Mr. Mahesh Sinha, a 21-year old graduate, has just begun working at a reputed multi-national corporation. He wishes to get on the road to financial freedom but is clueless on how to do so.
Like Mr. Sinha, many look to achieve financial freedom but are confused on how to get there. Following are six effective ways to help you achieve financial security.
- Save periodically
For many people, having a steady job and earning a good salary is indispensable for achieving financial freedom. However, such should not be the case. Earning a paycheck is just the first step taken towards your goal. The security that a job offers will last only until you hold the job. In an event of loss of job due to any reason whatsoever, you may be left financially unstable. To achieve financial independence, it is imperative to convert your earnings into savings. Money accumulated over a period of time may be used to achieve life goals at various stages such as pursuing higher education, meeting wedding expenses, or for your golden years.
- Start as early as possible
Starting early gives your investment more time to grow. Since time is your biggest asset, you may enjoy the power of compounding largely. This indicates that you may gain greater returns on your reinvested earnings. Additionally, investing early minimizes the risk of market volatility since you have a greater time to recoup losses, if any.
- Protect yourself with insurance
If you are wondering about how to get financial security through term insurance plans, an ideal recommendation is through a life insurance policy. Such a policy serves as a risk cover as well as a wealth creation tool. Your family will receive financial protection in case of an unfortunate incident. Such an insurance policy also helps you meet various financial goals, such as child’s education, child’s wedding, long-term savings, wealth creation, and retirement. Therefore, a life insurance policy provides multiple benefits that complement your needs.
- Manage your credit carefully
Many lending institutions offer attractive terms and conditions of a loan. Besides, banks provide credit cards with numerous features and benefits. It is important not to be lured by such offerings. A high interest is charged on credit cards if the outstanding balance is not paid before the due date. The best solution is to avoid credit unless necessary. If you do borrow, you may draw up a repayment plan, to help you manage your finances easily.
- Save for your retirement
Young individuals often do not think about retirement, as it seems to be a long way off. However, saving for your golden years early in life allows you to enjoy financial independence even when you are not working. Saving systematically throughout your working years helps in accumulating a sizeable corpus, which may be used to have a good quality of life, meet personal goals, and cover health expenses once you enter the retirement phase.
- Diversify your portfolio
Financial advisors recommend diversifying your portfolio to avoid devastating losses in case a particular asset fails to perform. The key strategy is asset allocation in various instruments such as debt funds, equity funds, and balanced funds, among others. You may consider various investment avenues based on your age, current financial position, and risk tolerance.
The entire concept of what is financial security and how to achieve it must be taken seriously. By keeping the aforementioned tips in mind, you may have enough money to cover emergencies and meet your future financial goals.