Want financial freedom? Here's what you should be doing

While it is common practice to herald a new year with a resolution, our long-term ambitions of attaining financial freedom would get a healthy boost if we commit to a financial new year’s resolution as well. Here are 7 money saving tips that will pay off in the long run. (Image: Pixabay)

Budget it right | Any progress in your career would mean a change in lifestyle. It influences your spending significantly. However, your approach to money would be a lot more fulfilling if you adopt Warren Buffet’s “Expenses = Income - Savings” approach. This means, target how much you would like to save and stick to it. Writing down your expenses would help strike the right balance. If cutting down on spending hurts, using technology to inculcate smart spending habits is an easier step towards transition. Competing with one’s self to spend less each month will make you a smarter spender. The upside? With a good rise in income, your savings will leap in no time. (Image: Reuters)

Set a goal | Having a financial goal with a time-bound range and a reasonable amount as a target will be useful in directing your spending, saving and investing habits. For example, you should plan to buy the latest smartphone costing Rs 75,000 in four months. Ideally, you should have both short term and long term goals. (Image: Reuters)

Target debts | Studying the real devils in your liabilities will help you track them better. Paying off pending loans at the earliest is always a good idea. Take stock of prepayment charges and interest rates payable. Target paying off high cost loans first, irrespective of the amount. Home loans come with tax benefits and lower interest rates compared to personal loans. Hence, if a personal loan does ask for prepayment fees, do try to close them as soon as possible. The foreclosure of loans means saving on the interest to be paid on the loan.

Plan your taxes | There are several investment schemes and plans that have a tax saving component. You can use these plans to trim your tax liabilities. For example, investing in a Public Provident Fund (PPF) with a long term retirement goal would go a long way in saving taxes. For a medium term financial goal, one can opt for tax-saving bank fixed deposits. (Image: Reuters)

Make a strategy | Having a goal is half the race won, and having a strategy to get the money in place will help you succeed. Depending on the goal’s time frame, you can save money in less risky investment avenues such as fixed deposits, recurring deposits and bond funds. For long term investment goals like retirement, it makes sense to embrace riskier investment options such as stocks, as they are expected to beat inflation by a major margin. If you do not understand stock selection, opt for investing in equity mutual funds and balanced funds through a systematic investment plan. (Image: Reuters)

Kill that procrastination | As the famous adage goes, “Time is money” and procrastinating in money matters is most damaging to profitability. It means that one would not let the power of compound interest work in our favour. Also, starting early allows one to take corrective action wherever required. To keep it simple —make a plan and start walking towards the goal of financial freedom. (Image: Reuters)