Self-employed individuals earn a lower income than salaried employees, for them to make arrangements for social, health, and retirement security. These financial tips can help in achieving financial freedom:
1. Maintain emergency funds to cope up with financial exigencies
Self-employed individuals should aim at maintaining a large corpus, at least for nine to twelve months, because of income uncertainty. Having an emergency fund is a highly liquid form like high-yield savings accounts or high-yield fixed deposit accounts to ensure instant access.
2. Adequate term insurance for your dependents
The primary purpose of purchasing a life insurance policy is to provide a secured future and income to your dependents in the situation of an unfortunate event. Purchasing life insurance coverage equal to at least 15 times your annual income and at a lower premium will not only help your family meet their regular living expenses but also achieve a financial goal like your child’s higher education or marriage expenses.
3. Health insurance policy
A steep rise in medical expenses highlights the importance of purchasing a health insurance policy. Without health insurance cover, the hospitalization of a single member can risk your life-long savings. Self-employed individuals should purchase family floater plans to cover themselves, parents, spouse, and children at a much lower premium.
4. Create a financial plan to attain your financial goals
Financial planning helps in money management for achieving various financial goals according to your risk appetite, investment horizon, and cash flow, it also helps in asset allocation strategy for your investment. Self-employed individuals should use SIP calculations for estimating monthly investments required for attaining the financial goals.
5. Start investing early to enjoy retirement corpus
As retirement planning is a long-term financial goal, begin investing your monthly contribution in equity funds through SIPs. Equity an asset class is well-fixed income instruments and other asset classes by a wide margin over the long term. Activate Systematic Transfer Plan (STP) in equity helps funds to automatically transfer the amount to debt funds at monthly intervals
6. Use the credit card for a good credit score
Those having a credit score of 750 and above have higher chances of getting the loan approved and credit card approval. Many lenders also started offering preferential interest rates to those having a good and higher credit score.