Have you become financially independent?
Financial independence is a term that was first popularized by Robert T. Kiyosaki, a financial expert from the United States.
This term means a condition where a person is no longer worried about his financial condition and is free from debt bondage or installments.
For many people, this condition is certainly a dream and hopes to be achieved as soon as possible. However, do you really understand what true financial independence is? Let's find out more in the following description.
What is Financial Freedom?
Literally, the word freedom has the meaning of freedom and not being bound by anything. While the word finance has a financial meaning. If the two are combined, we can conclude that financial independence is freedom from financial demands.
Financial independence or financial freedom is a situation where a person succeeds in achieving a decent life, free from debt, and can fulfill all his needs without worrying about financial conditions.
Apart from being free from the burden of the economy, financial independence also has another meaning where the person is happy with a fulfilled life and grateful for what he currently has.
We can achieve financial independence due to various factors. One of them is through our lifestyle or habits in using money. The earlier we process finances well, the sooner we will get financial freedom.
Characteristics of Someone Who is Financially Independent
After knowing what financial independence is, you may start to wonder what characteristics someone who is financially independent has. You could be one of them too! Let's take a look at its features below.
One well-known financial planner named Prita Ghozie Hapsari defines the characteristics of people who are financially independent as follows.
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1. Healthy Monthly Cash Flow, No Monthly Spending Problems
The first characteristic is characterized by a healthy monthly cash flow. Cash flow or cash flow is a financial record that contains your income and expenses.
Those who are included in financial freedom have a healthy cash flow where the monthly expenses are not more than the income.
2. Free from Consumptive Debt
The second characteristic of being financially independent is being free from consumer debt. Consumptive debt is a type of debt that is used to fulfill a lifestyle.
For example, in debt to be able to have the latest branded goods so as not to miss the latest trends. Such as bags, cellphones, cars, motorcycles, and much more.
Those who are free from consumer debt will think twice before applying for a loan to buy something that is depreciating in price or even prefer to save until they are finally able to buy the item.
3. Have an Emergency Fund
The third characteristic is having an emergency fund. Someone who is financially independent must have ensured all the bad possibilities that will happen. Therefore they will always make sure to prepare an emergency fund.
We have an emergency fund, ideally 3X the amount we need each month. However, since the pandemic has hit and the job market has become increasingly difficult, it's a good idea to prepare an emergency fund 6X the number of your monthly needs.
For example, your monthly needs range from 5 million - 6 million. In this way, you can prepare funds with the following calculations.
Monthly Fee X 6 Months = Emergency Fund
So, an emergency fund that you have to prepare if your monthly needs are 5 million by 30 million. Pretty much isn't it? Even so, these funds will later save you if something bad happens. For example, loss of work or termination of the employment contract.
4. Have a Place to Live
The third characteristic is having a place to live. The residence is a fixed asset that is included in the fulfillment of primary needs, namely the need for housing.
Having a place to live means you don't have to spend a lot of money to pay for rent. This has an impact on the health of your monthly cash flow, so the funds you have can be allocated to other things.
5. Have Savings and Investments, Whether It's For Living or Enjoying Life
The last characteristic of financial independence is having savings and investments. These savings and investments can later become a source of funds both for living in terms of future savings, as well as for enjoying life (fulfilling the need for a lifestyle).
Tips for Financial Independence A la BFI Finance
You can achieve financial independence quickly if you start managing your finances well early on. What do you need to do to achieve financial freedom? Here are the tips.
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1. Have Life and Health Insurance
One of the important things you must do to achieve financial independence is to prepare yourself for protection.
Without adequate protection in terms of health and life, you will have difficulty achieving financial independence because without insurance, the risks that may occur to you will have a major impact on your financial stability.
From insurance, you will be lighter to bear a number of funds from the risks that occur due to an incident.
2. Invest
Investment is one of the financial activities that is as important as saving in a conventional bank. The difference is that through investment you will get a number of benefits.
So, the money you have will not be affected by inflation and instead give you a number of benefits for the future. With a note, the return or profit given must exceed the inflation rate prevailing in that year.
Investment has a variety of instruments. Among them are deposits, bonds, mutual funds, precious metals, stocks, and property. Make sure to choose an instrument that has guaranteed safety!
3. Have Passive Income
As with investing, passive income is one of the factors that support someone to achieve financial independence.
Literally, passive income is passive income which has the meaning of additional income obtained without the need to bother spending a lot of time to get it.
Passive income is also widely interpreted as side income outside of the main source of income.
Quoted from Kompas.Com, passive income is divided into 3 types. The first type is paper assets, which consist of deposits, mutual funds, and stocks. These three types can provide returns or profits without bothering to do something.
The second type is business. In this second type, you only invest without participating directly in the various daily activities that exist. For example, supermarkets, mini markets, and laundry businesses.
The third type is property. What this means is that the property you own is rented out to someone else for profit.
4. Preparing Education Funds for Children's Future
Financial independence means that you are free from all economic demands that interfere with your financial condition. This includes education funds.
Considering that every year the cost of education continues to increase significantly, it's a good idea to prepare your child's education fund early on. So that later children can receive a proper education and live more prosperously.
There are various ways to prepare funds for children's education from an early age. These include:
1. Plan each level
2. Looking for school information
3. Taking into account children's education funds
4. Planning a child's education fund savings
5. Become a child education insurance customer
6. Make investments
7. Joint financial evaluation
5. Have a Pension Fund
This one tip is very important to do so that finances in old age will always be safe. Surely we don't want to retire later to live mediocre or just keep working, right?
Ways that you can do to have a pension fund include saving in a Financial Institution Pension Fund (DLPK), investing, or relying on fixed assets such as rental properties.
6. Already Prepared Emergency Fund
The next tip for financial independence is to prepare an emergency fund. These funds will later be very useful to cover large amounts of needs.
How to set up an emergency fund:
1. Have a strong will to have an emergency fund
2. Set aside some money from the salary
3. Consistently save every month
7. Productive Debt
Debt is not always bad or has a negative connotation. If managed properly, debt can actually make us richer and help us become financially independent.
One way is through productive debt. For example, existing borrowed funds are used for something that makes money again. Such as venture capital and business development.
Why can it be called productive debt? This is because the operating profit obtained from your business can be allocated to pay off or repay the loan. So, when the loan is paid off, you will have a number of advantages without being burdened by debt.
If you need a fast liquid loan, don't hesitate to choose BFI Finance products as your financial solution. Starting from business capital, education funds, to lifestyle, we can help with everything.
Not only that, in order to welcome independence day in August 2022, BFI Finance has a #PastiMerdeka promo where debtors have the opportunity to get cashback of up to Rp. 77 Million Rupiah! The full terms and conditions can be accessed via the following link.
You can see information about loans and other interesting promos at the following link.
Submission Information BPKB Motor Guarantee Loan
Submission Information Car BPKB Guarantee Loan
Submission Information Home Certificate Guarantee Loan
Sobat BFI, that's the discussion this time about financial independence. Achieving financial independence is not instant, it takes patience and effort. Even so, the results will be very beneficial for us and the next generation.
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