Home » News » Personal Finance»Planning
Jul 15, 2014, 03.04 PM | Source: Moneycontrol.com

9 Simple steps to achieve financial freedom

The first step to take is setting your goals efficiently. Discuss clearly with your spouse, about the mutual expectations and set workable goals for the desired lifestyle. Setting up highly ambitious goals can only wreck your financial life.

BankBazaar.com

Achieving financial freedom requires much foresight and smart planning. It requires not only clever planning and management of income and expenses, but also a bold and frank approach to various situations. However to act prudently in various situations, primarily you have to consider the advice of your family members. Here are some very simple tips to keep in mind to achieve financial freedom.

1.    Set your goals

The first step to take is setting your goals efficiently. Discuss clearly with your spouse, about the mutual expectations and set workable goals for the desired lifestyle. Setting up highly ambitious goals can only wreck your financial life. List out your goals like having a house, car, child’s education, marriage, retirement plans, and provision for family’s security in case of   any untoward incident, etc.

2.    Assess where you stand at present

Before planning, have a clear assessment of present financial position- what your assets and liabilities are. Be careful in including all present, expected and unexpected contingent liabilities also that may have to be met in future. If the assets are more, it means your economic background is good. But, if liabilities are more than the assets, then it is a matter of concern. If your income level is not up to your plans, plan out alternate ways like creating a double income or opting for passive sources of income or taking up extra assignments in your free time, etc.

3.    Review your past spending track

For better planning of monthly budgets, it is advisable to go through your spending history of the last five years or whatever figures that may be available to have a clear picture of the spending track. By taking a hard look into the past spending habits, you can get an insight of the needed and needless monthly expenses enabling you to plan efficiently for the future.

4.    Prepare monthly budgets

The next step is to prepare monthly budgets before each month according to the priorities and income. Try to cover all expenses within your monthly income including the monthly instalments of loans and credit cards. If possible, try and make some provision for savings also to meet any unexpected emergencies. Simply preparing a budget will not suffice. It should be strictly followed to achieve success.

5.    Cut expenses and do it yourself

 Identify unwanted spending and avoid frequent eat outs or extravaganza on birthday celebrations, marriage anniversaries, etc. Try to differentiate between a need and a want. Needs are mostly unavoidable, whereas a want or liking can always be postponed.

6.    Buying in bulk and during seasons

Develop the habit of buying clothes, gadgets and electronic during times of rebates and seasons. Further, try to buy seasonal items in their respective seasons as they are cheaper  

7.    Save from Tax Payments

If you are an Income Tax payee, minimize your tax payments by investing some money in tax saving bonds and schemes. Purchasing life insurance and health insurance policies can also help you save tax and heavy medical expenses. One can also smartly invest the tax refunds, which can be an unexpected source of funds.

8.    Lead a debt free life

Get habituated towards a debt-free life. Avoid personal loans and credit card over dues as far as possible.  If already in debt, try to clear the costly debts as early as possible. Consolidating all loans into one lesser interest bearing account can be helpful in getting out from debts easily. Use credit cards only when you are sure of making immediate payments into the account.

9.    Develop the habit of Investment

Always try to save some money from monthly incomes. Invest that in bonds or shares. Bonds give fixed return whereas shares may yield better profits but involve a risk element. If you can afford to bear the risk factor, then investing in shares can be a very good option if prudently done over the long term.

READ MORE ON  BankBazaar.com, planning

ADS BY GOOGLE

Ask the Experts

Get your Personal Finance queries answered

  • Q

    Interest rates are going to go down. And all my fixed deposits will be maturing next year. I will have to renew my fixed deposits next year at lower rate of interest. What is the way out?

    A

    Interest rates keep fluctuating due to various micro- and macro- economic factors. There is never an ideal rate of interest. In a high inter...

  • Q

    If I put Rs 2 lakh in PPF, how much tax rebate I will get?

    A

    As per the existing guidelines and rules a person cannot deposit more than 1.5 lacs in one PPF account. However you can deposit money in the...

  • Q

    I want to buy online term life insuance plan. Which is the best one? Should I go for single premium or regular premium policy?

    A

    Single premium term insurance policies don?t make much sense. Why pay such a large amount at one go when you have the option of paying in sm...

  • Q

    I want to invest some money with at least ten years view. I dont want share market risk. Can I invest in NSC? Is there any other investment option?

    A

    NSC or National Savings Certificate is a safe investment scheme offered by the Central Government. It is an ideal option for investors with ...

  • Q

    Is it a good idea to invest in asset allocation funds? if yes, please suggest some good fund to invest money. I am 35 years old and can invest Rs 10000 per month.

    A

    Asset Allocation Funds are for those investors who want to take an exposure into different asset classes but do not wish to create their own...

  • Q

    My CA says that I have to pay tax on interest accrued on my FD of Rs 20 lakh. I have submitted form 15H in all banks. Is it necessary to pay tax in this case?

    A

    In case of interest on fixed deposits which is taxable under the head ?Income from other Sources? a taxpayer has two choices. Either you can...

  • Q

    Please suggest a good investment option of land in South India. I want to buy a land parcel of around 2 acres.

    A

    If you take a look at the South Indian real estate market, Bangalore has emerged as a clear winner. Due to the strong presence of IT/ITeS an...

  • Q

    I want to invest Rs 20000 per month. I have identified Reliance Small Cap Fund and DSPBR Micro cap fund for investment. I can hold to investments for two years. Is it a good idea to invest in these schemes? How much returns I will be getting?

    A

    If you are an aggressive investor, you can consider investing in either of the 2 funds.DSPBR Micro Cap My suggestion is that if you are inve...

  • Q

    I want to save my money for retirment Please suggest a good insurance policy

    A

    For retirement it is advisable to use multiple investment instruments and not just life insurance policies. If you have 15 years or so for r...

  • Q

    IS IT a Good time to invest in GOLD ?

    A

    Currently the outlook for gold is bearish/negative. However if you are planning for a long-term investment in gold it is ideal to invest the...

  • Q

    I have retired from my job in November. I have got Rs 48 lakh from my employers, by way of epf, gratuity and other benefits. Should i invest in senior citizen scheme of LIC? How about pension plans from LIC?

    A

    1. You can invest Post office Senior Citizen Scheme. 2. You also should invest lumpsome in MIP in post office and get monthly interest. 3. K...

  • Q

    I want to save Rs 1 crore for my retirement when i turn 60. Now I am 42 years old and have fixed deposits worth Rs 18 lakh.What should I do to reach Rs 1 cr mark?

    A

    start investing a minimum 5000 per month in mutual fund and increase 10% to 20% every year....

  • Q

    I want to save on my utility bills and fuel expenses.Please suggest a good credit card for me.

    A

    Yes, you will be able to save on Utility bills and fuel expenses through the cash back schemes offered by some of the credit card companies....

  • Q

    Suggest couple of equity mutual funds for me. I am keen to invest Rs 25000 per month for next couple of years. I can remain invested for at least five years?

    A

    Asset Allocation Funds are for those investors who want to take an exposure into different asset classes but do not wish to create their own...

  • Q

    I am a senior citizen.I received interest of Rs .1,70,000/- on FD.I have duly filled 15G form.I have NO other source of income.Have I to pay Income tax on this interest or can it be excempted?

    A

    Sir, please note if you are less than 80 years but more than 60 years of age, your total income upto Rs 3,00,000 is exempt from tax, you are...

  • Q

    Please suggest a good money back policy for me. I am 27 years old and want to accumulate Rs 10lakh over 10 years.

    A

    If you are a fan of traditional money back policies, go in for the LIC New Money Back Policy of 20 or 25 years. I would suggest you go in fo...

  • Q

    I want to buy a life insurance for my brother Please suggest a good policy. He is 19 years old. he should get Rs 5 lakh when he turns 25 years.

    A

    Best to go in for a ULIP in case he is looking to grow the money also. Go in for a ULIP like HDFC Click 2 Invest which is very low on charge...

  • Q

    In 2013, I bought an Endowment policy from LIC. Premium for that is around 35K per year. Now i understand, this was a big mistake and i want to go for a term insurance policy. I have already paid two premiums in 2013 and 2014 and I want to make this policy paid-up. Can i pay one more premium this year and make that endowment policy paid-up ? Or is there any better alternative ? Please suggest.

    A

    Yes, you can convert to a paid-up policy after 3 years premiums have been paid. I would recommend that you surrender the plan and take back ...

  • Q

    Is zero depreciation cover a good option under auto insurance? I have plans to buy honda city in January

    A

    Zero depreciation is a good option to along with the standard car insurance plan. By paying a slightly increased premium you can ensure that...

  • Q

    I am 20 years old,I am getting 17+ % or returns from share in my portfolio consistently for the last 6 months.should i think about a career in stockbroking?

    A

    Its nice to note that your portfolio has been gaining such high returns, however it might be too early to take a call and make stockbroking ...

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.