Money is king but you should control over the finance you have instead of letting it control you. Here are 5 tips to help you make your money work for you. Financial freedom has a different meaning for people from different walks of life.
Some people define financial independence as the ability to buy anything they want, whenever they want. For many, it might mean not having to worry about how they will pay their bills or unexpected expenses. For some, it may simply mean becoming debt-free, whilst for others, it may entail having enough money to retire. While all of these interpretations are right in some ways, they are all half-baked solutions.
So, one of the better ways to define financial freedom is to have enough residual income to live the life you desire without worrying about how you’ll pay your bills or deal with an unexpected expense.
In other words, financial freedom does not always imply being wealthy and possessing a large sum of money. Instead, it is more about having control over your financial present and future.
You’ve probably seen two people on a similar professional path make the same amount of money yet end up with vastly different net worth. Instead of just being skillful and working hard, you must also make your money work for you to become wealthy.
Here are 5 things you can do to make your money work for you.
First create a financial strategy
A financial plan is a statement of your life goals, along with a financial plan to fulfil them.The difficulty with wealth development is that it doesn’t matter how quickly you run until you know where you want to go. Set goals for your retirement, your children’s education, your stock portfolio, and so on. Then, working backward, determine how much you need to save and where you should invest.
The best method to achieve your aims is to link your investments to specific objectives. Financial plans are adaptable and may accommodate as many of your aspirations as feasible. Develop a bottom-up strategy to reach these objectives and then streamline your investments as you move forward.
Get rid of your high-interest loans
Always aim to take loans for which you don’t have to pay loans. You can borrow money from family and friends for this. High-cost debt is the number one killer of long-term wealth. Consider credit cards and personal loans. A credit card’s annual interest rate is about 35%, while a personal loan may cost you around 20%.
There is no possibility to build money if you pay so much interest on your loans. The trick is to pay off high-interest debt as soon as possible.
Paying off a credit card in full is equivalent to earning 35% on your investment, and you may put these savings to greater use.
Not only should you save money, but you should also invest in stocks
There are two sides to this debate. First and foremost, how do you save? Savings should not be viewed as a residual amount after spending. Determine how much you need to save first, and then adjust your expenditure accordingly. Second, in the investment world, there is no greater danger than not taking a chance.
If you put long-term money in a liquid fund that pays 4% net of taxes, it will take 18 years to double. That is a terrible use of your risk capacity. If you want to create wealth in the long run, you should invest in equities.
A methodical approach to investing is effective
Adopt systematic investment, sometimes known as the SIP technique. For starters, it synchronises with your income flows, ensuring that your investments work hard for you each month. Second, because of their nature, SIPs provide the benefit of rupee cost averaging.
Above all, SIPs are about financial discipline, which comes from investing on a consistent and consistent basis. That is how you can make your money work harder for you.
Take risks only when they are justified
It makes no difference if you have the ability to take risks or a high risk appetite. Remember the golden rule: higher returns imply higher risk, but bigger risks do not ensure higher rewards. The moral of the storey is that if you want to make your money work really hard, you must take calculated risks. Investing in a diversified equity fund for 15 years, for example, is an example of calibrated risk. That is not the same as playing the roulette wheel in Las Vegas. Before you go in, weigh your options.
There are more ways for you to achieve financial freedom. But the above 5 tips to help you make your money work for you should also help control your finances.