5 Commandments for Reaching Financial Freedom
Financial freedom is a phrase that attracts different connotations. To some financial freedom means getting out of debt, while to others it would mean saving enough money for the future. No matter who you are or what financial freedom means to you, it needs a lot of focus and intent from you. This article is for people who want to stay out of debt or who want to start saving for their future.
Commandment 1: Plan
The beginning of any venture – planning. Plan what you want to do for example, do you want to pay off your credit card debt in 3 months (or) save a certain amount of money before a certain time (or) pay the down payment for a new house. Your planning will also be based on priority as you would do well to attend to more pressing matters immediately. Decide on what you want to achieve.
Commandment 2: Understand
Understand your earnings and spending. Know how much you make, understand all the deductions, the reasons behind it and track where you spend the money. This will give you an understanding of your income and expense.
Commandment 3: Strategize
Once you know your income and expense plan on where you can reduce. For example, if you are spending a lot on mobile bills go for a more economical plan (or) spend a lot in restaurants then reduce the number of times you go out. Cut down on all the expense that is unnecessary.
Commandment 4: Implement
This is the most difficult part – doing. People will do all the above steps but almost always fail here. Implementation of your plan should include
• Paying off your debt:
Pay off your existing credit card, education loan, car loan etc. This needs to be your priority. This is eating away at your salary every month and needs to be closed as soon as possible. Aggressive payment of debts is what is required here.
• Find ways to increase your income:
Find alternate sources of earning income like freelance article writing, part time jobs in retail shops or any other means which you are comfortable with. Use this fund wisely or save it for emergency purposes.
• Spend within limits
Do not spend more than what you have. Even better, decide a cutoff point and save the rest. Try to keep your spending below your cutoff point. Credit card holders need to pay off their debts on time and keep their credit limited to 30% below credit utilization ratio. You should also keep monitoring your credit report.
Commandment 5: Review and Adjust
After implementation review your actuals with the plan. If there is deviation adjust it accordingly. Continuously review your results on a weekly basis. This way you will know what you are earning and how much you are spending and if you are on track with your goal.
Attaining financial freedom lies with every individual – their focus, intensity, planning, need, persistence and patience. There will be temptations and difficulties and you will be required to make sacrifices for a short while but once achieved it will make your life very comfortable. Much like our own Independence struggle which required the sacrifices, selfless acts, and patience by many Indians.