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Financial freedom means different things to different people. The objectives of this freedom, and the ways to get there, are different for everyone. For some, it may mean getting out of debt. For some, early retirement. For others, it may mean not being caught unawares by life’s vagaries. That said, there are steps that practically everyone must take to make their journey to financial freedom easier. Taking these steps improves their chances of getting there. Let’s take a look at what these steps are.

Being Frugal

If you’re looking to accomplish a difficult financial goal, make living frugally your mantra. Frugality would need you to ruthlessly cut down discretionary expenses and find ways to increase savings. There can broadly be two things you spend your money on – things whose value appreciates with time, and things that depreciate. The fewer things you have in the second column, the better for you. For example, financial investments, investing in one’s career, or buying assets such as land or gold will give you greater value with time. But discretionary spends like frequent eating out, gadget upgrades, and expensive holidays will be a sunk cost the moment you money is spent.

Setting Goals

You must answer what financial freedom means for you. Setting a goal is extremely important to financial freedom. It helps you define not just a destination, but also the right vehicle to get there. For example, you are 30 years old now, and you decide that you need Rs. 5 crore to retire at the age of 50. Therefore, you decide to invest Rs. 18,000 a month in a top-rate mutual fund returning 15% per annum with a 10% annual step-up of your monthly contribution. This would allow you to save Rs. 5.01 crore in your desired 20-year frame, allowing you to retire on your own terms.

Being Prepared

This extends from living frugally. While you may be investing to a smart plan, life may still find a way to throw you on your back. You need to be prepared for life’s vagaries and, in essence, protect the money you’ve saved for the fulfilment of your aspirations. Therefore, an emergency fund is necessary to cover you in situations such as job loss. Most people should have at least 3-6 months of their take-home pay locked in a fixed deposit that can be accessed in an urgency. This money is not to be mixed up with your investment goals.

Insuring Yourself

Another extremely important way to protect your domestic finances is by insuring yourself. Health insurance is a must for everyone in your family. It will also protect your finances from being derailed by costly medical treatments and hospitalizations. Consider a coverage of 100% your annual income for starters. Similarly, if you have liabilities, responsibilities, and dependents, you need to protect against life risks by purchasing adequate term coverage. A cover of 10-20 times your annual income may help. While the health insurance coverage will help you stay on course for your goals in your life time, the life coverage will help your family members in case you were no longer around.

Developing Multiple Income Streams

Your career is valuable. It’s the fuel that will drive you towards your destination. One must find ways to get better at one’s trade. But in the oft chance your trade has a bleak future, you must prepare alternatives. Develop multiple income streams that will not just propel you towards your goal, but also help you remain in that serene place once you’re there. An alternative career, a hobby that can be monetized, a book that will give you royalties, a property that generates rental income, or bluechip shares that provide handsome dividends – the options are many. Which one works best for you?

Being Debt Free

No financial freedom plan can be complete without the payment of one’s dues. Attack high-cost debts aggressively, especially at the start of your loan tenure. With large loans such as home loans, try to pre-pay in the early stages to save interest. With high-cost debts such as credit cards, always repay your dues in full every month. The more you clear off your debts, the more money you’ll have for the achievement of financial freedom, and the faster you’ll get there.

Lastly, don’t leave home ownership for too late in life. Your 30s are an ideal time to start off with the goal of home ownership. Securing a roof over one’s head will make financial freedom much sweeter.