We all work for money. But, does having lot of money make us rich and wealthy? Does it take away the ‘stress’ from your daily life? Financial Freedom is much more than having money.
Financial Freedom means you are able to do what you enjoy without worrying about how it might impact your finances.
Financial Freedom cannot be achieved in one day. It is a process. You need to take the right steps to cushion you against losses during un-foreseen events. You need to have long-term and right investment strategies. You have to create multiple sources of income (active and passive income) and so on…
Are you on the right path to achieve your Financial Freedom?
Is your Financial Freedom at Risk?
Kindly go through the below ’15 point checklist’ to know if your financial independence is at risk.
If you answer ‘YES’ to most of the questions / points, you have taken the right steps which can cushion you against the financial losses and ensure ‘financial freedom’.
If you answer ‘YES’ to some of the questions, you may have a good chance to be financially free by taking few corrective steps.
If your answer is ‘NO’ to most of the questions or to all of the questions, you could lose your financial freedom. You may have to act NOW. You may have to SAVE more, avoid reckless spending and INVEST right.
- Financial Emergencies – If faced with a financial emergency, you do not have to sell some of your financial assets or take a loan? Do have a contingency fund to meet unforeseen financial expenses?
- Do you have health insurance? Are your family members / dependents having adequate health insurance cover?
- Does your life insurance cover ensure your family members to have same standard of living if anything happens to you? Do you have adequate life insurance cover (sum assured) which matches your income earning potential, covers your current liabilities and financial obligations?
- To meet your living expenses or to fund your financial needs, you have never withdrawn any amount from your Retirement Savings Schemes like Employees Provident Fund / Public Provident Fund.
- Do you judiciously save a certain portion of your money towards your Retirement goal? Do you save atleast 20% of your income towards this goal?
- Do you spend only 10 to 20% of your income towards repaying your loan EMIs?
- You have never rolled over your credit card bill in the last few years. Do you pay the entire credit card bill amount within due date?
- Do you have a long-term investment strategy to achieve your financial goals? You believe that financial growth can be possible over a longer-period and there is no short-cut to achieve it.
- You do not believe in short-term trading and investing in penny stocks. You prefer to invest in blue chip companies or mid-cap companies (quoting at reasonable prices) for long-term. You do not invest in stock market based on tips and speculation.
- Do you try to understand the features of a financial product before you invest in it? Do you select the investments based on your financial goals and requirements? Do you try to understand the risks associated with the investments?
- You do not invest your entire savings only in fixed deposits or recurring deposits. You believe in investing in different asset classes and portfolio diversification.
- You have clear idea about your monthly cash inflows and outflows. You track and monitor your expenses, savings and investments periodically.
- You do not depend entirely on your salary or business income. As of now, you may depend on one source of income but have clear plans to get passive income (or) income from multiple sources. (Passive income is an income received on a regular basis, with little effort required to maintain it.)
- You do not depend on your parents every time when you are in need of money. If you are a retiree, you do not depend on your children to meet your financial needs.
- You want to build your own wealth and want to achieve financial freedom.
10 steps to Financial Freedom
- Figure out where you’re at. Know and assess your Net-worth, inflows (income) and outflows (expenses, investments etc.,).
- Make a budget. Track every Rupee you spend. There are can be ton of things we pay for that we really don’t need and may actually be making you miserable. Cutting out unnecessary expenses isn’t about denying yourself convenience; it’s about learning what is really important to you and what makes you happy. (Be aware of little expenses; a small leak will sink a great ship – Benjamin Franklin)
- Create an Emergency Fund.
- Protect and Insure what you have.
- Plan, save and invest for your retirement goal.
- Set realistic Financial goals. Learn which important goals you need to set for long-term financial freedom and how to get there.
- Create a right investment policy. Most people understand they need to be investing to reach their financial goals but very few actually have a plan on how to get there.
- Eliminate high cost Loans (Read – good debt vs bad debt).
- Turn your hobby or interest into a business or career. (or) Earn extra money by taking a second job based on your hobby. Get out of your comfort zone.
- Knowledge is power. Be financially literate. Personal finance doesn’t have to be a mystery. Educate yourself.
We all work for money. But the ultimate goal or aim should be to make ‘money work for you’. Time is the biggest asset of all. Invest early. Invest right. Make your money work for you.
If you decide to work from 9 am to 5 pm, you may have to work till you are 95. Have a plan to get income from multiple sources. You can start your own business based on your interest or hobbies. You can encourage your spouse to take-up a franchise based on his/her interests. You can have ‘Plan B’to buy some good properties that could continuously generate passive income for you and your family. You can work part-time on weekends. You may start writing a Blog and monetize it. Create multiple income streams and have a life-time income plan.
Financial freedom is not a dream. It is a choice. Anyone can be financially free. Being financially free isn’t about not having to work; it’s about doing what makes you happy and getting paid to do it.