Financial Freedom for Generation Z, Here's How to Make It Happen
Financial Freedom or financial independence is defined as a condition where a person is free from all types of debt, has passive income that can meet life's needs, is financially protected from all risks, and no longer has a headache when having to spend money to have fun.
To realize financial independence, we are all required to have good financial planning.
However, financial planning is never taught in schools or colleges. Therefore, not everyone has good education about this one thing.
Lifepal's financial planner and financial educator , Aulia Akbar, CFP®, AEPP®, explained that there are several things that Generation Z must know in achieving financial independence.
6 stages to financial independence
There are six stages you can go through towards financial independence. Anything?
The first is the dependency phase, namely the initial phase where a person still depends on other people to live.
The second is followed by the solvency phase, when someone already has income because they have just entered the world of work.
The third stage, there is the stability phase, namely when a person's finances begin to stabilize. In this phase, a person receives a higher income and can save more funds, has health insurance , and has sufficient emergency funds.
The next stage, namely the fourth phase, is freedom from all forms of debt obligations.
In the fifth stage, there is a safe phase, namely when you already have investments that provide passive income equivalent to spending on basic needs.
Meanwhile, for the sixth phase, namely the independence phase where a person is said to be financially independent. Passive income from investments can cover basic needs or other things you want every month.
This is how generation Z achieves financial independence
For generation Z, according to Aulia Akbar, there are several ways to achieve financial independence.
“There may be many goals in life, but only some of us can achieve them because we can determine priorities. "While you're still young, prioritize investments according to your specific goals," said the man who is familiarly called Akbar.
Even though you are still in college, continued Akbar, you can start saving pocket money from your parents or from side work.
Apart from that, you also have to pay attention to inflation. The easy formula is to look for savings that are higher than the inflation rate in Indonesia itself.
The following are three ways you can start to achieve financial independence:
Know how and diligently check your financial health
The following is the financial health formula from Lifepal.co.id presented by Aulia Akbar:
SMART method for life goals
In determining our life goals, both short and long term. Get used to implementing SMART strategies.
SMART is an abbreviation for Specific (specific), Measurable (measurable), Achievable (can be achieved), Relevant (relevant), and Timebound or achievement can be measured in time.
Examples of SMART goals can be seen in the following table:
Without this strategy, the goals that have been planned from the start will be difficult to measure properly. That is what ultimately makes us fail in achieving financial independence.
Pay close attention to the rolling flowers
You have to pay close attention to the compounded interest or rolling interest like that of deposit instruments.
Revolving interest is interest that will return from the principal of the funds borrowed or invested. Interest from compounding results can be obtained when the money you earn from investments starts to produce profits again when reinvested.
These are the various things that millennials need to know in achieving financial independence. Make sure you are the one who is able to make this happen.
College is a golden age for someone. Therefore, you must be wise in going through it.
One way to do this is to start investing while in college. When you invest as early as possible, it will be easier for our investment process for long-term goals.
“Financial independence is not easy to achieve, but it is not impossible for us to achieve it. College years are the most valuable time for a person. "If someone can be disciplined in planning their finances during this period, then in old age they can more easily achieve financial independence," stressed Akbar.
Author's note
This article was created by Aulia Akbar CFP®, AEPP®, Lifepal .
