Are you moving towards or away from Financial Independence?
Are you moving towards or away from Financial Independence?
Everyone wants to achieve financial freedom early in their life. Financial independence is not just having money or getting rich, it is much more than that. If you have reached a status where you have enough income to take care of your comfortable living for the rest of your life without having to earn, then you have achieved financial independence. To achieve this, you need to have careful planning and take the right steps. How do you know if your financial independence is at risk? Are you moving away or towards your financial freedom? To find the answer, here are some of the important questions you must ask yourself. If your answer is ‘YES’ to most of the questions, then you are definitely on the right path towards achieving financial independence.
- Do you have adequate life insurance coverage to protect your family and dependents in case of an unfortunate event? Your life insurance coverage should be decided based on your current financial situation, future earning potentials, financial obligations, and current liabilities. Have you taken all these points into consideration to choosing the coverage?
- Do you have an adequate health insurance policy for yourself and for every member of the family or your dependents?
- Do you have the contingency funds to meet emergency financial requirements? Have you ever faced urgent financial emergencies and used contingency funds to meet the need? If your answer is ‘YES’, then you are on the right path on your financial journey towards achieving financial freedom. If your answer is ‘No’ and you have not set up an emergency fund yet or you have taken a loan to meet the urgent financial requirement, you need to focus on your financial planning without any delay.
- How many times have you withdrawn or liquidated your savings or investments meant for long-term financial goals such as retirement to meet urgent liquidity needs?
- Do you regularly save at least 20% to 25% of your income for your future goals without fail?
- Have you restricted your discretionary expenses to a maximum of 20% of your income?
- Do you have a solid financial plan and long-term investment strategy to achieve your financial goals? Have you assessed your risk profile? Do you believe in diversifying your investments into different assets and products like equity, mutual funds, exchange-traded funds, gold, and REITs (Real Estate Investment Trusts) not just by restricting to fixed deposits and other fixed-income instruments?
- Do you believe in investing in equity for the long term? If ‘YES’ you can expect to build a good amount of wealth over the long run with the magic of time and compounding effect. If you trade in the stock market or equities, then you may need to reconsider your investment strategy for the long-term goals.
- Do you pay your debt obligations and credit card dues on time?
- Have you created a solid budget and spending plan to get track of your income flow, and expenses and to hold control of your spending habits to save more?
- Are you well aware of the investment products that you are choosing? Did you try to understand the features of financial products that you are investing in and what could be the impact of those products on your future financial goals?
- Do you regularly review the performance of your investments and explore the new investment opportunities that come up in the market?
- Are you working on your passion or hobbies to turn them into passive income sources?
If most of your answers to these questions are ‘YES’ then you are on the right track and moving towards achieving financial independence. If your answer is ‘NO’ to any questions, then you are moving away from achieving financial freedom. All you need for making the money work for you is time and the right plan to build wealth and achieve financial freedom. Once you achieve this, there is no longer a need to work for money. Having a comprehensive and solid financial plan is extremely important to achieving financial independence.
All you need to do is plan properly and make goal-based investments, keep track of your investments, monitor, and review on a regular basis along with keeping a check on your debt-income ratio. To save more towards your goals, you need to keep your debt obligations low. Save for contingencies and be adequately insured to have protection against uncertainties. A disciplined approach towards savings and starting to save early makes a huge difference to your journey towards financial independence. Right direction and goal-based financial decisions with clarity are key to moving towards financial independence.
Disclaimer
This blog is meant for educating people about the importance of the right financial planning. The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Consult your financial advisor to get personalized recommendations based on your life circumstances.
- Do you have adequate life insurance coverage to protect your family and dependents in case of an unfortunate event? Your life insurance coverage should be decided based on your current financial situation, future earning potentials, financial obligations, and current liabilities. Have you taken all these points into consideration to choosing the coverage?
- Do you have an adequate health insurance policy for yourself and for every member of the family or your dependents?
- Do you have the contingency funds to meet emergency financial requirements? Have you ever faced urgent financial emergencies and used contingency funds to meet the need? If your answer is ‘YES’, then you are on the right path on your financial journey towards achieving financial freedom. If your answer is ‘No’ and you have not set up an emergency fund yet or you have taken a loan to meet the urgent financial requirement, you need to focus on your financial planning without any delay.
- How many times have you withdrawn or liquidated your savings or investments meant for long-term financial goals such as retirement to meet urgent liquidity needs?
- Do you regularly save at least 20% to 25% of your income for your future goals without fail?
- Have you restricted your discretionary expenses to a maximum of 20% of your income?
- Do you have a solid financial plan and long-term investment strategy to achieve your financial goals? Have you assessed your risk profile? Do you believe in diversifying your investments into different assets and products like equity, mutual funds, exchange-traded funds, gold, and REITs (Real Estate Investment Trusts) not just by restricting to fixed deposits and other fixed-income instruments?
- Do you believe in investing in equity for the long term? If ‘YES’ you can expect to build a good amount of wealth over the long run with the magic of time and compounding effect. If you trade in the stock market or equities, then you may need to reconsider your investment strategy for the long-term goals.
- Do you pay your debt obligations and credit card dues on time?
- Have you created a solid budget and spending plan to get track of your income flow, and expenses and to hold control of your spending habits to save more?
- Are you well aware of the investment products that you are choosing? Did you try to understand the features of financial products that you are investing in and what could be the impact of those products on your future financial goals?
- Do you regularly review the performance of your investments and explore the new investment opportunities that come up in the market?
- Are you working on your passion or hobbies to turn them into passive income sources?
If most of your answers to these questions are ‘YES’ then you are on the right track and moving towards achieving financial independence. If your answer is ‘NO’ to any questions, then you are moving away from achieving financial freedom. All you need for making the money work for you is time and the right plan to build wealth and achieve financial freedom. Once you achieve this, there is no longer a need to work for money. Having a comprehensive and solid financial plan is extremely important to achieving financial independence.
All you need to do is plan properly and make goal-based investments, keep track of your investments, monitor, and review on a regular basis along with keeping a check on your debt-income ratio. To save more towards your goals, you need to keep your debt obligations low. Save for contingencies and be adequately insured to have protection against uncertainties. A disciplined approach towards savings and starting to save early makes a huge difference to your journey towards financial independence. Right direction and goal-based financial decisions with clarity are key to moving towards financial independence.
Disclaimer
This blog is meant for educating people about the importance of the right financial planning. The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Consult your financial advisor to get personalized recommendations based on your life circumstances.
