This Republic Day You Must Pledge to Attain Financial Freedom!

Jan 25, 2023 / Reading Time: Approx. 10 mins

Listen to This Republic Day You Must Pledge to Attain Financial Freedom!

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India will commemorate its 74th Republic Day on Thursday, January 26, 2023. The day is celebrated with full vigour and patriotism across the country. Republic Day celebrations will include the largest drone show in India, a military tattoo and tribal dance festival, a Parade, and the Beating Retreat ceremony.

Republic day marks the occasion when the Indian Constitution came into effect on January 26, 1950, three years later after India attained freedom from the British Raj in 1947. Since 1950 India has continuously been mounting under the guidance of the constitution on how the country can function to become its best version. Without an effective constitution, this exponential growth could have become impossible.

 

Today, India ranks as the largest sovereign nation in the world in terms of population, and it is one of the fastest-growing economies globally. However, despite this, the awareness of attaining financial freedom amongst the citizens of India is extremely low. Many individuals have a misconception that if you are earning a decent amount and can fulfil your instant gratifications, you are financially independent and have attained financial freedom. Well, that's not true!

Remember, before being a republic, India had to be independent first, and similarly, before you attain your financial freedom, you need to work towards your financial independence.

Financial independence is the capability to be self-reliant and debt-free. For some, financial independence may mean not having to think twice before buying something or paying the bills. It gives you the power to achieve your envisioned financial goals and allows you to make decisions without any financial constraints.

Whereas financial freedom is subjective, it cannot be defined or quantified specifically because the sense of financial freedom depends on an individual and their financial circumstances. It reflects in one's ideologies about life, money, and/or the ability to enjoy the lifestyle one desires even when unforeseen circumstances arise.

Having said that, you may have realised that financial independence paves the way for financial freedom. Like India has a strong constitution that guides the path to development. Do you have your own financial constitution? This financial constitution or financial plan details the step-by-step process of taking sound financial decisions to attain financial independence.

This Republic Day You Must Pledge to Attain Financial Freedom!
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With the Indian Republic turning 74 this year, it is an ideal opportunity for you to take a pledge to attain true financial freedom as we step into yet another year full of hopes and positivity.

Wondering how? Here's what you need to do to be financially independent:

1. Have a Look at Your Current Financial Picture

The first step on your path to attaining financial freedom is to know where you stand financially. How far are you from reaching your financial independence. You may start by chalking out a clear picture of your debts, accumulated savings, your monthly expenses, income, etc. Budgeting apps may help you manage your cashflows effectively, generate an investible surplus, and, therefore, possibly reach your financial goals much more quickly.

Unless you are certain of being able to save consistently, financial freedom will remain at bay. You may consider increasing your income by controlling your spending habits and savings patterns and defining your long-term financial goals. Once you have assessed your financial situation, you will be able to move on to the next step.

2. Stop Living Paycheque-to-paycheque

Going debt-free is an essential part of attaining financial freedom. In the day and age of consumerism, reckless spending occurs, making us live on credit. While not all forms of loans are bad, the digital world is full of instant borrowing services that provide loans in a minute but charge you a high interest rate.

Ensure to reduce or pay your pending high-interest debts as soon as possible with the help of the snowball method and the avalanche method. The first step to financial nirvana is to refrain from borrowing tools or frequent usage of credit cards to fulfil your short-term requirements, which can derail your financial well-being. You may consider cutting down on unnecessary expenses and using the surplus to pay off your significant debts. Ensure to maintain a debt-to-income ratio of 40% or below.

3. Save for the Rainy Day

In case you have been living paycheque-to-paycheque up to this point, your first savings goal should be to create a safety net. You can do that by creating an emergency fund; this will be your financial cushion to sustain in uncertain times and provide you with the financial freedom you are aiming for.

 

Given the market volatility, economic uncertainties and the possible risk of recession, it will be prudent to have a liquid reserve of cash one can access quickly in case of an emergency.

An emergency fund should, ideally, cover your household expenses for at least 12-24 months, including loan EMIs. Make sure to keep funds in highly liquid instruments like short-duration debt funds or liquid funds without any lock-in period so that you can easily withdraw funds when required.

4. Invest in Inflation-beating Instruments

Aim to invest for your future. Investment in mutual funds via Systematic Investment Plan (SIPs) can be counted upon by all those planning financial freedom over the long term. It uses the 'power of compounding', which can give reasonable inflation-adjusted potential returns.

Inflation reduces the value of money with time, and if not tamed on time, it can expose you to vulnerabilities, particularly in your golden years. Also, for long-term goals such as children's higher education, where expenses tend to balloon with time, investing in inflation-indexed tools is an absolute must. This is where you can leverage the potential of equity mutual funds that deliver inflation-beating returns in the long run.

However, ensure that you invest in worthy and best-suitable mutual fund schemes based on your risk profile and investment horizon and that are aligned to your financial goals. I recommend PersonalFN's SMART Fund Explorer, which provides a list of the best suitable mutual fund schemes recommended by our research team. Invest smartly to achieve your financial goals.

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PersonalFN's SMART Fund Explorer will provide a well-diversified portfolio by suggesting investments across asset classes and market cap. Click on the key to accomplishing your financial goals with PersonalFN's SMART Fund Explorer. As you achieve your financial goals one by one, you grow closer to attaining financial freedom.

5. Get Insured Adequately

Financial exigencies may arise anytime, an urgent medical treatment or the untimely death of a family's breadwinner. With the increased risk to an individual's life and health, it is critical that you obtain adequate insurance coverage.

An insurance cover for life safeguards your family's financial requirements in your absence (untimely demise), whereas a health insurance cover assists you with highly expensive medical treatments. Many life and health insurance options are affordable and offer you plans that cover your entire family. Remember, you have to ensure the terms and conditions of the insurance policy before purchasing for easy access to claims. Being financially insured against the risk to life and health assists you in climbing a step towards financial freedom.

6. Retirement Planning

Many of you tend to put off planning for retirement, which can leave you severely under-prepared. The sooner you begin with retirement planning, the better it is, and it allows you to build a larger corpus over time.

Without a prudent retirement plan in place, you run the risk of outliving your savings while not being able to maintain the desired life in your retirement years. Start early and plan well to remain financially independent even in your work-free years. Sometimes, calculating the actual money required post-retirement could be difficult as there are various factors in play, like inflation. It is advisable to take professional help for retirement planning.

You may consider PersonalFN's Retire Rich service. It is an exclusive service with the sole intent of securing your retirement. As a privileged subscriber of Retire Rich Report, you will get inside access to 3 strategies that comprise a set of equity, debt, and gold mutual funds optimally allocated together to build a decent corpus for one's dream retirement. You need to pick the one that suits your age and time horizon. Subscribe now!

To conclude...

Financial freedom does not arrive overnight; it requires a solid plan and the determination to stick to it. If you follow these measures toward financial independence and stick to them with dedication, your journey to financial freedom may become much easier. As evident, achieving the right to financial freedom is heavily reliant on good financial habits learned over time.

India is a developing country that is learning and evolving in these tumultuous times. Similarly, you should concentrate on improving your financial literacy as it will enable you to unlock the path towards your financial freedom.

Happy Republic Day!

PS: We at PersonalFN understand that not everyone is equipped with financial knowledge. Here we encourage you to gain and enhance your financial knowledge and become a 'Financial Guardian' of your family. You will understand the financial planning elements to become your financial planner.

PersonalFN's latest special initiative, the "Certified Family Guardian," organised into eight modules with 24 extensive videos, will help you with all the relevant tools and learning modules needed to get better at money management. So, if you wish to be equipped with financial knowledge and attain financial freedom, you must enrol for the "Certified Family Guardian" programme!

 

MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.

She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.




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