Andrew, a middle-aged individual became a millionaire at 45 years. He wanted to spend more time traveling and sharing his knowledge in different countries. By 50, his savings had grown, even more, granting him financial independence.
Andrew didn’t inherit wealth and never won any lottery. So how did he attain financial independence at the age he desired?
He held various internships throughout his college, and he started his investments early with his internship stipends. At one point, he chose to take out a loan for his higher education tuition fee.
To become debt-free and fulfil his financial dreams, Andrew resorted to making a lifestyle choice and stick to his monthly investments which were following his financial goals and asset allocation.
From there, Andrew continued to invest without stopping. He started with index funds and NPS. Once he gained confidence in investments he started investments in actively managed funds and individual stocks.
Small steps by Andrew helped him achieve his financial freedom.
It is absolutely important to grow your money so that you can retire like a king or queen while still being able to enjoy hobbies, vacations, or whatever else you desire.
Analyse your existing financial situation
Many understand the significance of honest self-evaluation. This concept is also useful when it comes to financial planning. To begin with, you can examine your income, existing debts, and current investments. You can then plan the appropriate and subsequent steps for financial planning.
It may become difficult to assess your current assets and liabilities, as well as which investment avenues to pursue. Obtaining financial advice from a Registered Investment Advisor can assist you in achieving financial independence.
Identify your debts
Debts have to be analysed and dealt with carefully. Debt traps are the most common reason for people to lose their financial independence. If you have a debt that you can pay off, make sure you do so as soon as possible.
Before you embark on your journey to financial independence, make sure that you have paid off all of your debts. Creating and sticking to a financial plan is the most effective way to avoid debt. Some debts, such as student loans, may be necessary, and it is reasonable to consider them based on your budget.
Emergency fund is a saviour
Unexpected events in life such as job loss or medical emergencies, can be addressed with the assistance of an emergency fund. An emergency fund is essential for unwelcome rainy days such as the COVID-19 pandemic.
During an emergency, you should always have access to funds. One of the most important characteristics of emergency funds is their quick ability to be converted to cash (liquid). When choosing investment options for an emergency fund, make sure you don't sacrifice liquidity for a high return.
If you start saving early in life, you can avoid taking more risky bets. The compounding effect teaches us that saving a reasonable amount of money does not necessarily require a large sum of money. What you will need is the discipline to save regularly. The longer the period, the more fruitful the returns.
However, this should not deter anyone who has begun their investments in later periods of life. Investing has no age limit, but the sooner you begin, the more time you will have to accumulate wealth.
Managing your finances is one way to practice self-care. Mastering financial freedom will enable individual freedom.
(Nitin Mathur is CEO, Tavaga Advisory Services--a Robo Advisory platform)
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