alexa

Search in Indianmoney's WealthPedia

Home Articles How to Become Financially Independent in 10 Years?

How to Become Financially Independent in 10 Years?

IndianMoney.com Research Team | Posted On Thursday, January 30,2020, 04:41 PM

5.0 / 5 based on 1 User Reviews

How to Become Financially Independent in 10 Years?

 

 

What is Financial Freedom?

There is no perfect definition to financial Freedom and it may mean different things to different categories of people. For a teenager, financial freedom means entering the professional world and ending their dependence on parent’s money. Others may define financial freedom as the phase of life where you no longer have to depend on your active income.

Want to know more on Financial Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

While some others may define financial freedom as the time when you can do the work that you enjoy. Thus financial freedom means you are no longer tied to jobs or services just for the sake of earning money.

How to Become Financially Independent in 10 Years?

People who long to be financially independent must remember that financial independence doesn’t just happen. You need to implement regularity and discipline in your life to make it happen. It starts with planning various aspects of your financial life and then committing to the plan eventually. Here are a few steps that will guide you to financial independence:

See Also: What Is Financial Year?

Know your Savings rate:

Most people believe the key to creating wealth is high paying jobs. But this isn’t true. People often end up with very little financial independence even after getting highly paid. This is because people often end up amassing assets like an expensive car or a luxurious apartment with more money coming in each month. These are the liabilities that deplete your savings the most.

You can be financially independent even if you have a moderate income. The key to creating wealth is saving money at a consistent pace.  To escape the urge of spending money you need to understand that wealth is directly proportional to savings. The more you save the more wealth you can create through investments.

Live a Frugal Lifestyle:

This is one of the most important steps you can take to become financially independent in the next 10 years. This is because committing to the other steps is not possible until you adopt this one. A minimalist lifestyle will help you reach your financial goals easily. The step is important as most of the extra cash you need to fulfil the other steps will come from this step.

Learning to live a minimal life is one of the most important things in learning how to become financially important. Living life frugally will allow you to understand the value of time over money and will control the urge to spend needlessly. Setting goals to master a frugal lifestyle will have the biggest impact on the way you achieve financial independence. This step will also help you to hold on to your resources rather than outliving it when you attain financial independence.

Stop Exchanging Time For Money:

This step talks about the importance of a side income. Instead of only focussing on your active income, explore ways to establish a passive source of income. When you are trading time for money your income is bound to be limited. Thus you are compromising on your income and hobbies.

Instead of continuously trading time for money, try to follow your hobbies and create a passive income using it. Gear up your skills and knowledge and recognise the ideas that can help you create a second income. Add value to your side business by allotting some time to it every day. Take small but steady steps towards establishing it. If you are lucky enough you can eventually reduce your dependence on your active income.

See Also: Top 5 Financial Resolutions for New Year 2020

Make strong financial planning:

Becoming financially independent is not a single goal. It is a combined effort that needs dedication and patience. It is important to establish goals in several aspects of your life, to achieve your goal of financial independence. These include:

  • Increasing your income
  • Controlling your habits like spending or consumption of alcohol
  • Paying off your debt
  • Understanding your saving pattern
  • Determining your short-term goals and your investment objectives
  • Determining your long-term goals and planning your investments.

This way you can budget every aspect of your personal finances and move on with your financial journey coherently.

Reduce Debt:

It’s hard to attain financial independence if you have a huge debt or if you owe money. The first step you should take towards financial independence is to reduce your debt and paying it off as soon as possible. However, you cannot eliminate debt overnight.

Thus, you may have different time horizons for getting out of debt. For example, you can commit to repaying your credit card debt in 1 year or your personal loan in 5 years. Getting rid of debt is one of the most efficient ways to free money and use it for achieving financial independence. There is nothing as “good debt”, so if you want to attain financial independence make sure to stay out of debt.

See Also: Personal Finance Tips to Rock the New Financial Year

Get Income Tax benefits:

Taxes are a major depletion in your income. This means you will have less money to save, invest and reap returns. Devise strategies to reduce the overall tax outgo on your income. By using strategies you will be able to save a higher amount thus converting it into investments.

One of the best options to save taxes in India is retirement planning options like PPF and NPS. PPF investments help you to attain the yearly savings goals while helping you save tax on interest income and maturity proceeds. NPS, on the other hand, allows you to get additional tax benefits over and above the threshold limit of 1.5 Lakh. Using such plans you can save almost 10-20% tax of your income.

Financial independence requires discipline and a bit of sacrifice as even your smallest moves can generate huge outcomes.

You May Also Watch

Iframe Content

Keep your Financial Cognizance up to date with IndianMoney App. Download NOW for simple tips & solutions for your financial wellbeing.

Have a complaint against any company? IndianMoney.com's complaint portal Iamcheated.com can help you resolve the issue. Just visit IamCheated.com and lodge your complaint. If you want to post a review on any company you can post it on Indianmoney.com review and complaint portal IamCheated.com.

Be Wise, Get Rich

What is your Credit Score? Get FREE Credit Score in 1 Minute!

Get Start Now!
CIBIL Meter
Get It now!
Attention!

This is to inform that Suvision Holdings Pvt Ltd ("IndianMoney.com") do not charge any fees/security deposit/advances towards outsourcing any of its activities. All stake holders are cautioned against any such fraud.