how to be financially independent

How to Become Financially Independent

If you want to become financially independent as fast as possible you should set realistic goals.

You should know

  • Avoid loans
  • Spend less invest more
  • Track your spending

But I post 5 points that will help you to become financially independent and free.

Important Note:- Do not tress too much about money, enjoy your life but keep a balance between spending and investing.

The Advantages of Financial Independence

Achieving financial independence has numerous advantages, the most important of which is the freedom to spend your time however you want, without being bound by a work schedule or reporting to a boss.

The work you choose to do becomes more enjoyable because it is something you want to do rather than something you have to do.

It also allows you to quit any job or type of work you choose without the stress of having another job lined up.

Financial independence can have a positive impact on both your physical and mental health. Being unattached to a full-time job allows you to devote more time to self-care.

how to be financially independent

1. Purchase a House or Rent it

At a young age, everyone wants a house before marriage because a house is a need but do you think you should purchase a house at an early young age.

Let us know two scenarios

Purchase House Vs Rent a house

Purchase House

2 BHK Flat cost almost 1 Crore Plus

Example

  • Cost of house: 1 Crore
  • Down Payment: 20 Lakhs
  • A loan from a bank: 80 Lakhs
  • Interest Rate: 6.7%
  • Tenure of Loan: 20 Years

Monthly EMI Rs 60,592 for 20 years

  • Loan Amount: 80 Lakhs
  • Interest Amount : 65,41,971
  • Total amount payable : 1,45,41,971

Rent a house

Rent a house for Rs 30,000 per month

Save EMI Rs 30,000

If you saved Rs 30,000 Per month and Invest for 20 years

  • Monthly Investment : Rs 30,000
  • Expected Return: 12% Per Annum
  • Time Period: 20 years

In 20 Years You Investment will be

  • Invested Amount : Rs 72,00,000
  • Estimated Amount : Rs 2,27,74,438
  • Total Value : Rs 2,99,74,438

Why this is important because In this digital world people keep changing their jobs and work in different companies and if they quit jobs and start their own business, then they need to move to another city or change places.

Your job in Pune city but you got another better job in Mumbai then how you shift your house from Pune to Mumbai if you rent a house in Pune then it’s quite simple but if you already own a house in Pune on EMI then it’s hard to sell.

You are capable of buying a house if you earn Rs 1 Lakh per month in a metro city but you feel the pressure of EMI every month but you invest more than you spend then after some years you will become financially free and at that time you can purchase a big house in cash.

2. Never Borrow to Consume

how to be financially independent

In the united states, almost everyone uses credit cards and loans.

They purchase things today from their future income.

This is fine in the US because the interest rate in the US is 2 to 3% and in India Interest is 12 to 18%.

Therefore you should not borrow for consumption.

You should consume your own money without borrowing.

If you are borrowing then it should be profitable.

Example: If you borrow Rs 1 lakh at 12% P. A and you have to pay interest of Rs 12,000, but you earn Profit of Rs 24,000 then you can pay Rs12k interest this profitable for you.

Note: You always keep in mind never to borrow for consumption.

Borrow for starting a business or investment.

Borrow for consumption but always use No COST EMI

3. Learn New Skills

how to be financially independent

You should learn new skills at any age of your life, then you can start a business using that skill.

Example: You can learn Digital Marketing and then you can start your own business or you can start your own website and then you can publish a blog post or if you build an e-commerce site then you sell your products on it anything you want to start digital. learn technology, investment planning, and finance whatever you like. from blogging, you can earn passive income from Google Adsense or Affiliate.

4. Power of Compounding

The power of compounding is the eighth wonder by Warren Buffet.

Money will compound with the help of SIP ( Systematic Investment Plan ) you can start SIP in Mutual Fund or Stocks.

Example: You make an investment of Rs 30,000 per month for the next 20 years.

You will make an investment of Rs 72 Lakhs

If this money grows by 12% only, but the stock index in our country is growing by 14 to 16%

After 20 years your money will become more than Rs 3 Crores.

This is the power of compounding – earn interest on interest.

So you can plan your life properly through SIP and grow your money

5. Refurbished Products and Shared Economy

Refurbished

You want to purchase a new car on a big budget but in the refurbished car, you can buy the same car at half of your budget.

Example: Purchase a new Toyota Fortuner Price Rs 50 Lakhs but if you purchased a refurbished Fortuner 4 to 5 years old then you can get a Fortuner at a Price of Rs 25 Lakhs. you can save Rs 25 Lakhs.

You get a second-hand car at depreciated value.

See how you can reduce your cost by purchasing a refurbished car.

Shared Economy

How to be financially independent in 2022

Previously catching taxi, cabs or auto was difficult because sometimes they did not treat you well and charged higher prices

Ola and Uber have changed entirely the experience of taxi services.

In Today’s world, it’s not a compulsion to keep a car instead you can use public transport and utilize the benefit of the sharing economy. ex :- ola, uber, metro, etc.

In India today if you want to purchase a new car is too costly because almost 30 to 50% is a tax on a single car.

New car cost – EMI, insurance, maintenance, depreciation, and driver then per month cost will be Rs 60 to 70 thousand.

You should not buy any depreciating vehicle on loan because its value also keeps on decreasing.

Note:- I am not a financial advisor, always consult your financial advisor before you buy a house or car.

Thanks for Reading.

If you liked the blog please share it with your friends and family.

Open Demat and Trading Account

how to be financially independent

Why choose Upstox?

  • Upstox is a trusted broker in India.
  • Free equity delivery trades for life.
  • Low brokerage on intraday orders ( RS-20/per order ).
  • Invest in direct mutual funds plans that charge 0% commissions.
  • Smart transfer feature to earn interest on idle trading account funds.

Open Account – Sign Up