‘A penny saved is a penny earned…’
Financial independence can be achieved even if you don’t have a lot of money. Small amounts of money build up over the long run and help you achieve financial independence. Financial independence is deeply linked to curbing unwanted expenditure and putting the savings to good use.
Here are some important tips for financial independence:
Save First and Then Spend
Ideally, you should try and save from 10 to 15% of your salary. Once the bills begin to come in, it will be challenging to save any money at all. Skim a portion of your money off the top and remember to do it diligently every month. If you earn monthly salary of £ 6000, you should be able to save at least £600 every month. At the end of the year, you will have £7200 in the bank.
Make out a Detailed Budget for the Month
You’ll be surprised to realise that your expenses are usually much higher than you think. You can only make a practical savings plan if you become aware of your monthly expenses. Write down a detailed list of all your expenses including mortgage payments, loan repayments and grocery bills. This will help give you a clear idea of where your hard-earned money is going.
Use Credit Cards Wisely
Credit cards are meant to provide convenience and are not meant to be used as ‘instant loans’. Only spend money that you already have. Credit companies are notorious for luring customers to spend money that they don’t have. Credit card interest rates hover between 13 to 15% which is exorbitantly high.
So if you book a holiday that costs £3000, you will pay an extra £450 as interest. Keep a close watch on credit card and pay off your bills on time. This way you will avoid late charges. Using your credit card wisely can help you curb wasteful spending.
Seek Investment Avenues
If you have managed to save some money, put it to work for you. Preferably, try and invest it in a way where you cannot get at it easily (keep some money aside for emergencies). Stock investing, ETFs (Exchange Traded Funds) and bonds are good options. Banks also offer flexible savings accounts, fixed deposits and CDs (Certificates of Deposits) to grow your savings.
You can achieve financial independence starting out with small sums of money. Keep a closer watch on wasteful expenses.