This Independence Day take steps to achieve your financial freedom

August 14, 2020 10:09 PM

We have got political and social freedom, but have you gained financial freedom? Let’s check out what it requires to be financially independent.

Independence Day, financial freedom, financial planning, financial goals, Contingency Fund, retirement corpus, health insurance, life insuranceIt may require sacrificing some of your luxuries today to lead a comfortable life later.

By Ajay Sharma, Director & Designated Partner, InvestmentMitra Advisors LLP

The country is celebrating the 74th Independence Day after our ancestors freed us from foreign rulers 73 years ago with Britishers leaving India on August 15, 1947 after ruling nearly 200 years. Today we breathe in a free country that gives us an identity and freedom to do everything except the things that oversteps others’ rights and freedom.

We have got political and social freedom, but have you gained financial freedom? Let’s check out what it requires to be financially independent.

Few questions that should emerge immediately to know if you have achieved financial freedom are:

  • Do I have enough funds or provisions to take care of my expenses in case I lose my income temporarily? If not, create a Contingency Fund to take care of your expenses for one to three years.
  • Do I have enough money to take care of my expenses even after my retirement? For this, calculate the retirement corpus that you will need at the time of retirement to take care of expenses all through your life post retirement when you are not earning and start saving and investing for the same.
  • Do I have enough funds or provision to take care of any medical emergency if that happens to me or any member in my family? If not, then buy family floater health insurance policy for yourself and your family.
  • Am I saving enough to achieve my financial goals? To assess this, write down the major events of your future life that will require one time but large money to be spent. Make fair assessment of expenses and start saving for the same.
  • What happens to my dependents if something unfortunate happens to me? For this, calculate your human life value and see if you have those funds in investments. If not, take a term insurance plan for the shortfall. Do keep in my mind some liabilities that will come in future while calculating your human life value.

Remember freedom didn’t come so easy to us. It took nearly a century of struggle to win freedom from the foreign rule. So many sacrifices were made over hundreds of years of struggle before we won our freedom.

Similarly it may not be that easy to win your financial freedom. It may require sacrificing some of your luxuries today to lead a comfortable life later. Your efforts to save and accumulate the required funds to be financially independent may take quite a time. And your investments may see highs and lows at times. It is very important to keep yourself composed and immune to the disturbances and just work on to gain “Financial Freedom”.

We won freedom because a good part of people exercised non-violence. There were many wars that were fought by freedom fighters against the foreign ruler. Many Indian fought for British army during the world wars and helped them win and who were later considered as potential threats to British rule if their ambitions were not met. All these efforts collectively won us the freedom.

Along the same lines, you must have a diversified portfolio of investments – diversified across asset classes viz equity, debt, gold and further diversified among investment products within the asset class. It is of utmost importance to know the risk and reward matrix of each asset class and product before making any asset allocation.

So are you ready to win your Financial Freedom now? If yes, prepare a financial plan to achieve your financial freedom. In case of any difficulty in charting the course, take help of a good financial planner.

Happy Independence Day and Happy Financial Independence!

(The author is an Air Force Veteran, IIM Alumnus and Co-founder of InvestmentMitra Advisors LLP)

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