Financial Freedom: How to get rid of all your financial worries?

Financial freedom is a dream come true for every person – when one need not worry about earning his/her livelihood and may pursue all the hobbies and enjoy life thoroughly.

Financial Freedom: How to get rid of all your financial worries?
Unless belonging to a wealthy family, a person needs to plan his/her finances well and work accordingly to earn financial freedom.

Financial freedom is a dream come true for every person – when one need not worry about earning his/her livelihood and may pursue all the hobbies and enjoy life thoroughly.

However, unless belonging to a wealthy family, a person needs to plan his/her finances well and work accordingly to earn financial freedom.

“Financial freedom has a different meaning for different people. For some it may mean being debt free, for others, it means not being able to work another day to earn money. The conventional definition of financial freedom is the latter. Whatever the case may be, financial freedom is achieved when you have life-long cash flows in the form of interest or dividends or profit from businesses that will take care of all your monetary requirements,” said Vikas Singhania, CEO, TradeSmart.

Also Read: Why is it important to start a money conversation with your child?

“One cannot talk of achieving financial freedom by hoping to earn in the future. Financial freedom is achieved by either having money in the bank or a visible cash flow that will not get disturbed under any circumstance. In both cases, it is important to start planning early. Without a plan, the dream of achieving financial freedom will remain a dream,” he added.

Singhania lists the following steps that would bring you closer to achieving the financial freedom:

Plan

As mentioned earlier, without a plan financial freedom will just remain a pipe dream. One needs to take a prudent approach to achieve financial freedom and plan it to the minutest detail.

Simple lifestyle

Living a frugal lifestyle will leave money in your hand that can be saved for a better future. Wasteful spending and running after short term gratification will not help you in achieving your life goals. The mantra has to be to save every possible rupee you earn.

Protection

When one is young they do not realise the importance of having an insurance policy. One mishap or an untoward incident can ruin the life of not only that person but also his family. To protect yourself, you need to take comprehensive medical insurance and a term policy. Premiums are low when one starts early.

Also Read: 5 common financial traps you must avoid

Start early

To achieve financial freedom early in life, you have to learn the formula of compounding and believe in the power of compounding. There are two components in compounding your wealth – time and return on investment. The longer you stay invested in a quality investment, the higher return you will get. It is therefore important to start saving early in life. For this, you should first save and then spend. There are many mathematical tools to help you achieve financial goals.

The 15-15-15 rule is one of the mathematical tools that would help you achieve financial goals. According to the rule, in order to be a crorepati (have Rs 1 crore in your account) you should save Rs 15,000 every month for 15 years in an instrument that gives you 15 per cent return per year (CAGR).

A return of 15 per cent is possible only in equities. So, you may achieve the target by Investing early in quality stocks or in good mutual fund schemes.

Monitoring

Despite starting off on a promising note, your plans may fail due to various reasons that are not fully under your control. So, like regular monitoring and course correction help the corporate world to stay on course, you have to adopt the practice in personal finance as well to reach your financial goals.

“Investors, especially those who are relying on equity investments, need to monitor their finances regularly to meet their financial goals. Making adjustments to their investments by tweaking wherever necessary is an important part of meeting your goal,” said Singhania.

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