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Know some easy tips for financial independence

For financial independence, every earning person must take some simple but significant steps. In this article, the author discusses some simple steps which would enable us to become financially independent. Read on to know more.

After a lot of struggle India achieved political independence on 15th August 1947. However, after independence the leaders of the country understood that without financial independence, political independence would not be very fruitful. So, after independence, the people of India have struggled to achieve financial independence and they have become successful to some extent. Whatever is true for the country is also true for the individuals. Every person, every family must strive to achieve financial independence. Financial independence gives us the freedom to work to achieve our own goals. In this article we are going to discuss some small and simple tips to achieve financial independence.

Save 30% of the income

Every earning person must understand that their earning not only takes care of themselves today, but also helps them in future, when they would have no earning capacity or reduced earning capacity. So, every earning person must save for post-retirement life. So, how much should we save? The financial experts of the world have given us a thumb rule. We must try to save 30% of our own income. Immediately after receiving the salary we must keep aside 30% of the amount for future purposes.

Credit card must be used as last option

Nowadays most of the earning people carry credit cards. There is no doubt credit cards are very convenient to meet emergency expenditure, but the convenience comes with a cost. The rate of interest levied on outstanding amount in credit cards is very high. Many people have fallen in debt trap by regularly using credit card to meet day to day expenditure. So, we must remember that credit card is the last option. We should try our level best not to use credit card to meet day to day expenditure. It should be used as a last resort during emergencies.

Try to avoid taking loan

: Loans increase financial liability. Even if we take loan from our near and dear ones, we are under obligations to return it. Even if loan is taken from parents or brothers/sisters, there is a pressure on our mind to return the loan. So, we must not take loan under normal circumstances. Financial experts advise us to take loan only in such cases when a person is going to acquire some valuable assets or in case of meeting urgent expenditures on medical grounds. Besides these two reasons, we must avoid taking loan either from financial institutions like banks or from any other person.

Buy when absolutely necessary

We must control our habit to buy unnecessary items. We must make it a practice only to buy items which are absolutely necessary. We must restrain ourselves to buy fashionable items. Every person or family member must make it a habit to consciously try to reduce expenditure by 10% on various items in every quarter (three months). If we consciously try to reduce and ultimately stop unnecessary purchasing, it will strengthen our financial health and ultimately give us financial freedom.

Make a budget and stick to it

Every family must prepare a budget at the beginning of the month taking into consideration all earnings and expenditures. Making budget will help us understand our income sources and the ways we spend our money. If we understand the ways we spend our money, we would be able to check unnecessary expenditure. Not only budgeting, we must give adequate stress on sticking to our monthly budget. This healthy habit will go a long way to give us financial independence.

Invest, save, insure with your surplus money

In the first tip we have stated that each earning person must try to save 30% of his/her earnings. The saved amount must not be kept only in savings account. This may further be trifurcated and one portion may be utilized to purchase insurance. Needless to say that insurance provides a protective umbrella to the members of the family. Another part of our savings should be kept in the savings bank account or liquid mutual funds, which can be utilised to meet unforeseen expenditures. The third part must be invested to meet long term goals and as retirement corpus.

Concluding comments

Following the above tips will help us to become financially independent. Financial independence in turn would help us to fulfill our duty towards our family members and also to achieve our personal goals. Moreover, it would provide adequate retirement corpus to lead a tension-free life after retirement.

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Author: Nomita Mitra29 Aug 2017 Member Level: Gold   Points : 6

A well written article by the author showing people the way to financial independence. Everybody likes to be financially independent and strives hard for it. They want to see that their near and dear ones are financially secured. However, it seems that the author is talking only about the people with white-collar jobs and has ignored the blue-collar or pink-collar workers that constitute almost 50-60% of the total population of the country. There are certain impediments on their way:
Low income:
Even after so many years of independence, the income of most of the people are so low that they can never think of financial independence. The income of a daily laborer like a mason or even a freshly graduated young man earns hardly Rs.15,000/- a month. How can he maintain his family after keeping 30% of their income aside as savings?
2. Making monthly budget:
Even these people try to make a budget every month but the ever escalating inflation compel them to exceed their budgets and even at times, compel them to take loan at high interest rates to meet up their immediate needs.

Author: DR.N.V. Srinivasa Rao29 Aug 2017 Member Level: Platinum   Points : 3

A well written article. The author has mentioned very clearly the importance of saving money for future. These days young people are forgetting the word Save.
Another point is usage of credit card. Really, that is a big threat. If we have to purchase an item and if we want to pay cash or debit card, there is no problem. We will restrict the expenditure to the amount available. Instead of that if we go with a credit card we never worry about cash position but we will go for our liking. It is dangerous.
But as pointed out by Nomita Mitra, 30% saving may be a difficult to low income group. I agree with her.

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