4 Golden Rules to Achieve your Financial Freedom
There is an interesting quote from Charlie Munger – I did not intend to get rich. I just wanted to get independent.
Everybody wants to become financially independent. But very few actually get there, Why?
There can be various reasons but I think that achieving something like Financial Freedom doesn’t just happen. It requires one to have a serious plan and more importantly, they need to Take Action & commit to that plan. And that’s easier said than done.
Getting the Financial Freedom is a tough nut to crack combining with the early retirement.
A popular Thumb Rule for Financial Freedom is – having a corpus equal to atleast 25 times your annual expenses.
This may be enough for some people but may not be for many others. For some 30X or 40X may be a more appropriate size. It depends on a variety of factors like current age, age of early retirement, life expectancy assumption, inflation % assumption before and after retirement, return estimates before and after early retirement and several other more serious factors like the sequence of returns risk, etc.
If you are just beginning your journey – then the exact accuracy doesn’t matter and you can have atleast some target in front of you – which I think is a good one provided by the 25X, where X is your annual expenses.
Remember that only committing and Taking Action will help to achieve your Financial Freedom and not the knowledge about it
- To begin with save min of 10% of your monthly income and invest in a long term Equity Products like Mutal Funds & Direct Equity ( Equity is a good bet considering your financial freedom is a long term process and Long Term Average Return from Equity is 12.5% in India )
- Figure out your finances, Understand your cashflows, Set your financial Goals, Analyze your surplus, Pay off your high interest debts and determine your Networth first.
- It is very important to review your investments in 4 months interval to monitor the progress of your Asset Allocation, Dynamics of Markets and performances of the funds.
- Have a Financial Expert by your Side. Investment is a complex process considering Risk, Returns, Tax, Asset Allocation and Liquidity. This necessitates the need for a financial planner who has accurate information about products and the client’s needs.
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