Identifying your financial goals, choosing a diversified portfolio are among the few steps to increase your savings consistently.
Follow these simple steps to start your journey of financial independence:
- Identify your financial goals
This is by far the simplest yet most important step you need to follow before you start investing your money. Determine your financial goals and set a realistic timeline to achieve them. These goals could be buying your house, planning an international vacation, paying for your wedding, retirement, etc. It could also be an amalgamation of multiple such goals. Give a realistic timeline for each of your goals, to not burden yourself with unnecessary pressure of achieving them within a short period.
- Choose a diversified portfolio
Diversify your portfolio across multiple financial products to maintain a balanced investment plan. Not only does it lower your risk by investing in different vehicles, but also helps in amassing higher returns. Ideally, you should invest money in multiple asset classes like Fixed Deposits, Mutual Funds, Equities, Gold, Real Estate, etc. Over-dependence on a single investment could prove to be disastrous if the markets crash.
- Give contingencies a priority
While you would want to plan for an international trip with your family or friends or purchase some jewelry, it is always wise to first create a financial pool for your emergencies. One of the fundamental purposes of savings is to ensure you have enough cash in your reserve for unforeseen expenses like medical or hospitalization charges, loss of a job, loss in business, etc. It is always advisable to keep some money parked for such rainy days so it does not impact your overall financial health.
- Compound your growth for your long-term goals
One of the key steps in financial planning is to ensure you stay invested for a longer period. The longer you stay invested, the better are the chances of you compounding your growth. If you stay invested long enough, the power of compounding returns can help you multiply your wealth at a faster pace, thereby helping you to achieve your goals. Also, long-term investments help you to beat market volatility.
- Stay disciplined with the help of automation
Automation helps you to maintain the financial discipline you need to achieve your goals. It is extremely easy for anyone to get distracted and spend money to buy the latest mobile phone. To become financially independent, you must look at avoiding such mistakes and create solutions, which could help you to maintain good financial habits. Enable automatic transfer of money from your bank accounts to your investments every month to safeguard your investment strategy.
Follow these 5 crucial yet simple steps to start your journey towards financial independence. The key is to start investing as early as possible and continue investing for a long period. Barring an absolute financial meltdown, this plan will keep your portfolio healthy and increase your savings consistently.