As August 15th approaches, how about having your very own Independence Day celebration this year? To be more specific, we mean your Financial Independence Day. While money cannot buy everything in life, financial independence is a valuable asset that few people possess. So, how do you acquire financial independence? Is it true that earning a fortune equates to financial independence?
If that's the case, why do we frequently read about high-paid athletes, actors, models, and other celebrities becoming bankrupt once they've passed their prime, despite having made a lot of money during their heyday? Why is it that even a middle-class man can sometimes handle his financial emergencies better than the majority of his upper-class people?
The solution is simple: individuals who grasp the difference between income and wealth, as well as how to develop it, are financially self-sufficient.
Six steps at achieving your financial independence this year
Step 1: Investment
Begin by putting down a portion of your salary by reducing your discretionary spending. It can be accomplished by resolving to invest at least 20% to 25% of your salary. The more money you save today, the more money you'll have later. Compounding is a powerful tool that should not be overlooked. Simply calculate the gain you'll receive on 20% to 25% of your salary if you save regularly and invest wisely! Canara HSBC Life Insurance offers a wide range of Savings plans that customers can choose to secure their future.
Step 2: Incorporate some equity into your financial portfolio
When compared to other investment options, equity investments have rewarded investors by multiplying their money in a very short period. One can attempt to acquire sufficient money by starting early, planning effectively, and investing attentively, allowing him or her to reach financial freedom at a young age.
Step 3: Take the SIP path
If someone is unable to make lump-sum investing, periodic equities investing can help an individual build wealth to fund his or her retirement benefits. The SIP option has allowed investors to bring much-needed consistency to their investment strategy while also allowing compounded assets to operate to their advantage.
If you invest Rs 1,000 monthly in an equities mutual fund with an annual return of around 12%, you will have a capital of Rs 35.3 lakh at the end of 30 years! If someone has a sizable capital to spend post-retirement and requires a consistent source of income, one can engage in stocks and schedule a methodical withdrawal.
Step 4: Make a plan to achieve your objectives
Have a separate investment strategy for each of your goals (marriage, health, school), quantify them, and define a time horizon for each. You should conduct a study and provide sufficient time to make informed decisions; do not follow the herd and devote time and effort to learning the essentials.
Prepare a change-of-scenario action schedule and work it throughout the investment horizon. It will assist you in avoiding hasty decisions. Don't be persuaded by short-term anomalies' enthusiasm or dread. When the markets are unstable, don't panic if your investing horizon is long.
Step 5: Take control of the situation
Have enough cash on hand to deal with any emergency. Determine your emergency fund needs and work towards collecting them. The notion is that any contingency that anyone can confront at any moment in their lives, such as health concerns, job loss, or physical asset repair and restoration, should not derail your financial objectives.
Step 6: Keep records of your money and evaluate it
Even though short-term volatility is unavoidable, you should concentrate on the fundamentals of your invested equities. Keep your investing plan on track once you've devised it. Examine your portfolio from the perspective of the rationale that guided your investment.
Don't be too set in your ways only because you put in the time and energy for your past research; maintain the flexibility to adjust your portfolio as the fundamentals alter. Keep in mind that overconfidence might be dangerous to your finances.
Best investment plans to achieve financial independence
The first stage in financial investments is to choose the best investment for your background and requirements. Investment planning entails carefully selecting investments after conducting enough research and avoiding quick-money schemes that promise big returns in a short period.
Here are the top 5 investment plans to consider
1. Public Provident Fund (PPF)
PPF is among the most prominent modest savings schemes in India, and it is traditionally regarded as one of the best and safest investment options. In a fiscal year, PPF account holders can deposit up to Rs 1.5 lakh, with a minimum contribution of Rs 500. Section 80C of the Income Tax Act allows you to deduct PPF contributions from your taxable income.
2. Mutual Funds
Mutual fund dealers let you evaluate funds based on a variety of criteria, including risk, return, and pricing. Furthermore, because the data is readily available, the investor will be able to make informed selections. Mutual funds also provide advantages in terms of liquidity and expert management.
3. ULIPs (Unit Linked Insurance Plans)
ULIPs give a variety of advantages, including the ability to invest and insure at the same time. ULIPs are one of India's most popular investment vehicles, thanks to their tax advantages.
4. National Pension Scheme
It is a government-sponsored pension plan for employees from all sectors of the Indian economy, with plans based on equity debt, corporate debt, and government bonds. NPS requires a minimum payment of Rs 6,000 per year, with no higher limit.
5. Direct Equity
You can save money on royalties and marketing costs with direct plans. This modest sum is put into the plan, and it may help you earn additional returns over time.
Being financially self-sufficient takes time, but so has every other freedom movement in history. A whole-hearted dedication to money management will help you attain financial independence. Participate in this freedom fight to make your life financially worry-free and independent of forces beyond your control. Give your family a track record of financial independence.