Financial freedom remains elusive. The most common reason for unattained financial liberty is that people do not know what defines it. Many people are under the impression that financial freedom is a state of having loads of wealth when you do not have to care about budgeting and saving.
It is rather a state of being in control of your finances, which is unachievable without financial management. The concept of financial freedom lures many, but people do not know what efforts they need to make. This blog discusses some crucial steps to help you achieve financial freedom:
- Set goals
First off, you need to set goals to achieve financial independence. You will have to determine short-term and long-term goals. You can call yourself financially independent only when you are able to meet your goals. You need to decide when you will retire and how much money you have to live on based on your lifestyle.
Do not forget that your monthly pension cannot be enough all the time. It means you may have to generate a fixed income source, such as rental income. You will have to plan a mortgage. It depends on your purpose and suitability which financing option you would consider.
Set a deadline to achieve goals, so you do not struggle in your twilight years. For instance, if you are trying to save money to purchase a car or a house, you will need a large deposit. Set a deadline by which time you should have stashed away money for it. Make sure that you set a realistic deadline; otherwise, you will be frustrated and feel that your efforts are taking you nowhere.
- Create a budget
Budgeting is not impossible. All you need to understand is what works for you. Various budgeting methods are out there. They all work differently. A rule of thumb says that you should use a budgeting method that works for your needs. For instance, if you are looking to cut back on your expenses, you should try a lean budget. This will cover only essential expenses. However, if you are trying to justify each penny spent on all your expenses, you will have to rely on a zero-based budget.
You can create a manual spreadsheet in order to keep track of your expenses. Make sure that you note each tiny expense, so you know how much money you have already spent. This will preclude you from overspending. Try to use a budgeting app. A budgeting app will help you track all your expenses in one place without requiring you to record them manually unless you make any transactions in cash or with a credit card.
It can be boring to keep tabs on your expenses, but this is important, especially for those who take out loans for bad credit with instant approval in Ireland. With the help of budgeting, you can avoid overspending and relying on loans.
Loans are not bad as long as you need them for one-off costs and you are absolutely certain about your repayment capacity.
- Pay off your credit card bills
The convenience that credit cards offer often results in credit card debt. You just have to swipe the card, and payment is made without hard cash going out of your bank account. You are liable to settle the credit card debt when the bill is generated. And when it happens, you eventually realise that your budget does not have enough money to settle your credit card debt.
This keeps mushrooming the debt, and your credit score keeps going down. Unfortunately, the impact of having outstanding credit card bills is far-reaching. Not only will your credit score be impaired, but you will also lose your capacity to borrow money at lower interest rates.
If you have credit card debt, you should consider using a 0% transfer card to settle it. A debt consolidation loan in Ireland is useful to discharge personal debts. They do not club credit card debt. It is always advisable that you should borrow money only when you are certain about your repayment capacity and you need it for an unavoidable reason.
Loans are expensive, even if your credit report is stellar, because you have to pay interest and fees on top of what you borrow. Be cautious with funding your needs. As far as it is about mortgages and car loans, you should always try to arrange larger funds. A large down payment will help you save a lot of money.
- Start investing
You should invest money in order to build wealth. Investing is crucial if you want to gain financial independence. Investing is not a cinch. You should be very careful about the dynamic nature of the investment world. While you can earn impressive returns by investing in some assets, there is a huge risk of losing money.
You should always try to create a diversified investment portfolio. Make sure that you invest in shares, bonds, and mutual funds to minimise your risks. If the market does not work as per your expectations, you can still save money. Look for safer investing options, too. For instance, you should consider fixed deposits as well. They will let you earn compound interest. This will prevent you from losing the buying power of your money.
You should also consider investing in properties. You can build equity over time. However, investing in properties requires careful planning. Make sure that you choose a property with caution because sometimes it turns out to be the worst investment. There are high possibilities of scams, too. Talk to an investment expert who would analyse your risk-assessment capacity and then suggest options for investing money.
Summing up
It takes time to gain financial liberty, but it is not possible without budgeting and planning. You will have to track your expenses, set goals, set deadlines, and tackle your debt smartly.
Most of the people struggle to achieve financial independence because they are up to their neck in debt. You should carefully plan your finances so you can easily achieve financial success.
