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How to achieve financial independence to live the life you want

This content was provided by Citibank Singapore

Learning to live on your own income is an important milestone for young people, as well as adults in transition. Those starting their career may need to set up their finances in a way they can manage. Meanwhile, adults who have experienced life-changing events, such as job loss or death of a loved one, may also require a restructuring of finances to make financial independence possible. Here are some tips that may empower you to build financial health so that you can minimise outside financial support to manage money and achieve your goals – and enjoy your desired lifestyle along the way.

Become financially literate

To play a more active role in your life, it’s important to learn about finances, financial management and financial planning. If you’re part of a couple with joint finances or have a family, you can help make more meaningful and informed financial decisions if you are educated on how investments and insurance work. A strong understanding of your family finances, and what affects it, can help you make sound decisions together. Keep up with financial news to stay informed and ensure you understand what affects your financial health.

Maintain job security

Use job opportunities to get the most out of your career. Negotiate salaries, raises and bonuses, which are crucial for a lifetime of earnings. Consider researching your salary in the market and asking for what you would like to receive. Concentrate on performance and heading in a career direction where a market, business or company is growing or where your passion lies.

Stay out of debt

Spend wisely and don’t overextend your credit. Loans and credit cards will likely keep you from your goal of financial independence, so it’s key to pay down any debt as soon as possible. Calculate how much you can afford for a mortgage, car loan or credit card purchases. Consider sticking to a strict repayment plan if you have debt. Do side jobs if you need some extra spending money, rather than supplementing your lifestyle with credit cards or loans. Use debit instead of credit cards to manage spending.

Live within your means

Create a lifestyle you can afford and cut back on everyday expenses to save money. Start with a food budget, whether that’s eating out less or not hitting the gourmet grocery store each week. You don’t have to eliminate luxuries completely but have a budget to work within to keep your goals in place for financial freedom.

If you’re married, it’s a very personal decision whether you maintain a separate bank account to your spouse. If you’re in a relationship where your finances are shared, discuss discretionary spending so that there are no surprises, and to ensure that you both live up to your commitments to your financial goals.

Other key considerations include buying a car you can afford the loan and upkeep on, as well as housing in your price range and not extending too much debt. In terms of entertainment, have a reasonable budget and keep your mindset on the long-term goals you may want to have later in life, such as a dream vacation versus several weekend trips for fun.

Keep savings to cover costs in the event of a major life change

Create a safety net of savings in case something drastic happens, such as job loss, critical illness, or death of a partner. Put away enough savings to cover expenses for six months as you get your life back in order. Having a regular savings plan from your financial institution or investment company – which schedules a recurring deposit – is a good way to ensure you consistently bank your money. Even positive changes like marriage, children and higher education require some kind of financial planning to ensure that you have living costs covered. Estimate costs and start saving now.

Get insurance plans

Insurance can potentially make your money work harder and provide security if you have any issues that affect your income. In the event of an illness or accident, insurance typically covers your medical and, in some cases, your living costs. Insurance for your housing and car protects your assets.

Have a long-term plan

Knowing what you want to do in the long run can help mould your plan towards financial independence. Having financial independence to retire early requires a strategy for setting up your lifestyle and savings. If you want to obtain higher academic degrees, to travel around the world or have a family, it’s important to start planning for that early too.

You may not yet have that long-term vision but as soon as you do, it’s never too late to start planning. How much do you need to save for retirement? Use financial tools such as retirement calculators, which will take into account debt, planning, investments, as well as potential increases, such as health status and inflation.

Invest in retirement plans

Forging your financial independence means you’ll never have to rely on a partner or your children to care for you in your later years. Consider retirement plans offered by your employer or government. Putting money into mutual or index funds can potentially build your retirement savings conservatively and securely. If you don’t have an employment retirement plan, speak to your relationship manager or financial advisor to set up a long-term savings and investment plan. Diversifying your investment plan can help ride out changes in the market.

Overall, making these suggestions a habit will give you a better chance to achieve the financial independence you want, at any age. Keeping yourself educated on changes that may affect your plans will help you stay on track. Creating a lifestyle that employs these financial habits can make all the difference as you move through different stages of life.

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Disclaimer: This article is for general information only and is not intended to be a forecast of future events nor a guarantee of future results and should not be relied upon as financial advice. All views and opinions are as of the date hereof, and are subject to change based on market and other conditions without notice. The article has no regard to the specific objectives, financial situation and particular needs of any specific person. It is neither an offer nor a solicitation to purchase, nor endorsement or recommendation of any products or services mentioned therein, and the products or services mentioned may or may not be offered by Citibank Singapore Limited, its related entities and their respective directors, agents and employees (together "Citigroup").

This article and its contents do not constitute the distribution of any information or the making of any offer or solicitation by anyone in any jurisdiction in which such distribution, offer or solicitation is not authorised or to any person to whom it is unlawful to distribute such information or make any offer or solicitation.

Citigroup is under no duty to update this article and shall not be liable for any complaint, suit, action, claim, expense, loss or damages directly or indirectly arising out of or in connection with any person’s reliance on, or acting upon, or use of, any contents on this article. The article is subject to amendment without notice. Investment Products are (i) not insured by any government agency; (ii) not a deposit or other obligation of, or guaranteed by, the depository institution; and (iii) subject to investment risks, including possible loss of the principal amount invested. The information contained herein is not intended to be tax or legal advice, or an exhaustive discussion of the strategies or concepts mentioned herein. Please seek advice from your tax, legal or financial adviser as appropriate about the contents discussed herein or before investing in any investment products. Should you choose not to seek such advice, you should carefully consider the risks associated with any investments and make a determination based upon your own particular circumstances and assess whether such investment product is suitable for you.