Best ways to achieve freedom financial
Financial Freedom Many of us heard about this word’s financial freedom and also want to know the meaning. Financial Freedom means you are managing money instead money manages you.
In Simple words Financial freedom means you Have the fixed source of passive income means your all expenses will be taken care of by your passive income and if you don’t have an active income source then also you will survive and do your all expenses. Before knowing steps on how to get financial freedom to let’s know about active income and passive income
As it is clearly mentioned in its name Active. Active income means you will receive income as long as you do work in other words when you will do work you will be paid according to your work and when you will stop working you will not get paid Example of Active Income are – Teaching, Doing the job in an office , etc.
Passive means you will receive income even if you don’t do any work. To earn this type of income you need to do hard work for a few months or a few years and after doing hard work for few days or few months you will start receiving income without doing any work.
So to earn the passive income you just need to do hard work and smart work for few months or few years. Example of Passive Income -MLM (Multi-Level Marketing ), Buying stake in companies who pay high dividends every year to its stakeholders, etc.
With Passive Income definitely you will achieve financial freedom but here we will discuss methods on how to achieve financial freedom with the help of Active Income
1- Knowing how to manage your money is your first step towards achieving financial freedom. In this very first step. Managing Money you should know what are your essential expenses and what are your other extra expenses.
You should have made your monthly budget when the salary credited to your account. Always try to save in the 50:30:20 means 50 % on your essential expenses. 30% for your luxuries and the rest 20 % should be your savings.
2- Always pay your debt as soon as possible is your next step towards achieving financial freedom . It means if you have any Loan on you you should pay this loan first because you have the amount every month in the form of EMI and this will give you pain .
You can choose the part payment option many loan companies to provide a part payment option to repay the loan before the tenure. In the part payment you can maximum deposit upto 25% of the loan amount which will be remaining after one year of installment.
Part-payment can be done every year but only a 25% amount can be repaid. Part-payment helps you in reducing the tenure of loans and also it makes your mind free.
3 – Always have minimum of six months salary in your savings account . You should have atleast six months of salary in your savings account . If suppose you loose your job and it will take some time to find new job . If you have atleast six months of salary in your savings than you can freely find new job .
4- Buy one Health Insurance and Term Insurance – IN today’s world everyone should have two types of insurance Health Insurance and Term Insurance.
Due to advancements in the technology Health industry has invented many new technologies for treatment and it increases treatment cost and no one knows when a health emergency comes in his way.
So to save your savings and to make your financial freedom health insurance is a must for your whole family. If any mishappening happens with you and to support your family financially after you Term Insurance is also must and term insurance must be 20 times your yearly income.
5- Invest in Stocks and Mutual Funds – One should invest in stock market directly if one want’s to achieve financial freedom . It is the mandatory for one to invest in stock market if one want’s to become financially free .
Investing in stock market compounds your money at very faster rate and it is 12% minimum . For investing in stock market one should invest in the top 10 companies of stock market .
You can refer to the Best Multibagger stock article by clicking here. Investing in the stock market requires ample patience because sometimes the market underperformed or sometimes outperformed its index.
If you are having fear of losing your hard earned money then you can invest through mutual fund route . Investing via mutual fund will give you little bit of less return and this little bit difference had a huge effect in long term .
The mutual funds also invest in the stock market but they have hired professionals to invest in stocks so they charge some fees due to this fee returns in the mutual fund is less as compared to the stock market.
These are some points by which one can achieve financial freedom in one’s life but remember one thing achieving financial freedom with the help of active income is not everyone’s cup of tea.
You need passive income to achieve the goal of financial freedom. For passive income, you have to learn some sort of skills. For the top in-demand skills, you can refer to the article.