Crucial Steps to Achieve Financial Independence

You save for a month to buy that latest mobile phone or you utilize your bonus to take a trip with your friends or family. And you pretty much feel satisfied about the fact that your goals and finances are kind of balanced. Now, these are your short term goals which you competently take care of very well. How about the long term goals? For instance taking care of your family’s dreams or funding your child’s education or funding your retirement. And what about the time if an uncertainty strikes.

Are your financial planning that strong to take care all your short and long term goals? Well the answer to this question would most certainly be ‘Not quite’. That’s because although we give priority to savings, we don’t quite explore the territory known as ‘Investment’. And even if we do, we start investing without acquiring enough knowledge about it. Now you don’t want to be in either of the boats. You cannot rush when investing and you cannot be laid back about the whole thing. Hence strike a balance. This post will help you achieve the same!

Think why you investing

What’s your goal? Are you doing it for a short term goal or a long term?
You cannot be aimless about it at all. We come across to so many people who declare that they want to invest but don’t have a goal! That’s like deciding to travel but don’t know where. So pick your goal first. Retirement is a goal by default and is the topmost in the priority list.

Think when you need the money

The time remaining is the single most important factor that determines whether a particular instrument is suitable or not. So it helps to be precise about the duration.

Think how much you need

This means you need to know the target corpus. If you are planning for your child’s education, you can estimate what it costs today. Then with a reasonable inflation percentage calculate the target corpus during the year you need the money. You most definitely get a tentative budget. It’s no rocket science!

Think of an appropriate benchmark

By this we mean for goals that are at least 10 years away,inflation is the benchmark. An investment or couple of investments should be able to beat inflation for such long-term goals (take cue of child’s education again). The amount we invest is also important to achieve the target corpus.

Think of the asset class

Now this is another vital step. You need to know the asset class you need to achieve the target corpus, given the time you have. Once the benchmarks are clear, the asset classes should be clear too. Like: Gold is a dud investment that offers risk more than stocks, but rewards like a fixed deposit. Whereas real estate requires a lot of knowledge and a lot more starting capital.

Think of the expected return

This would need a bit of knowledge gathering as to how asset classes operate.
For example in fixed income returns depending on the overall health of the economy, it’s hard to
predict over the long-term. Post-tax 6-7% is a reasonable expectation for the next 5-10 years.

Also it is reasonable to expect equity produces returns that are close to or even a bit lower than how the GDP has grown over 5,10,15 years (depending on the duration that we have in mind).

Calculate how much of each asset class should you choose

Now you have decided which asset classes to choose and how much return you would be expecting from them. The next step is to decide how to build a portfolio with this information.
Suppose we expect 10% (post-tax) from equity and 6% (post-tax) from fixed income, we can mix them up in different ways depending on the need.

For a 10+ year goal: 60%-70% can be in equity.

For a 5-10Y goal: Anywhere between 0%-40% equity depending on comfort level.

For a 0-5Y goal: 0%-20% equity.

Please note: This is a complete tentative calculation which may differ from person to person depending on the goals each one set. This is just to give you a fair idea.

Now decide investment categories

Since by now you will be done choosing the asset classes and their proportions would be decided, you can consider the categories available in each asset class.
This would completely depend on your comfort level, understanding of the product and associated taxation. Whether you choose equity mutual funds or stocks or debt mutual funds, it’s your choice. You can also take help from financial experts to help you with this.

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Financial Independence for women is paramount

From excelling in areas like the arts, sports, governance to pursuing the professions of their choice,from winning the world with the beauty and grace to landing in space and beyond, women have come a long way in empowering themselves. Yet when it comes to handling their finances, a lot of women still leave it to the men (if not entirely, partially) in their lives.

Although most women understand the importance of being financially independent some lack the confidence in their own ability to manage finances well. However, women should know and believe the fact that they are equally good if not better at making sensible money decisions (imagine your saving skills or purchase choice).

Just like financial independence is paramount, confidence to manage one’s own money is important too. No matter what stage of life, each phase has individual goals and objectives which ultimately strive for one thing – Financial Freedom. And the last thing they want is financial worry to overshadow their lives.

We have discussed, asked questions and gained clarity from women who have gone through circumstances that needed financial independence and they have learnt it the hard way how to have one. Through our post we will help you with few things that women must do to achieve greater financial independence.

Plan for your finances for life

You are single or married or about to get married, all this shouldn’t come in your way of having a strong financial plan. If you are single, either by choice or by circumstance, you need to create a master plan that provides a sense of direction of how to steer your finances. Married women too need to actively participate in any financial plan of the family,whether they are contributors or not, as they stand to be affected as beneficiaries. “Many married women, may seem happily settled, but, in fact, don’t have any financial freedom.

They trust their partner way too much and don’t find it necessary to build a savings basket to cater to their own needs. As a result, if they are unhappy in their married lives, nothing much can be done as they have nowhere to go with the children and have no means to support a separate life” said Mitra, a single mother.

And even if anything goes smooth, think of it this way, as women, you can bring in an element of discipline and focus in the family’s financial plan (skill sets). So, otherwise also seek active involvement in putting together a financial plan.

Switch to savings from spending

This is ultimate and irrespective of men or women, having a savings budget is an important step towards financial independence. The idea is to help you monitor whether expenses are overshooting in a particular month and to hopefully curb them in the following months.
However, such a budget doesn’t help to track your savings. So, what you need is a savings budget. Decide how much you wish to save from your family income month.

Ideally you should push yourself to save 25-30% of the household income (very crucial). Those who don’t get a monthly pay cheque can fix a percentage of saving from the yearly pay.

Don’t be ignorant in money matters. Never

This is especially for people who are married. The way you know the likes and dislikes of your family and have a good grip on household needs and requirement, you need to have a good grip on finances too. Even if you don’t have an income of your own, you must know what your family’s income and sources are (salary/business, income from investments, rent, etc.).

Know how much life and health insurance the family has. Know where to look for the documents and contacts in the event you need them. Additionally, as a good practice, have access to the family’s savings and investments through joint accounts. Mishra, a business woman, married with two kids, said “It’s most important for women to encourage their husbands to have term life insurance policies with them as a nominee. Any liabilities should also be covered through term policies so that if something should happen to him, at least the family is debt free.”
Smart move!

Seek advice

Not all of us are experts here. Taking sound advice from time to time isn’t a bad thing after all. So you can hire a good financial planner who can answer all your money questions and guide you on making a comprehensive financial plan.

Beware of free advice from your bank RM, or insurance agent who may not consider your goal in the first place. Always remember, a good planner will focus on your goals and risk behaviour to make a goal-based financial plan, and help you stay focused to achieve those goals on time. That’s basic.

Financial independence is not just about having funds in your individual and joint accounts and investments; it’s also about the ability to take strong decisions in times of need and uncertainty. It’s a big step and requires a shift in your attitude and lifelong beliefs; but it’s not unachievable and having achieved it will ensure a comfortable and meaningful life.

Our co-founder Rashi Bhargava advocates Financial Literacy and Financial Wellness in women, she believes a financially empowered women is not just more confident but also more productive and creates a perfect work-life balance. Her IAPs for women are all about the day-to-day financial issues and concerns of almost every Indian family and she works on creating a pathway solution devised out of your financial standing as per your life goals.

If you wish to enquire more about the programs or you wish to set up an appointment for a one on one discussion, write to us on or connect here.