11 Points To Achieve Financial Freedom - Part II

Being independent is wonderful feeling. We got our independence from British after long struggle. Same is applicable to financial freedom. Let’s understand what financial freedom is:

 “Financial independence is a term generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities”

In part one of this post I have listed 5 points, do read it "11 Points To Achieve Financial Freedom - Part I".
Here I am listing remaining 6 points.

6. Purchase adequate life cover

The main purpose of term insurance is to provide the financial security to your loved ones in case of you died so that after you, your family will not be in any debt.

7. Purchase adequate health cover

Medical emergency can disturb the financial freedom very badly. Purchase a health insurance for self and dependent peoples so that it will provide cover to your saving if some medical emergency arise. Medical emergency can make a big hole in your saving which can affect your future goals.

8. Create Emergency fund

Creating emergency fund is very important step to protect your financial freedom in future in case of emergency. Generally one year’s take home income or one year’s expense including all EMI’s should be the emergency fund. Do not forget to increase this fund every year depending your annual take home or yearly expense. Do not use this fund to make down payment for your any purchase. Use emergency fund only in emergency situation otherwise do not touch it. Better to put this emergency in liquid mutual fund or in separate saving bank account which you don’t use for daily purpose.

9. Start Investing Early

Create your future goals and start investing towards them as early as possible. Staring investment early will make sure that you can fulfil your future goals (dreams) without losing your financial freedom.

10. Create second source of income

Everyone have some hobbies like photography, painting, writing, gardening, teaching, travelling etc. You can create second source of income while pursuing your hobby professionally. This way you can enjoy your time and also earn some money which you can use towards investments or paying bills etc.  

11. Knowing how much to spend

Remember the golden rule “spend whatever left after saving”. Knowing how to spend and when to spend is also important as knowing how to save and where to invest. People should learn about the proper way of spending. 

Please provide your views about financial freedom.