Mastering Personal Finance: Ultimate Strategy For Your Freedom

Financial Freedom - Free from all your worries

Personal finance involves planning, saving, investing, spending, and protecting your financial resources. It does not matter if you are a teenager, a young adult, a grown-up adult, or an old-aged person, you can always gain more skills or learn tips to manage your finances which would help you achieve your financial goals. It is the art and science of managing your money.

If you’re just starting your journey to financial freedom or looking to improve your current financial situation, this blog will provide you with essential knowledge, tips, and strategies to help you achieve your goals and lead you well on the way to financial freedom. Following are the aspects of your personal finance which needs to be understood properly to work on each of them for the best results.

Income – Core element for financial freedom

It is the money that you receive from all sources, such as salary, investments, rental income or any other sources. It is very obvious that income will significantly affect how you manage every other aspect of your finances.

Think about how are you going to grow your income. By looking for better job opportunities? Putting in more hours at work for additional incentives? Growing your business, or reallocating your investments for better returns? etc. The more you earn, the more you can save, which means you have more to invest which would then increase your income, this is an eternal cycle and the secret of getting rich systemically.

Expenses – Killer of plan for financial freedom

Expenses play a crucial role in the success of our financial plan. Knowledge of the impact caused by expenses on your financial plan is necessary for taking better decisions on spending hard-earned money.

The first type of expenses are the ones that you can not avoid such as health, insurance, taxes, food, utilities, clothes, etc,  however, you can always optimize these expenses. For example, you can buy cheaper clothes or prefer to cook meals at home rather than buying it from restaurants, review insurance coverage limits, or save on your taxes.

The other type of expenses are the ones which can be completely avoided, however, they are necessary at some times for enjoyment and gratification. Such as going on a recreational trip, buying jewelry or expensive goods, etc. It might fit into your reach to spend money, however, always keep in mind that it will reduce your savings, which would reduce your investment and thereby your income from that investment.

When you start thinking about spending money on avoidable expenses, always ask yourself a question, is it necessary? When did you spend money last time on similar expenses and how much? How much is this amount of money in proportion to your income? Is it worth spending? However, this does not mean depriving yourself of joy or comfort, it is about finding satisfaction from making smart financial decisions.

Savings – Protects your plan for financial freedom

Savings becomes an investment that helps to generate an additional source of income. It can help you to achieve your financial goals, safeguard you from unexpected expenses, and enjoy financial freedom. Most financial advisors would recommend setting aside a fixed amount of money for saving and enjoying rest of money. I would recommend it differently. It is fine deciding to save a fixed amount of money each month. Treat it as your minimum saving target. However, do not spend the rest of the money yet. Think with your intellect and ask yourself the same questions listed in a paragraph above for expenses. Saving is part of the eternal cycle described in a paragraph for income.

Debt – Poison for plan of financial freedom

Debt can become a burden that affects your financial health, your mental well-being, and your quality of life. Most people say debt is an unavoidable part of life in the united states and expresses in a way as if you are never going to get rid of debt, but I completely disagree with it. You can get rid of debt if you have acquired debt carefully and have planned well financially.

There are debts that help you to grow in your life such as education loans, house mortgages, etc, however, there are debts that are taken for recreation or gratification and usually are with higher interest rates, which should be completely avoided. Credit card debt is one of the worse debts. The strategy here is simple, increase your income, reduce expenses, save more money, and start paying your debt with the highest interest rates. Do not acquire new debt until you have paid off all debts. .

Investment

Investment is an integral part of financial planning to achieve your financial goals, and financial freedom, and defeat inflation. It generates passive income. However, it does not mean that you do not need to spend time for it to gain the necessary knowledge and research the most suitable investment avenues for you. There are plenty of investment advisors out there, however, there is no guarantee that they will not be biased for their own benefits or lack of skills.

Many types of investments include stocks, deposits, bonds, real estate, mutual funds, precious metals, etc. You have to research it based on own financial goals, portfolio diversity, and risk tolerance. Investment is part of the eternal cycle, one has to do it right in order to keep cycle moving continuously. I do not consider speculative trading such as futures and options, forex trading, cryptocurrency trading, etc as investments. I would never advise speculative trading. It has very high risk and it needs very high analytical skills, trading discipline, and close monitoring of price movements. Mostly common people lose money in speculative trading.

Caution!!

Never ever try speculative trading such as trading of futures, options, binary, forex, cryptocurrency, etc for additional income unless you are a trained and seasoned full-time trader. You might have momentary gains and might think you can master these trading skills and that’s when you will start riding it downhill. There is a very high probability that you will lose more money than you have.

Insurance

Insurance is a safeguard against uncertainties in life, however, it is not free, you have to pay money. This is why you have to think intellectually and analyze your risk tolerance capabilities and the worthiness of insurance. There are many types of insurance available on the market. Some of which are essential to ensure the well-being of the family during major health issues or upon the loss of a breadwinner, and some of them are mandatory by-laws or contracts such as car insurance, house insurance etc. You can always choose coverage limits wisely based on the probability of realization of risk, one’s risk tolerance, and the cost of additional coverages. The more you save money on insurance premiums, the more you can save and invest. However, it would work against you when an unexpected event occurs. Hence, it is very important to choose insurance coverage based on the factors above.

In my view, a good financial plan should consist of the topics above. Each of them should be well understood and executed in order to achieve financial goals and freedom. Managing one’s own personal finances is a transformative journey that can lead to financial freedom and peace of mind. Personal finance can be very different from person to person because everyone has different income sources, goals, lifestyles, and priorities. Remember, eternal cycle, every step you take today will have a compounding effect on your future financial stability. Start now and embrace the power of mastering personal finance.

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