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Financial freedom is mental, emotional, and education process. - Robert Kiyosaki

Here’s a step-by-step process of how you can chalk out your journey toward financial stability:

Assess your existing financial position:  

Before you determine what you want to achieve, you must assess your current financial position. 

Pro tip: Your current financial position would include your assets and liabilities and your net worth.

Set your future financial goals:  

Next, we need to assess what we want to achieve. Setting your financial goals involves enumerating your needs and a timeline for when the funds would be required. 

Pro tip: Once you know the same, pen it down. It helps to revisit the same at a later point in time. 

Click here to read an article on the Importance of Financial Goals & Planning.

Budget your expenses: 

An integral part of achieving financial stability is understanding how you manage your money. There are many apps now which enable you to track your expenses effectively. This enables you to track how much is spent on what items, thus providing insight into areas where you could potentially cut your expenses. 

Pro tip: Budgeting doesn't mean you need to lower your expenses. Just allocate a certain fixed percentage of money to a certain expense. 

Weed out unwanted expenses: 

Tracking your expenses would enable you to cut down on impulse buys and unwanted expenses. 

Pro tip: With the advent of e-commerce and food delivery apps, the expense in these areas has increased drastically. Sticking to your monthly budget and only investing in what you need is crucial.

Debt management: 

This skill should be taught in school and college. It is very easy for the younger generation to get into a debt trap. We must inculcate the principle of payoff debt as per schedule.

Pro tip: Pay off your high-interest loans first, such as credit card outstanding and personal loans. Good loans, i.e. home and education loans, wherein you receive tax benefits as well, can be carried forward.

Increase your savings: 

There should be an effort to increase your savings in line with your increased income consistently. 

Pro tip: Such savings should be invested prudently to align with your financial goals.

Generate passive income: 

Many individuals miss the importance of making their money work for them. You must create an alternate source of income that can act as a buffer and be integral to your long-term wealth creation. 

Pro tip: The passive source of income can be in the form of returns on your investment, rental income from additional property etc.

Keep a tab on lifestyle inflation: 

People become obsessed with lifestyle expenses such as buying branded clothes and accessories, eating at fine dining too often, and hosting parties for friends and family. Over time, this could escalate into a major expense item. It is important to keep a tab and avoid lifestyle inflation. 

Pro tip: It is important that you budget the expense towards these expenses and gradually cut them down as you move along your life stage. 

Invest for your future: 

Goal setting is only one part of your financial planning. Ensuring you consistently invest in a disciplined manner to achieve your goals is an ongoing commitment. 

Pro tip: Set a pattern for your investments and follow it to the tee for maximum results. Consistency is the key to financial stability.

Repeat the process: 

Financial goals do not remain constant over your lifetime. Also, the essence of financial stability changes at different life stages. You must strategically evaluate your financial goals and align your investments with your changed risk/return profile and updated requirements. 

Pro tip: Remember to review your portfolio and check if it is aligned with your financial goals, which could change or evolve with time.

Financial stability is not a destination. It is a journey which ensures mental peace and emotional stability.