Tips for financial independence for Millennial Workforce
Wondering on how to best plan your financial life at the beginning of the career itself? Well, while it may be the right thought coming to you, it is not quite easy a task. In case you are just recent fresh graduate or fresh into the job market, several life transitions are on your way, and it is all in your hands to handle several financial situations from now on. It is essential to plan and guide the present and future successfully.
Be it just fresher in a career or starting a new life in a new city or taking major life decision, financial decisions always play a vital role in your life. You may have trouble to think about planning finances and cash flows, we understand that. Being just the beginner, you would need the help of some tips and tricks which can possibly guide you on the path of financial freedom. Let us see a few of the life changing tricks in this article.
There is nothing like having a tentative plan for future and present finances. They are like backbone which helps you to know the smart goals. Create a list of important financial goals and life goals and make a log. Make sure you create a dream board which can tell what all you want in life and finances you would require for that. Along with that, create life goals, possible life events and finances, regular expenditures, long term savings, and retirement goal. These will help you be prepared and know what is in store for you and what your responsibilities are. This may be a first home, marriage, parent’s health plan, travel and so on. Taking a good time to create this list is important as this will help you prioritize on finance plans as well.
Begin to create a budget every month
One cannot emphasize the importance of creating a budget every month. This is a realistic and flexible idea of knowing what is in store for you. This will also give you the financial freedom to know what you can spend on, what can you splurge on and how much to save. On average, Indians generally do not have the habit of creating budgets and spending plan in general. However, this may not be as difficult as you may think so. Creating a few guidelines at the beginning of the month does no harm but instead is good. you can also follow through online and digital tracking tools to create a comfortable budget and spending plan. Make sure you divide into savings as well, with short term saving, emergency fund, future savings, savings for a particular goal in the near future and so on. This will help you evaluate the expenses and know what is essential for you.
Create automatic savings
Once you make your spending plan, you can also go ahead and put a savings plan. While savings is done by many, the right savings plan should be taken into consideration as per income source, consistency, life goals and so on. One important thing is to make an emergency fund which is maintaining six months of minimum living expenses in case of unforeseen incidents. This will help you get sorted at the first level and then think of long term savings. One can create automatic savings as well where at the beginning of the month, the savings are automatically debited from your account and are deposited in respected realms. Make sure you have automatic savings through the deduction for at least ten percent of your income consistently.
Clear your Debts
While we know a few exceptional situations may throw us to take debts, it is crucial to make sure there are no underlying debts at first. Personal loans, debts should be first cleared before you begin saving a goal. Further, do not load up your credit card balance; make sure to pay it up on time always. That is why the emphasis on the emergency fund is also made so that debts situation may not likely arise in the future of unforeseen circumstances.
Limit on your temptations and spending
There are various aspects and things in life which we may want. But prioritizing them is firstly required. It is not simply ending of life in case you do not acquire the thing you need. However, one does not need to forgo necessary and required dreams as well in life. Hence once you chalk out your plans for savings, do not get tempted for spending on things which you may regret later in life. Withdrawals from savings should be limited to least extent in the case of most required purpose in life or for what you sincerely wish to have in life. Or else, in other cases, it is not recommended to withdraw and use up your savings for short term temptations.
Financial priorities and financial independence
Once you make sure you do not have any debts or outstanding balances to pay, then you have to make sure of prioritizing every financial aspect. For instance, you took an education loan for your studies, and you got a job. The first thing is to pay off all the educational loans you have in hand. These should be viewed as a priority. Further, just like this case, you have to chalk out your preferences every month in even small spending behavior and actions. You want to buy two things in the month; you should see
what is required for you and what is splurging. You can take a wise decision in this way.
Always remember, financial freedom is just not about earning much and saving much but knowing what it means for you and how freely you can have an idea of finances planned, goals planned and emergency sorted. It does not really matter on how much you earn, what matters instead is knowing what to spend on and what not to. it is knowing what goals you have and want to achieve and what you look forward in doing. Now one should note that this definition keeps changing for everyone. Hence make a plan and prioritize on every financial aspect in your life, from short term to present to future. This will enhance your clarity.
Know the smart saving behavior
Further, it is not just about savings but doing the right savings. Know more about savings behavior in your country. In India, people save mostly in the form of real estate, gold, deposits, bonds, shares, and mutual funds. Now one should know to what percentage of savings one should keep in these. Not everyone can depend on one formula due to differences in salary, lifestyle, savings goal and life goals, along with necessities. Hence know what you want to invest on at first, and how you want to diversify your savings.
Further, do not under estimate the tax saving method too. Know what suits your best, talk your HR in the office and know how you can take advantage of saving tax through your savings every month. for instance, you are planning to buy a home then you know how much you want to do EMI and how much down payment through which you can save particular portion of the tax. Further, know tax savings bonds, and tax savings schemes in the country like National Savings Certificate and so on. The employer can help you get an idea on taking full advantage of tax savings which can help you a better plan.
Being at the beginning of the career, you are at the right point of time in knowing how to begin and get to know the foundation of achieving real financial freedom. This is the time you can clearly start with planning financial choices smartly. While many of us do not really understand and learn these financial lessons, it is essential for a graduate to know how to plan smart, celebrate the goals and set life’s stage early and in a transparent way.