Last Updated on May 25, 2022 by Neera Bhardwaj
Many people want to achieve financial independence. It generally entails having enough savings, investments, and cash in hand to afford the lifestyle you desire for yourself and your family—as well as a safety net that will allow you to retire or pursue the career of your choice without being constrained by the need to earn a certain amount each year.
Unfortunately, far too many people fail at this. They are plagued by mounting debt, financial emergencies, frivolous spending, and other obstacles that prevent them from achieving their objectives. Then there are unanticipated occurrences, such as a storm, earthquake, or pandemic, that upend plans and disclose previously unseen gaps in their safety nets.
However, adopting solid financial habits is a sufficient requirement to safeguard your financial future. Here are a few habits that you should fall in love with this Valentine’s day to create wealth.
Table of Contents
Paying yourself first
This is a notion in which whatever you make on a monthly basis must be saved, i.e. paying yourself before paying everyone else – such as the landlord, servants, home expenses, entertainment, and so on. This simple act of saving over time has the potential to build a corpus large enough to sustain yourself throughout retirement years. Therefore, start practising paying yourself first.
Stay out of debt traps
This implies that you should live within your means and that any purchases should not be funded through debt in a way that threatens your future financial well-being. The interest rate at which the loan is taken out and the loan amount are critical attributes here. Paying down existing debt each month is a consequence of this habit.
Some debts, such as house loans, are inevitable, and sometimes considered good debt. However, it would be best if you had a strategy in place to reduce some debt over and beyond what is necessary. This may be accomplished, for example, by utilising your annual bonus to pay off some debt. It may be tempting to take on additional debt while interest rates are low. Still, once the cycle reverses, the debt may become overwhelming. So, it’s better to stay out of such debt traps.
Don’t put all your eggs in one basket
Diversification is a technical word for this age-old knowledge. This suggests that in order to control risk, one should invest in a variety of asset types. This also assures that an investor is not aiming to maximise returns, which frequently leads to over-allocation to a certain asset class that may be the new vogue. However, you can go a step further and diversify not just across asset classes but also wherever feasible, taking in mind the related expenditures and taxes. If you’re looking at equities, for example, diversify by style, market cap, and so on. A mixed portfolio that combines all of these techniques is also an option. Make a habit of not putting all your eggs in one basket.
Curtail impulsive buying
We don’t mean to imply that you should all live on a shoestring budget. Consider how your income and lifestyle have changed throughout the years to grasp this concept fully. Your spending would have increased virtually magically over time to match your income, leaving you with a poor savings rate despite growing revenues. Because the salaries are not increasing, but the cost of everything else is.
This is primarily due to the fact that we mix up required costs with aspirations. This is a tough habit to acquire and sustain since there is a lot of peer pressure, and you might compare yourself to society at large. Still, it has the most scope and ability to provide financial freedom. So start practising limiting your impulsive buys.
Create a budget
Making and sticking to a monthly home budget is the best method to ensure that all expenses are paid, and savings are on track. It’s also a daily practise that reinforces your objectives and strengthens your willpower in the face of temptation to splurge.
Investing has its own ups and downs. Historically, there has been no better method to build your money than via investment. The magic of compounding will let it expand enormously over time. Still, it will take a long time to attain substantial growth. It might benefit you if you start investing with discipline. You can start learning the basics of investing here on tickertape as well.
Take good care of yourself
The notion of adequate maintenance applies to the body as well. Invest in your health by seeing physicians and dentists on a regular basis, and follow medical advice for any difficulties you face. Many illnesses can be alleviated or prevented by making lifestyle changes such as increasing physical activity and eating a better diet. Some firms have a restricted number of sick days, resulting in a significant loss of income after those days are used up. Obesity and illnesses raise insurance rates, and bad health may necessitate an early retirement with a reduced monthly income.
All these steps won’t fix all of your financial difficulties. Still, they will help you form healthy habits that will put you on the road to financial independence, whatever that means to you. It is also necessary to enjoy life, indulge once in a while, be flexible in your goals, and be open to new ideas to become future-ready. A healthy mind and body are the most powerful wealth creators. So start falling in love with yourself and these tips. #tickertapeHaiNa
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