4 personal finance rules to be financially independent

Everyone dreams about getting financial independence but there are certain things which people usually don’t follow and just run behind a dream and take too much stress to achieve them. To attain financial independence, one must follow certain rules.

Rule 1
To achieve financial independence the first thing you must do is remove all the clutters from your cashflows and formulate a budget which you would maintain and follow regularly. Having a budget will ensure that you don’t make any unnecessary and impulsive buying which you would regret later. For such kind of expenses, it is better to build a fund by saving some part of the income for such purchases which even if you regret buying won’t hurt your overall cashflows.

Rule 2
Save before spending. This is one of the basic rules that you need to follow. What is this rule and how can it be beneficial? As human is a psychological entity it becomes very important to deal with problems psychologically. Saving before spending would ensure two things. Firstly, at the back of your mind you would be ensured that you are saving so you don’t have to worry about lack of savings or if you require money out of emergency. Secondly, as you would be knowing the exact amount that is available for spending, you would be able to control your spending on unnecessary things.

Rule 3
Take as limited debt as you can take. Specifically, avoid using credit card apart from in case of emergencies. It's not like credit cards are bad, it is a very powerful and convenient tool in the time of need until you use it responsibly and repay it before the month ends. If you have a prolonged credit card debt then it is better to switch that debt to personal loans which have lower interest rates as compared to credit cards and pay it off as early as possible before interest shakes your cashflows.

Rule 4
The above three rules would ensure the smooth cash flows which in turn would help you have a reasonable investible surplus. As said in rule two save before you spend. But saving is not enough to achieve your financial objectives. You need to invest those savings in various asset classes depending upon your risk appetite to get most out of it and achieve your stated financial objectives. Not just invest but also you need to link your financial objectives to the investments which would indeed help you to manage your investments effectively.