It is that point of the year when freedom as an idea dominates. Financial freedom is propagated by every bank, open-end fund , insurance firm or stockbroker. you’re inundated with messages on your phone, email and within the press. They prod you to seek out your financial freedom. Ideas about retirement at 30 or 40 sound good to everyone. However, take a breath, and you’ll realise that it’s easier said than done. It needs more of you than anything . Your determination and energy would make a difference. This column has argued for a step towards gathering financial knowledge whenever possible. regardless of your background. you would like to figure towards giving direction to your money.
The thanks to financial freedom is thru financial literacy. Knowing practical concepts makes a big difference. you’ll have learnt about interest in class . the thought is that the single most vital one to make wealth. all of your investments need to earn an ‘interest on interest’ for an extended time. The minimum time-frame is ten years. The more, the higher . the important power of compounding propels your wealth much later.
The other important concept to master is that the rate of inflation within the economy. you would like not dive deeper to find out about the way one arrives at it. But you want to track the movement in prices regularly. Your freedom is tied to the power of your investment to beat the rate of inflation consistently. If the rate of inflation is above the return you get on your long-term savings, you’re not creating wealth. you’re essentially losing money.
There are a couple of other things too. Concepts like diversification of risk, the connection between risk and returns and rate of interest on loans. Once you get on top of those concepts, you’ll create room for a viable plan towards financial freedom.
Your money behaviour
Besides knowledge, your actions matter tons . Your behaviour towards loans and therefore the use of credit cards would also drive your ability to liberate yourself in financial terms. If you spend before your income, you’ll find yourself during a debt trap. once you borrow your mastercard and don’t pay the entire outstanding amount monthly , you delay your financial freedom.
Borrowing to make assets is sensible . However, borrowing to spend money won’t help. If you would like to retire early, you would like to start out early. Your attitude towards money, savings and investments will primarily make or break your wealth. Investing in tax-saving instruments just like the public provident fund, equity-linked savings schemes or national pension schemes allows you to urge a pre-tax deduction. that cash is your retirement money. you are doing not touch it if you would like to line yourself free. once you invest during a tax-saving instrument, there’s usually a lock-in period. you would like to inform yourself that it’s the cash you’re giving yourself. that permits you to line aside money for your future and also save tax.
Why financial literacy matters
In 2019, the govt came up with a National Strategy for financial literacy. A survey of 75,000 people on parameters like Financial Attitude, Behaviour and Knowledge revealed that 27% of the people achieved the minimum target score. it had been 20% during a similar survey conducted in 2013.
The survey was conducted among adults in rural and concrete areas, government services or private and students. Financial literacy is highest among salaried within the government services. it’s rock bottom among agricultural labourers.
An essential initiative towards financial freedom is that the creation of an emergency fund. Your ability to face up to an unexpected shock determines your level of independence. The pandemic in 2020 has wiped off the savings of millions in India and abroad. Many of you had an interruption in your long-term investment plans. Being financially free differs from one individual to a different .
It means ensuring that you simply have enough to satisfy your living expenses without work. which will not be enough to understand all of your dreams. But it should be sufficient to take care of harmony in your life.
Strategising Investments
If you would like to retire early, you would like to start out early. Your attitude towards money, savings and investments will primarily make or break your wealth
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