7 Steps to Financial Independence
Effective fund management is the key to financial freedom. Over time, small and consistent habits can bring huge results. Before starting your journey of financial freedom, sit in the corner, pick up a pen and paper, and write down what is your ultimate goal? What kind of life do you want to live? Where do you want to live? If you have unlimited free time, what will you do? Once you have all the answers, you can start, but remember that the more luxurious lifestyle you imagine, the higher the price you should pay. The minimum requirements can be met earlier and can lead to early financial independence.
1. Financial dependence: The first stage of this journey is dependence. When you are completely dependent on your parents, guardians or third-party financial assistance to meet your needs. At this stage, all your attention should be focused on skills investment. Remember, investment is not only a form of money, you can also invest time and energy. Master skills with good market value and learn how to sell them. If you are a student, even if you have to work without pay, you must enter the practical industry as soon as possible. Gain experience and turn it into a good job.
2. Financial survival: This is a step where your income is sufficient to manage all expenses. You may be heavily in debt, but you have enough capacity to pay bills, manage debt, and go smoothly. Your income is equal to or greater than your expenses. If there is an imbalance, please improve your profile, find a better job, increase your net income or reduce your expenses. This is the survival stage, also known as hand-to-mouth. This is the least needed to manage his life.
3. Financial security: Once you pass the survival stage, your first task should be to create an emergency fund, starting from $1,000. In any case, the fund should remain stable. This does not mean that you should not use it, but to replenish it as soon as possible. Debt settlement from lowest to highest. Clear your study loan, car loan, etc. in order to save your remaining amount.
4. Financial reliability: At this stage, your income exceeds your needs, please take good care of your emergency funds to deal with any uncertainties. Now, your next task is to find small investment options and save for the future. You can invest in many ways, such as stocks, bonds, insurance, etc. Just make sure your investment plan is safe and reliable. Don't be part of the "get rich quick plan." Over time, compound interest is an amazing way to increase investment. It just means reinvesting the gains you get in the recurring cycle. It will increase your net investment portfolio.
5. Financial sustainability: At this stage, you must get something from your investment choices. Once you have enough money on hand, you can look for passive income options. This is the best way to get rid of the 9 to 5 routine and become your own boss. Invest in business, real estate or establish partnerships.
6. Financial freedom: When your annual passive income is equal to your annual salary, financial independence is achieved. At this stage, you no longer rely on your company to make a living. You can freely explore the world. However, the goal of achieving financial freedom varies from lifestyle to lifestyle.
7. Financial freedom: Some people have gained financial freedom, but due to lack of management skills and inactivity and excessive consumption, they soon lose financial freedom. Similarly, there are some people who never enjoy at this stage and continue to compile assets. Both of these methods are unsustainable. At this stage, you have to learn not only money management, but also asset management. You should manage your inactive assets in an effective way, look for upgrades in your passive income sources and maintain a smooth flow of funds. Make sure that the current benefits pass from you personally to family, relatives, and friends. The wider your vision, the less likely you are to collapse.