Financial Independence is having enough money to pay for your living expenses across life. It must not be confused with financial freedom which is having enough savings, investments and cash to afford the lifestyle you desire. While financial independence sounds great, it’s not that easy to achieve.
Before trying to achieve financial independence, you must understand what financial independence is. Is it buying a Mansion or a Private Jet? Well in simple terms, it’s living off your savings and investments with no debt at all. Living debt-free is easier than you think.
Managing money is an art, learned at an early age. This is why you must attend interactive sessions on wealth generation. Enroll and participate in the Financial Freedom Workshop by C S Sudheer just by leaving a missed call on +91-8655097256. You will also be eligible for a one-year membership to the Millionaire’s Club of IndianMoney.com.
When it comes to financial independence, how much is enough? There are people with lakhs of rupees in their bank accounts or property worth crores and still make their spouse work. This is because they don’t feel 100% secure.
The amount you need for financial independence depends on monthly expenses and the ability to manage healthcare expenses. Financial independence depends on the number of dependents and the power to support the kind of lifestyle you need.
Well, you need passive income to compliment salary income. Eventually, passive income must substitute salary income. This is the secret to financial independence.
Well, life has no shortcuts to achieve success and there are no shortcuts to financial independence. However, people do this to achieve financial independence.
Let’s take a look at this rule of thumb for financial independence:
Let’s have an example to understand financial independence. You have an annual income of Rs 15 Lakhs and expenses of Rs 12 Lakhs. The rule of thumb for financial independence is 30X. You need Rs 12 Lakhs * 30 which translates to Rs 3.6 Crores.
Well, you must first cut down on unnecessary spending and reduce annual expenses. Let’s say you bring this down to Rs 8 Lakhs from Rs 12 Lakhs. When you use the 30X thumb rule, you get 8 Lakhs * 30 = Rs 2.4 Crores. Now, the target is Rs 2.4 Crores. This means that you can save Rs 7 Lakhs instead of Rs 3 Lakhs. This is a double benefit of a reduced target for financial independence and the ability to save more.
Can savings of Rs 7 Lakhs a year help you collect a corpus of Rs 2.8 crores? Let’s use IndianMoney investment calculator to find out. Well, if you invest Rs 7 Lakhs in equity mutual funds at 10% expected returns for 15 years; you get a corpus in excess of Rs 2.5 Crores. It might take you 17 years to achieve this figure on an expected return of 8%, common to conservative investments.
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