gold, and some liquid money lying in the bank to take care of immediate emergencies.
Typically during the starting of your investment towards attaining a particular goal, the investments should have more equity exposure.
As you near the timeline of your goal, you should shift the investment into debt products in order to safe guard your principle and returns. Identify good mutual fund schemes, insurance plans, and FDs apart from banks, which have a good track record and give you a decent return on your investments. Keep a contingency plan handy. Then start investing! Monthly!
Step 3: Track your investments and become financially independent!
Great that you have begun investing! Now you have to keep track of your investments and see if they are doing fine. Else you may have to alter your strategies a bit, use the contingency plan, and invest in other options.
This way you will be able to stem the loss at the start itself and be poised to achieve your financial goals! Spend some time every month tracking your investments. Get professional help if you feel overwhelmed about making all your investments by yourself.
Remember keeping track of your investments is the only way you can be sure that you are on the right path. Go ahead, track your way to freedom!
These three golden steps are enough to ensure that you turn financially independent at the earliest and remain so for the rest of your lives!
By ANIL REGO, CEO & FOUNDER, RIGHT HORIZONS
Source: Money Guru India