Steps to Financial Freedom

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4. Insurance

Insurance can help secure your family's financial future.Once you’ve got the savings buffer setup, you could consider buying a life insurance. This is to protect your loved ones.

Think about this. You worked so hard to setup your emergency fund, cleared off your debt so your family wouldn’t be burdened by it and setup a savings buffer to ease the financial impact on your family day-to-day living.

If you are the sole income earner in your family and if anything unfortunate should happen to you and you leave this world for a better place, then who is going to pay for the food and shelter? Your savings buffer could help your family for maybe up to 6 months. What happens after that?

If you have a life insurance, then the income from the life insurance will help your family take care of the living expenses for a long time to come.

Therefore, by buying a life insurance, you take away this financial risk from your loved ones. As long as you live, you will provide for them. If you are no longer here, the insurance will provide for them.

However, if you have no dependent and no financial commitment then you could shelve the thought of buying a life insurance until a time in the future when the needs arise.

Read more:
• What is Insurance. Do you need one?
• Why Insurance is not an Investment Tool

5. Buying a house

Buy a house to build equity.When you rent, you are building net worth for your landlord. When own the place you live, you are building net worth for yourself.

Aggressively save money towards a down payment for a house. Research on the property you intend to buy.

If you’ve bought a good property in an up and coming neighborhood with high demand, then chances are your property will rise in value and this helps in building your net worth.

The monthly mortgage payments you make out to your bank also build your net worth. Part of the mortgage payments goes to paying interest while a portion goes to paying down the principal of the mortgage.

Read more:
• Pros and Cons of Renting vs Buying a Property.
• Assessing Whether You Ready to Buy a House.

6. Investment - Retirement fund

Build your retirement nest egg through investment.Eventually there will come a time when you retire from working. How well you live during retirement depends on how well prepared you are for this day. It is never too early to setup and build your retirement fund.

Read more:
• Are you ready to retire?
• Automatic retirement plan.
• Types of passive income.

7. College Education Fund

Investing in your children's future.After you have your retirement fund in place, you could also start a college education fund for your children. If you can only afford either a retirement fund or a college education fund, then priority should go to investing in your retirement fund because there are other ways to raise the funding needed for your child’s college education, such as scholarship, student loan and others.

Read more:
• Education Fund Planning.

8. Pay off Your Mortgage

Finally, pay off your mortgage. You will have peace of mind knowing that even if you lose your income, nobody will take away the roof over your head.

However, if you are already reaching retirement age, then priority should be paying off your mortgage, then invest your surplus money.

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