To achieve financial independence is one of the most cherished desires we all have at a certain point in time. In most cases, we don’t plan properly and even if some of us plan, we don’t execute it properly and give up somewhere in the middle. The first few steps towards achieving financial independence are learning to reduce expenses. To achieve financial independence, one must follow a process and plan with a certain time frame in mind. As it goes for a minimalist lifestyle, achieving financial independence is also not a one-day event. We can start with the below 7 steps to achieve financial independence.
- Usage of Cash: It was true then, it’s true now and it will be true forever “CASH IS KING”. There is an emotional relationship with all the different ways of spending money. Paying by cash while counting the currency raises the level of awareness towards spending than paying by card. When we see what we are giving away, we feel more connected towards it than seeing some messages of deduction. Follow a 30 days rule of paying cash towards at least 90% of the expenses and soon you will realize, you might have stopped yourself at least 10% of the time.
- Delaying the impulsive buying: We are a generation where everything can be purchased through the usage of the Internet. This accessibility increases our probability of spending by 2x than buying offline. The day we get our salary, we get an impulse of buying something we wanted. Delaying this impulse by a couple of days gives us the time to think through if we really need to purchase the particular object. In most of the case, you will not make the purchase and eventually save some money.
- Going Offline: Online discounts, flash sales, festival sales have created a perception that online is always cheaper than offline. This is not entirely true and most of the time, we don’t even investigate. While increasing the impulse of buying something we might not actually need, some time online purchases made us pay more than offline. Comparing online prices with offline may help us to save some more money while also stopping us from some unnecessary purchases.
- Abandoning Credit Card: Credit is always a credit, no matter borrowed from whichever source. It’s never your money, its somebody else’s which you are using to fulfill your wants in 99% of the cases. Usage of credit card is a behavior change and once changed, most of us crosses the threshold line and start paying interest. One proven way to avoid credit card interest is to enable auto-debit. This way you will only spend what you can immediately pay in the coming month. One trick is to keep the credit limit to the most minimum threshold.
- Clear debts: If we are on debt, we can’t invest to grow our money until and unless the debt is cleared. Clearing a debt automatically earns us the interest if any, we pay on our debt. For e.g. if you have a personal loan with 11% interest, clearing the loan is the best option than investing money on any kind of investment. The clearance automatically earns your 11% and then interest on that investment.
- Maintaining Expense Ledger: We are rarely using notebooks and pens these days for anything. Apps have replaced everything from taking notes, maintaining to-do list, maintaining expenses, etc. With all these easy options available, still, most of us don’t maintain the discipline of using any expense manager. We all need to revisit our expenses from time to time so as to understand our spending pattern and work on it. Learning to manage finances is a skill and it needs some cumulative effort. If you are not using any app for your expense management yet, make sure you install one today. One of the simple expense managers I use for myself is Monito as it doesn’t read my messages and emails.
- Starting a side Hustle: This is a vast topic about why we need a side hustle, what side hustle should we choose, what is suitable for me, etc. As of now, we need to understand, technology is changing very fast and each one of us is replaceable. To be replaced, we need not be bad at our skills. There can be various factors out of our control which can be the reason for our lay off. Having a side hustle even if its small provides us the confidence of self-dependence. It might also happen that we fall in love with our side hustle so much that we make it our primary source of income. Nothing can be better than falling in love with what we do.
As the process to achieve financial independence is long term and time-bound, we can come up with various ways like controlling grocery expenses, investing money in the right way, upskilling ourselves for any side hustle, etc. We all have to start from one point and controlling our expenses must be the very first step towards becoming financially independent.
Feel free to share your ideas and thoughts to achieve financial independence in the comments section.