As we celebrate the 74th anniversary of India’s Republic Day, it’s important to reflect on not just the progress and accomplishments of our nation but also on our personal life journey’s so far. Just like our country makes a gradual transition to a modern state, it’s important to work on transitions in our personal and financial lives as well. Being a registered financial advisor with enough experience to speak volumes, I will touch upon the topic of financial freedom and wealth creation. In the past, physical assets like gold and property were relied upon for financial security, but now it’s important to focus on saving and investing in financial assets too. Your financial well-being matters to your personal prosperity. It’s a time for unbiased introspection on both, pockets of excellence and areas for improvement in our wealth creation journey. With this in mind, considering the present-day scenario, we will focus on attaining the right to freedom of financial security and provide recommendations on how to achieve it.
Here is how you begin:
Tidy up your finances:
One of the most essential steps to achieving financial freedom is getting organized. This means creating a budget, tracking expenses, and setting financial goals. A budget will help you understand where your money is going and where you can cut back on expenses. Tracking your expenses will give you a clear picture of where you stand financially and will help you make better financial decisions.
Create a realistic money map:
Once you have a clear understanding of your finances, it’s important to establish a realistic action plan that you can follow. This means setting specific, measurable, and achievable financial goals. It’s essential to have a plan for achieving these goals and a timeline for when you expect to achieve them. It’s also essential to have a plan for how you will handle any obstacles that may arise. By establishing a realistic action plan, you will be able to stay on track and will be on your way to achieving financial freedom. It’s important to review your plan on a regular basis and make adjustments as needed.
Track your dough:
Keeping tabs on your expenses is crucial to achieving financial freedom. This means knowing how much you are spending and on what. It’s essential to be aware of your spending habits and to make sure that you are not overspending. When you keep tabs on your expenses, you will be able to identify areas where you can cut back on spending and put that money toward your financial goals. It’s also important to ensure you are not neglecting essential expenses, such as retirement savings or paying off debt. By keeping tabs on your expenses, you will be able to make better financial decisions and will be on your way to achieving financial freedom.
Here are 5 additional crucial areas that you should recognize and consider when building your financial plans.
One of the most important steps toward financial security is having adequate insurance coverage. A pure-term plan is your best bet in this endeavor, as it provides substantial coverage at an affordable premium. Term plans not only help your dependents meet day-to-day expenses but also keep crucial financial goals on track in your absence. It is an essential part of financial planning and provides a safety net for your family in case of any unfortunate event.
Another critical aspect to consider is inflation. Over time, inflation can significantly impact your retirement savings and long-term goals, such as children’s higher education. To combat this, investing in inflation-beating instruments is a must. One such asset class that has the potential to deliver inflation-beating returns, in the long run, is equities. You can invest in direct equities if you have the knowledge and time to monitor and understand stock markets. Else, you can opt for the mutual fund route and invest via systematic investment plans (SIPs) that help you remain invested across market cycles and bring discipline into investments.
The COVID-19 pandemic has shown us how quickly things can change, which is why it’s crucial to have an emergency corpus ready. Building this fund is easy, just calculate your monthly expenses and set aside enough for six to eight months. Keep the funds in highly liquid instruments, such as liquid funds, so you can access them quickly when needed. Having a contingency fund can be the most potent tool in your arsenal to survive a crisis.
Avoiding Loan Traps:
Another aspect of financial security is avoiding loan traps. While not all forms of loans are bad, the digital world is full of shady apps that provide loans in a minute with no credit checks but ultimately lead to more financial trouble. It’s essential to be cautious and do your research before taking out any loan.
In addition to these steps, it’s also important to regularly review and update your financial plan. This includes setting and reviewing financial goals, monitoring your investments, and making adjustments as needed. It’s also crucial to have a diversified portfolio that balances risk and return.
In conclusion, securing the right to financial security is essential for every citizen. It can be achieved through insurance, investing in inflation-beating instruments, saving for a rainy day, and avoiding loan traps. With the right planning and investments, individuals can take control of their financial future and ensure the well-being of themselves and their loved ones. It’s important to take a holistic approach and review your financial plan regularly to stay on track toward your goals. As always, seeking the guidance of a financial advisor can be extremely beneficial in this endeavor.