5 Things for being Financially Independent

Financial responsibility encompasses more than you would imagine. In the end, there are three things to do:

• Taking care of yourself
• Taking care of people dependent on you
• And keeping your promises

It implies that you should take care of your immediate family and yourself. Make plans for both the now and the future while being careful not to take on any debt you won’t be able to repay.

Essentially, these five things can make you financially responsible:

Be on a Budget

The basis of financial planning is budgeting. It explains where your money goes, item by item and category by category, and it aids in keeping you on track. Do you spend too much money eating out? Do you have enough money set up to retire in comfort? Only when you have created a budget will you be allowed to respond to these queries.

Take a look at your bank and credit card bills for the past year, and then categorise your expenses into the following groups: housing, utilities, food, transportation, medical costs and insurance, savings, leisure, and personal spending. In addition, take into consideration any one-time costs, such as tuition or annual travel expenses.

Live within your means

A budgeting exercise reveals whether your expenses exceed your income. To fill the gap that is revealed when one creates a budget, many people turn to credit.

Start by examining your spending in each of the aforementioned categories, then trim any “excesses” to simplify your budget. While the necessities cannot be eliminated, discretionary spending needs to be restrained to balance the budget.

How do you decide which costs to remove from the list?

By turning absolute costs into percentages, you can determine this (of the overall budget). It is possible to analyse each expense as a piece of a pie by arriving at budget percentages for each expense. You may determine if you are going over the limit by comparing the percentage of each item to the prescribed budget percentages.

Even if one saves 20% of their salary, they might not be making much progress toward their financial objectives. Therefore, if your income is insufficient, focus on advancing your career rather than just reducing your spending.

Save enough

Savings should be between 20% and 30% of one’s gross income, according to financial experts. Depending on the time of life, it may be invested to achieve a variety of financial objectives, such as retirement or the higher education of children.

Additionally, one needs to save a respectable sum each year. Even if one saves 20% of their salary, they might not be making much progress toward their financial objectives. Therefore, if your income is insufficient, focus on advancing your career rather than just reducing your spending.

Work to automate the channelling of your savings into several investments.

Shun debt

Whenever you use credit to purchase something, you end up paying more than the MRP. For instance, if you take up a car loan for five years, a car with a price tag of Rs 5 lakh practically costs you Rs 6 lakh. Since their worth keeps declining, it makes little sense to purchase a smart TV or imported bike in “simple” instalments.

In contrast, if you plan to live there (saving money on rent) and you aren’t going overboard with your spending, it might be worthwhile to purchase a home on credit.

To maintain a good credit score, use your credit card sensibly and pay all of your bills on time. Seek financial assistance if you are repaying various debts to escape the debt trap.

Set goals

Are you considering purchasing that stylish cell phone? Decide on a financial objective that will encourage you to save more responsibly. Only purchase a phone once you’ve met your monthly savings goal.

Set many other financial objectives, both short- and long-term, to prepare for the future. For instance, setting a retirement goal that specifies your desired retirement fund will help you choose how much to save aside each month. Alternatively, you may set aside money for a fantasy vacation. Have an emergency fund that can cover expenses in the event of a job loss or medical issues.