Principles of financial independence

It often happens that even people with a fairly high income do not know how to properly manage their money and, therefore, do not have financial independence.

This negatively affects the standard of living: a person cannot develop and his financial situation is unstable. We bring to your attention the basic principles of financial independence. If you stick to them, you can gain confidence in the future and start building your own capital.

Create a financial cushion

A certain amount set aside for contingencies is a necessity that every financially literate person should consider. Many became convinced of the correctness of this approach, when during the quarantine a large number of people were left without work, without savings and found themselves in a difficult situation.

You set the size of the financial cushion yourself, however, many economists recommend accumulating six wages and spending this money exclusively in emergency situations. Thus, even if the source of income is lost, it will be possible for some period to maintain material stability and the usual standard of living and, at the same time, look for new ways of earning money.

Control income and spending

Discipline in this aspect will help you learn to optimize costs and save more money over time. Conduct a small experiment: keep a record of absolutely all expenses for a month, and then determine what the most money is spent on.

The result may surprise you, since many spend a significant part of the budget on impulsive purchases, which they could easily do without, this is one of the bad financial habits. Thus, money goes through your fingers, and meanwhile, it can be used more rationally, for example, to invest or set aside for more important needs.

Increase your capital

This point smoothly leaves the previous one. What to do with the freed up money? Make them work for you! In the modern world, almost everyone can figure out where and how to invest correctly (in securities, real estate or other assets).

Investing some part of the capital in investments will allow you to provide yourself with another source of income, which means one more step closer to financial independence and stability.

Stop living “on credit”

Of course, we are not talking about those necessary things that are very difficult to acquire without taking out a loan, for example, real estate. Only a small part of the population can afford to make such a large purchase right away and at their own expense.

But it is worth thinking about the advisability of acquiring less significant things on credit. For example, they include luxury items: expensive equipment, a car, etc. Also, the old Russian fun is still very popular – a wedding on credit. Ultimately, you pay the bank huge interest and lose your own money. We recommend that you carefully consider such transactions and, if possible, refuse loans unless absolutely necessary and live “within your means”.

Set goals

Aimless accumulation of money is often a bad idea, so you always need to formulate financial goals and draw up a plan for their implementation. At the same time, goals should be divided into short-term and long-term ones and step-by-step towards the implementation of each of them.

This approach will allow you to achieve financial independence and clearly define the ways to achieve your goals.

Leave a Reply

Your email address will not be published. Required fields are marked *