This question draws many answers and is different from person to person depending on their situation. Especially now, as the COVID 19 has locked the entire world, many losing their jobs and thus savings. Many realized they weren’t prepared financially for some situations like this. And, this COVID 19 time has made it more important for us to know where we stand financially and how much are we prepared for a future that is uncertain.
But before that, we need to understand “what exactly does it mean to be financially independent?”
It means different things to different people, but even if a person knows what is financial stability reaching to that point is quite a task to do. And come on we know how difficult all these malls and online sales make it difficult to save, reaching financial stability is kind of out of the picture.
We’ll tackle all these in this Blog
But before bringing in Science and Math of how to become financially stable we decided to ask some of our folks what exactly does financial stability means to them.
Richa, a graphic designer said, “financial stability for me means being able to pay all my bills and all by unexpected bills, like a sudden repair of water pipeline at my home without worrying about from where this extra cost will be covered”.
Praveen, a businessman said, “for me, financial stability means me and my family have everything to live a thriving life now and in future too. A thriving life means I must have money that would give me a life of luxury that covers all the educational and expenses of vacation”.
Naina, a mom of one and have a job, says, Financial stability for me is once my assets and investment, apart from my work income, can cover all my monthly living expenses.
What do you find similar in all the above situation, everyone wants to cover the ‘BASICS’ and then want some amount left with them for luxuries.
Here are 5 major components to living financially free –
- All basic as electricity, water bill, gas bill, grocery bills, etc. paid
- After basic expenses have some money left with you
- Pay off any debt that you might have like credit card debts, EMI’s, house loans, etcetera
- Always save 2-5% of your income and invest 2-5% of your income
Always save for the long run as you know we all will retire someday and thus being prepared for it is of prime importance.
Forget about savings, I don’t even earn enough money
Perhaps you must be thinking about how to save when I earn only enough to pay my bills. Then it’s time for you to buckle up if you feel you are underpaid then this is the time to ask for a raise in your salary. Or, if this is not the case you can always start a side income vis business or anything that you can do online in this corona world.
Paying off Debt
While we talk about pay off your debts, this doesn’t mean right now, we mean to say to find ways or opportunities to pay it off. If you are left with surplus money it is always better to pay off the debt first.
Pay equal weightage to both saving and investment
Savings and investment must be done regardless of your income level and on a regular basis. Savings will prepare you for the future while investment will earn more for you.
Have health and term insurance
This coronavirus taught this very important lesson, to be insured. Health insurance will cover your expenses if you or your family falls ill. Whereas, the term will provide your family financial support in case something happens to you.
Conclusion
This pandemic has hit us hard and taught us to be financially prepared for any situation in life, this is the time to be prepared for any situation.
Happy Investing!
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