Tips to Achieve Financial Independence, You can Follow These Tips!
You may often hear the term "financial freedom," meaning that you have enough money to pay and support your life goals. Having financial freedom means that you are in control of your finances and life choices.
At least there are 7 levels of financial freedom. The following are the seven stages of financial freedom:
Level 1 : Clarity
The first step is to check your financial condition, how much money you have, how much you owe and what goals you want to achieve.
You cannot achieve the goals you want without knowing where to start.
Level 2 : Independence
You wish to be financially independent. When it comes to this level, a person with enough income to finance their living needs without outside help, such as help from their parents.
At this level, you live paycheck to paycheck or take out loans to make ends meet.
Level 3 : Financial Ease
People at this Level still have some money left after paying for living expenses. The rest of this money you can use to achieve other financial goals, such as building an emergency fund and investing for retirement.
When you are at this level, you have financial freedom, but this does not mean you make a much bigger salary.
Just because you make a lot of money, doesn't mean you're actually saving it.
Level 4 : Stability
People who reach Level 4 have paid off high-interest debt, such as credit card debt, and have an emergency fund equal to six months of living expenses.
When you have secured an emergency fund, you already have a safety net in case of unforeseen circumstances, such as when layoffs occur.
At this level, you are not worried if you lose your job or have to move to another city.
Level 5 : Flexibility
People at Level 5 have enough emergency funds to cover at least two years of living expenses.
With that much savings, you don't need to keep it all in cash.
As long as you can access that money quickly when you need it, you have the flexibility to break free, at least temporarily, from work.
Level 6 : Financial Independence
People who have attained financial independence can live solely on the income generated from their investments. The investment can be in the form of property rental income, or an investment portfolio that generates interest.
To arrive at this level, you must invest a high percentage of your income. Pursuing financial independence requires a change of mind.
People were taught to save 5%, 10%, 15% of their income, and maybe you can retire when you're 65.
Many young people are starting to understand that if they aggressively save and invest, they can work more relaxed and have more control over their future and destiny.
Level 7: Abundant Riches
If a person at Level 6 needs to monitor changes in an investment portfolio to ensure retirement plans are on track, those of you at Level 7 have none of those worries anymore.
Level 7 is an abundance of wealth, they have more money than they need. You don't need to worry about money anymore.
Steps to Achieving Financial Freedom
How to reach financial freedom? One of the strategic steps to achieve this, of course, is to invest. The following are tips for achieving financial freedom:
Set goals
Financial goals are targets that you want to achieve within a certain time period. This target must be specific in value, so you can plan how to achieve it.
For example, say you want to have $50,000 in the next five years.
Know your risk profile
As an investor, a risk profile is something that must be known before making an investment, because it determines how much risk you are able to bear.
The higher the potential investment return, the higher the risk. There are at least 3 types of risk profiles, namely conservative (risk averse), moderate and aggressive (risk averse).
Choose the right investment
If you are a beginner investor, money market mutual funds are suitable for you to choose. Because, the risk is low, and your investment value tends to be stable. Money market mutual funds contain deposit assets and bonds with maturities of less than a year. (investopedia.com)
If you are getting proficient in investing, other investment instruments with higher risks can be tried.
For example, fixed income mutual funds, mixed mutual funds, and equity mutual funds. These three types of mutual funds are suitable for investors with a moderate - aggressive risk profile with an investment term of 3-5 years.
Apart from that, investors can also consider investing in gold bars or precious metals. Mutual funds, Retail SBN and gold, are both investment instruments that are worth considering to beat inflation.
Investment discipline and routine
The most important thing about investing is discipline. If you have set goals, you must routinely set aside money according to the planning at the beginning.
Mutual fund investment contains risks. Investors are required to understand fund fact sheets and prospectuses when investing in mutual funds.
No comments:
Post a Comment