Financial habits for a Debt Free Life

Ramesh and Suresh, two software engineers. They went to the same college, hail from the same financial background and make the same salary. Yet Ramesh owns a house in Mumbai, has a stable balance to life whereas Suresh is finding it difficult to meet both ends meet on a regular basis. The difference in their financial picture could be night and day because they view or rather handle money matter very differently. One chooses to walk in the path of debt free life whereas the other doesn’t quite see the benefit of it. We aren’t saying Ramesh didn’t ever carry debt. He might have carried debt in the past or might have witnessed the havoc that carrying a large amount of debt has had on other people’s’ lives, vowing never to be in the same position. This may sound like unattainable, but debt free life is something you can achieve. It will take some time and you will need to put in the work to take the path of Ramesh. Start with the steps we suggest and then you decide where you can go from there!

Don’t be ignorant

Every penny of yours is hard earned so you can’t afford to ignore where it is going. At least debt-free people like Ramesh certainly won’t. Debt free people attach a high value to every penny , because they know how hard they had to work to make that money. Be watchful over your money and money your accounts regularly, so you know what’s the status. Tracking your spending — every rupee that comes in and every rupee that goes out — is one of the best ways to maintain control of your money and reduce how much you’re wasting or saving or investing each month.

Don’t go overboard with spending

This is one advice that is for everyone trying to get a debt free life or trying to have financial independence – don’t go overboard with spending. The trouble is that many of us have a hard time following it. We live in a world where we constantly hear about the things that we “should” buy. It’s very easy to spend money on extra things that we don’t need (you can list 20 things instantly). Debt- free people do not waste money on unnecessary items and they are always checking to make sure there are no hidden fees on their bills and there are no fraudulent chargers on their bank statements. Living below your means is key for your long-term financial success. If you regularly spend all of your money, or more money than you make, you can’t expect to grow any savings. To accomplish this make sure to chalk down a budget for each month. Then you can work with that number to make sure you don’t overspend.

Don’t neglect saving

People who are in debt generally carry a mentality of scarcity (mindset of never having enough). And very often this actually causes people to avoid saving and continue spending, because they associate cash flow with a sense of temporariness. You have to put your money to saving first and then workout your spending schedule accordingly. People who are debt-free make it a priority above anything else! According to experts, the rent/mortgage of an individual doesn’t make up more than 30% of his or her monthly spending. So leaving that aside one can easily get a buffer of 10% to 20% of the remaining money towards the future. That means your retirement account, emergency fund and other savings accounts. Workable!

Don’t overlook the power of “knowledge”

People who are debt-free take charge of their financial education. Being debt-free for them hasn’t happened by luck or through a trick — it’s because they’ve realized a thing or two about money, and they are committed to getting better at it. Start taking responsibility of your finances, and you can do so by gaining knowledge on how money works. If you’re truly committed to reaching financial freedom, you have to invest the energy required to make it happen. Take for instance home mortgage: Most people aren’t aware that by the time they finish paying on a 30-year loan, they will actually be paying over double the home’s original value — due to high interest! People who are free from debt understand the consequences of debt, and they understand why bad debt should be avoided whenever possible.

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Retirement Planning for Millennials

The millennial generation is known to plan ahead in life. Next summer vacation – booked. Latest gadget – ordered. International concert tickets – purchased. The generation works hard, works smart and knows the importance of planning and executing. So, if you are of the millennial generation, you should agree that the planning to a comfortable retirement should begin now. The days of getting a job for life with a secure pension are gone. Nowadays, one has to plan ways and take initiatives to create pension arrangements, especially if one is planning to retire early. The advantage of starting now or early is that you will have plenty of time to benefit from your early efforts. Here are few financial moves that will help you plan your retirement better.

Eliminate debt. Grow wealth.

First and foremost – reduce liabilities. Which means avoid spending money on things that will lose financial value or have no value in the coming years. Also, pay off other debts such as credit cards and consumer loans, otherwise you'll be paying unnecessary interest that could otherwise be put towards your savings. While you do so, you need to also focus on accumulating things that grow in value – investing and watching your money grow, through things like stocks and real estate. If you make this a regular thing, it will help you develop a high "net worth" calculated by how much your assets exceed your liabilities. You can't retire unless you have a high net worth, and you can’t get there unless you make the right financial choices – especially by starting now.

Assure yourself to get insured

This generally doesn’t come as a priority to most but trust me it should top your list. You may think that health insurance is a waste of money because you are young and in good health. But if you truly want to gain financial independence and work toward an early retirement, you must be properly insured. After all you don’t want to leave the power to the uncertainties of life. It's hard to save and invest regularly if you find yourself saddled with pocket burning medical bills. Even if you have insurance now, review your policies to make sure you're covered at the right levels. Not having apt insurance can send your financial future off track. Please review to keep it moving on track.

Don’t wait for an emergency, have a fund

Like we were talking about the importance of having insurance, it’s also important to have an emergency fund allotted for unexpected events in life. You never know how life might surprise you, and sometimes events can blow a hole in your budget unexpectedly. The car may need replacing, you fall in love with the home of your dreams, or a once-in-a-lifetime investment opportunity comes along. Now how would you say no to that! So, start putting some money aside so that you can take advantage of that opportunity at that point in time.

Diversify your investments

A broad range of investments is also an important component to your planning. Here you should think and act big. Sticking to a narrow portfolio of domestic investments could hamper your ability to turn a profit. Besides investing in diverse funds, consider owning real estate, whether that’s private rental units or commercial property. Most people doing well today either have a good pension or have passive income from investments in real estate. But it’s important to understand that real estate is a long-term investment opportunity, and people looking to retire soon should definitely explore the market!

Let your hobby, pay for you!

The passion for travelling, photography, the guitar classes, you took as a teenager, that’s worth something. Isn’t it? Cash it to accumulate enough money for an early retirement. Sometimes, your day job may not be enough, hence you can look for other ways to generate cash. And it can be a lot fun! This may mean freelance writing or playing guitar at local coffee shops. Maybe it's tutoring math, working as a DJ, or doing anything that your are good at. If you're young, you have energy and freedom, and the ability to make some cash on the side. Earn it, invest it, and watch it help you retire for good from work at an early age.

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