Want financial freedom? You may first need to take control of EMIs

Is financial freedom just a hype? Can one really design financial freedom or exit the trap of easy monthly instalments? Yes, if you can take careful steps early on, manage your money.

 Personal finance expert, Amit Gupta, MD, SAG Infotech shared some tips:

Take stock of your EMIs

The first step towards taking control of your financial goals is to gain a comprehensive understanding of your existing EMIs. Take a closer look at each EMI, its principal amount, interest rate, and maturity date. This will provide you with a clear and accurate picture of your credit obligations, allowing you to make informed decisions moving forward.

Draw a detailed budget

A well-structured budget serves as your financial compass, guiding you through the complexities of managing your income and expenses. "Incorporate all your monthly income sources and meticulously account for every expense, including EMIs. This process not only sheds light on your financial standing but also empowers you to prioritise your expenses and set achievable financial goals," says Gupta.

 Review interest rates

Not all EMIs are created equal, they come with varying interest rates. "Prioritise paying off high-interest debts first, such as credit card debt or variable interest rate loans.

Manage your EMIs smartly to achieve financial freedom | Image credit: Unsplash

High-interest debt can accumulate over time and significantly impact your financial stability. By addressing these debts head-on, you minimise long-term financial strain," Gupta adds.

Consolidate your debts 

Streamlining your financial obligations can bring about significant benefits. Explore options to consolidate multiple loans into one with a lower interest rate. Debt consolidation simplifies your payment process, reduces the complexity of managing multiple EMIs, and can potentially lower your overall interest costs.

Engage with lenders

Initiating a dialogue with your lenders can lead to favourable outcomes. Negotiating for a lower interest rate or an extended repayment period can make your payment plan more manageable. Lenders often appreciate proactive borrowers seeking to fulfil their obligations and are often willing to collaborate for mutually beneficial solutions.

Create an emergency fund

While your journey to managing EMIs unfolds, simultaneously build an emergency fund. This safety net acts as a shield against unexpected financial crises, preventing you from taking on additional debt due to unforeseen expenses. Aim to set aside a portion of your income regularly to ensure your financial stability.

Make additional payments

Seize opportunities to make extra payments towards your EMIs whenever you have surplus cash. These additional payments can chip away at both the principal and interest, accelerating your journey towards debt freedom. Even small contributions can make a significant difference over time.

Steer clear of additional debt

As you manage your existing EMIs, exercise caution when considering new loans. Reserve the pursuit of fresh financial responsibilities for essential needs. Prioritise reducing your current obligations before embarking on new financial ventures.
Evaluate continuously

The journey towards financial independence requires consistent vigilance. Regularly review your budget and monitor your progress in managing EMIs. Adjust your strategies as needed in response to changes in your income, expenses, or financial goals.