HABITS THAT HELP CREATE YOUR WEALTH
As we metamorphose into adults, not only we start thinking of our vocation but we should also start thinking and planning about our finances. Money does play a prominent role in our lives and that is why it becomes crucial to invest it in a way so that it helps us build wealth in the future.
Becoming financial independent would mean that you are in charge of your own money. Sounds fascinating right? It is fascinating if you know when, where and how to use your money.
The road to an independent lifestyle is not an easy one, but can be achieved if it is planned well. Don't think of this concept as a later stage of your life, in fact: read more about it, talk to your parents or relatives about it and research it.
As a 19 year old, I take this concept very seriously and try applying various aspects of it in my life. Here are some tips which you can follow to gain financial independence:
1. Learn to save money- no matter what your income is
I've heard people saying, ‘I'll start saving money when I earn more or I'll start saving money when I need to’. The ‘when’ never comes! Before you fall into this slump, remind yourself that the ‘when is now!’. Try not to keep saving money as a last option because before you know it, you'd already have spent/lost it. If you don't have enough room in your budget to save money now, you might want to increase your income, lower your expenses or both. Saving money is one of the very best strategies to make sure that you are always moving forward. Hence, save first and spend later.
2. Live below your means
Don't worry, this doesn't mean that you stop living the way you are right now. Try to differentiate between your needs and wants. Needs include things like food, water, hygiene, home, basically the things which are needed to survive. You probably clearly know what your ‘wants’ are. Once you know the difference between these, start managing your expenses in that way. If you are an impulsive buyer, try to delay your buying for at least a week because when you do that, you might realise that you never needed it. Give a second thought before you spend. This is the first step to start saving some money which you can use to invest.
3. Create a budget and stick to it
Creating a budget isn't that difficult when you differentiate between your needs and wants. Plan out a monthly expense for yourself. Try to create a budget in a way that all your needs are more or less fulfilled. Also, creating a budget doesn't mean that you get to spend no money or that you have to completely deprive yourself. It just means that you have to spend your money wisely. If you're just starting out, don't be too hard on yourself. Just try to be consistent and you'll master the skill in no time!
4. Keep a track of your expenses
If you're trying to save your money regularly but still wondering where all your money is going then maybe you should start tracking your expenses. Keeping a track of where you are spending money will give you an exact idea as to where you need to cut down. You can either do it by writing it down or using spending tracker apps. I remember reading a beautiful line on the Forbes website which said:
‘Never let excuses stand in the way of saving money. It’s a long term goal that starts today and never stops.’
5. Work, Work, Work!
How will you save money if you don't earn any? For those who already have a job and a stable income, try to move forward in your career and visualise where you want to see yourself in the next few years of your career. For those who are just starting out, you sure have a long way to go but I assure you that you are going in the right direction. Working would not only help you earn money, it would inculcate a sense of confidence and self-esteem. It would teach you to be responsible and professional in whatever you do.
6. Always have an emergency fund
After you start saving money, cash out a small part of it and create an emergency fund. An emergency fund should be held in a perfectly safe account like a savings account or a short-term certificate of deposit. The money in this fund would solely be used for purposes like medical emergencies, recession, loss of income/job, etc. This would help you save more money in the long run. I'm sure the crisis we are facing today (COVID-19) clearly depicts the importance of an emergency fund because you never know what may happen.
7. Invest to grow
A penny saved is a penny earned! Once your emergency fund has been stocked, you can now think about investing your money. This is an very important step because investing is about using your money to build wealth. The more you invest, the closer you get to becoming financially independent. There are different ways in which you can invest your money, like mutual funds, fixed deposits, government schemes, LIC, real estate, precious metals, stocks, etc. If you don't know how to go about investing your money, I would recommend that you educate yourself and/or take help from a financial consultant or expert.
I hope these tips help you in your journey to become financially independent. In a world running on credit cards and EMIs, the value of financial prudence is underestimated.
However, the goal of this journey isn't just having more money. The goal is living life on your terms.