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How Young Professionals Can Achieve Financial Freedom Quickly

Adhil Shetty
Photo: www.freepik.com

Financial freedom is a goal all of us want to achieve. However, the journey to achieve it sooner than later gets a major fillip if the journey is started early. Simply because with limited financial commitments, young adults have more space to learn and make mistakes.

So, if you’re a young professional, you’d do well follow these money tips:

SAVE AT LEAST 20% OF YOUR MONTHLY SALARY

Your savings will build the foundation of most of your future money moves, like building an emergency fund, raising investment capital, setting aside money to clear your debts or even for building the down payment fund for your house or car. To begin with, it will be a good idea to save at least 20% of your income every month and try to do it regularly without fail. Setting a budget for all your expenses and sticking to it, implementing ways to cut down on wasteful spends and avoiding unplanned big-ticket spends as much as possible are sure-shot ways to help you achieve your savings goals.

BUILD AN ADEQUATE EMERGENCY FUND

Well, we might have no control over unanticipated events like a sudden job loss or a family emergency, but we can certainly implement strategies beforehand to minimize their impact on our financial health. And having in place an adequate emergency fund is a great way to ensure that. The meaning of “adequate” may differ from person to person, however, the emergency fund should at least be worth 6 months of your average expenses. Also, it’s best to set it up in a separate savings account with an ATM card for quick access while tackling an emergency. An emergency will also save you from relying on unnecessary debts that can add to your financial woes.

PROTECT YOUR SAVINGS FURTHER BY SIGNING UP FOR A HEALTH INSURANCE PLAN

Our precious savings are often the first casualty during a health emergency in these times of skyrocketing medical expenses. A great way to keep our finances healthy (just like leading a healthy lifestyle to keep ourselves healthy) is to sign up for a comprehensive health insurance plan if you’re not a part of a family floater plan. Yes, it will cost you some money, but if you start young, you will still be able to get a policy with an adequate coverage amount (read at least Rs. 5 lakh) with an affordable annual premium.

SET FINANCIAL GOALS AND START INVESTING ACCORDINGLY

Yes, investing is key to growing your wealth over time (apart from saving on your income tax outgo), and it puts you in an advantageous position when you start young. Simply because you’ve limited financial commitments when you’re young and hence can afford to take slightly riskier investment decisions. However, before you start your investment journey, it’s critical that you set short, medium and long-term financial goals, like raising Rs. 1 lakh for an international trip after 1 year, Rs. 20 lakh for a house down payment fund after 5 years and Rs. 3 crore for your retirement fund after 35 years. Having clear-cut objectives provide a lot of solidity to your investment plans in deciding how to invest, in which instrument and for how long.

That being said, research thoroughly on how different investment instruments (like Public Provident Fund, Equity Funds Systematic Investment Plans, Fixed Deposits, Equity-Linked Savings Schemes, so on a and so forth) work and try to evaluate whether the returns will be able to help you meet your financial goals on time. You can read investment-related articles and books to educate yourself. But don’t make rash decisions based on hearsay, and consult a financial advisor if you get stuck at any point. Also, when you start investing, aim to keep a balanced portfolio with a mix of risk-free and risky investments to keep the overall risk factor under control.

INVEST IN YOURSELF TOO

In our times of cut-throat competition, it’s important that we constantly upskill ourselves to grow in our professional spaces. So, make it a point that you utilize a portion of your income in upgrading your skill sets. So, always be on the lookout for meaningful professional courses, online tutorials and certification programmes that can boost your career prospects – even if it involves paying some money.

Investing in yourself also involves taking the necessary steps to boost your health. They say health is wealth for a reason.

WORK TOWARDS INCREASING YOUR INCOME POOL

You might think that as a young professional, you may not have sufficient income to tick all the important financial boxes discussed above. You’re not wrong if you feel that way, because it’s a fact that you can save only up to an extent no matter how frugally you live. So, to be left with more funds to meet all your financial targets (like building an emergency fund, having adequate savings and investment funds), the best idea is to look for ways to increase your income pool.

Taking part-time jobs on weekends, tutoring online, launching a YouTube channel providing meaningful content based on your expertise, doing freelance work on the side (if your employer doesn’t object) are just some ways you can do this. And if the plan to make some money on the side is based on something you always loved doing (like part-time gigs if you’re a musician), this could also mean rediscovering your ignored talents, a cure for your office-related stresses and more money to save, invest and spend. A perfect win-win-win situation, right?

In conclusion, if there’s one attribute that joins all the steps discussed above, it’s financial discipline. Yes, it’s not easy being financially disciplined, but if you start training yourself from a young age, you’ll be in a much better position to achieve financial freedom quickly. Wish you all the very best!

The author is CEO, Bankbazaar.com