Stepping into the 20's? Check out these 5 ways to attain financial freedom

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“If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.” – Edmund Burke. The twenties are a crucial age to take monetary decisions. It is more because you are often naive and are new to the concept of money. Most of you have just started working and in a month or two, will be handed the first paycheque. And while the fact that you are now independent and are about to pay your own bills is thrilling enough, there is one thought that you haven't been familiar with, all this while - financial freedom.

Yes, you heard us right! Earning money and being able to pay your monthly expenses doesn’t entirely make you financially independent and that’s the concept we’re here to introduce to you today. So, sit back with a notebook and pen to jot down the to-dos to ensure that you attain financial freedom in your 20s.

1. Establish a (solid) Financial Plan

Before you step out and declare that today is the day when you'll be financially independent, get yourself a notepad and list down a solid plan. Make sure that you know what exactly you are looking forward to achieving with the plan that you have in mind. 

Include every aspect of your lifelong journey - from buying a home to investing for your future and getting married to saving for retirement. Every important turn of your life will matter once you start listing it down. You should have savings on every crucial step that your journey takes along with a sufficient amount for the goals that you want to achieve in your career.

2. Create an Emergency Fund

An emergency fund acts like an insurance policy, the only difference being that this one manages your finances. Having a fund for cases of emergency like that of an accident or sudden illness which might cost you loads of money will keep you at peace. 

You do not have to save the emergency fund in large amounts. So, just in case you are paying off a debt, you can save a minimum amount every month and add it to your fund. This process can be continued for a period of 6 to 8 months until you have sufficient funds to invest in the market which can then offer you slightly higher rates of interest.

3. Understand Compound Interest

Another concept that should be highlighted when you are looking to achieve financial freedom in your 20s is the concept of inflation. Often overlooked, you must understand the simple fact that small savings can add up to large amounts of money in the future, which is how compound interest works. 

So, you must make sure that you add around ten per cent of your monthly earnings in your savings account along with another ten per cent to a retirement account. But again, remember that compound interest, as simple as it sounds, can act like a double-sided sword, which means that a small debt today can turn into a large debt tomorrow.

4. Save and invest

Some young people, or in better words millennials, are aware of the stock market, mutual funds and the like. But they would rather hold on to their money in cash than risk it in the market. Yes, markets are known to fluctuate over time. However, history suggests that if you expose yourself to the market over long periods of time, your money will most likely grow faster than inflation. 

The best way to go about this is to think of the worst-case scenario and stay prepared for it. People tend to get disappointed when they consider the best-case scenario, expecting handsome returns. But they are left hanging, with no way out, if things do not work out in accordance with the way they’ve planned. So, have a strategy in place before investing. And remember - it is always wise to not put all your eggs in one basket. Learn to diversify.

5. Start Budgeting 

Budgeting essentially helps you plan how you would like to spend your money, helping you keep a track of your expenses. Additionally, it prevents you from spending more than what your pocket allows and also distances you from the use of credit cards.

Whether or not you take the necessary steps to attain financial freedom in your 20s, it is sensible to learn to stick to a monthly budget, regardless of your financial status. The sooner you learn the art of working with a budget, the better and more stable you will get financially. It might take time to get accustomed to the monthly budget that you set for yourself. But if you create a workable budget and follow it diligently every month, you will be able to handle your finances a lot more responsibly. 

We all are unique and have different priorities in life. But all of us, in one way or another, have the potential to turn into someone we’ve always admired, if only we know how to work towards it. The 20s supposedly are the most glorious years of one's life. If you shape your actions today, you’ll be able to pull the chords in your favour tomorrow. It is never too late to think better, dream big and act accordingly. The strings of your life are in your hands, the way you pull them decides the future course of actions. So, think wise and act smart!