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How to Achieve Financial Freedom in Two Steps

Author – Sparrows Sprout

Description – Freedom comes when we are fully prepared for the known and the unknown.  Financial Freedom is the feeling of “Being Secured” about Family’s Financial Safety in present and future. An online survey conducted by “Economic Times” in November’19 found that majority of urban India score too low on parameters that define “Financial Freedom”.

Financial freedom can be achieved by anyone with proper planning and execution. We spend a lot more than we use to 10 years back because of the lifestyle change and sustainment. We all have routine check-ups for health likewise; we should keep a check on our financial health so we have a smooth retirement and no burden during crisis.

Basic Parameters of Financial Freedom –

  1. Emergency fund – An emergency fundis a bank account with money set aside to cover large, unexpected expenses, such as: Unforeseen medical expenses. Home-appliance repair or replacement. Major car fixes. And, costliest of all, unemployment.
  2. Financial risk status – Financial riskis the possibility of losing money on an investment or business venture. Some more common and distinct financial risks include credit risk, liquidity risk, and operational 
  3. Retirement planning – Retirement planning is a process of setting retirement income goals and following them with the actions necessary to achieve those same goals.
  4. Achieve your financial goals – Financial goalsare the personal, big-picture objectives you set for how you’ll save and spend money. They can be things you hope to achieve in the short term or further down the road.
  5. Burden of loans – In finance, a loanis the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations etc. There can be a huge burden of loans if not well planned.
  6. Loan EMI – An equated monthly instalment (EMI) is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. Loan EMI is a big part of your monthly expenses and so should be calculated.
  7. Loan duration- The period of your loan depends upon the amount borrowed and EMI amount as well. We should be aware to make sure correct steps are taken on time.
  8. Total credit card/bills outstanding – Outstanding balanceis the amount you owe the bank on your credit card. Your credit card outstanding balance is an aggregate of unpaid charges billed to your card during a particular month, it includes: Purchases. Returns. Payments. Your total outstanding amounts add to your monthly expenses.

These are few of the very important questions you need to ask yourself in order to financial planning and achieve financial freedom. Monthly updates and check-ups are needed to fix gaps and move faster to achieve freedom. We should not ignore any aspect of our finances if we truly want to achieve financial freedom.

Two Step Formulas for Financial Freedom –

Step 1 – Check your current Financial Status and identify gaps of

  1. Protection
  2. Bad Debts
  3. Emergency fund
  4. Retirement fund
  5. Financial goals
  6. Review and managing investments

Step 2 – Take appropriate actions for

  1. Filling protection gap immediately
  2. Planning to payoff bad debts urgently
  3. Building emergency fund on priority
  4. Contributing monthly for retirement corpus
  5. Systematic planning of family’s financial goals
  6. Organizing all savings and investments under one single platform.

How to get Financial Freedom?

Step 1 – Check your current financial status and identify gaps

Step 2 – Take appropriate actions.

Only if today we take a step to plan out our finances, we will be able to achieve financial freedom in future. Financial freedom is a must and everyone should have achieve it in the best way they can.

About Sparrows Sprout

Sparrow’s Sprout is a training institute for business solutions. We work extensively in financial services sector for building financial advisors and wealth management firms.

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One Response

  1. Manjiree Sankhe says:

    Article on financial freedom is really very good. In one page you have mentioned exactly what one should do about financial planning.
    Also steps mentioned 1) Check your current Financial Status and identify gaps and 2) Take appropriate actions are really very helpful.

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