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Learn How to Achieve Financial Freedom

IndianMoney.com Research Team | Updated On Monday, December 02,2019, 05:30 PM

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Learn How to Achieve Financial Freedom

 

 

Financial Freedom means you can maintain your desired lifestyle, without the need for a regular paycheck. It’s the freedom to do what you really desire, without having to worry about the daily living expenses. Financial freedom is living a debt-free life.

Managing money is an art, learnt 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 one year membership to the Millionaire’s Club of IndianMoney.com.

Learn How to Achieve Financial Freedom

Go through these 7 stages of financial freedom and learn how to achieve them.

1. Learn Where You are and Where You Want to Be

You just can’t pretend there are no loans or credit cards to repay. If you live life lavishly and don’t pay loan EMIs in time, you will never be debt free. How can you ever achieve financial freedom?

2. Learn to Live On Your Own

Financial Freedom is being self-sufficient. You need to earn enough to live on your own. You must have enough money to pay for food, transport and other essentials. How do you achieve this? Well, you will have to live on less in the initial years till you get a firm grip on finances.

3. Get an Emergency Fund

This is where you build breathing space. If you are married, you must have at least 6 months of living expenses in an emergency fund. Its 3 months if you are unmarried. Keep the emergency fund liquid. This means you must be able to liquidate the emergency fund in a hurry. Liquid funds are an excellent option for the emergency fund.

4. Get Stability with Finances

You have the emergency fund fully ready. The next step is to save a year’s worth of expenses. This money can bring you stability as you pursue prominent financial goals. Follow this simple rule of thumb. At least 20% of income should go towards savings. Come what may; invest at least 10-15% of monthly income.

5. Build 2 Years of Living Expenses

The next stage of financial freedom is to have at least 2 years of living expenses. This gives the flexibility to live life the way you want.

6. Get Money for The Rest of Your Life

This is when you have money to last for the rest of your life. There are 2 ways you can achieve this.

  • Save enough so that you can live off the interest of the investment.
  • Invest in income bearing assets like land or real estate. You easily earn a consistent amount of money across your life.

7. The Final Level of Financial Freedom

The last level of financial freedom is abundant wealth. This is when you have more than enough money you need and can leave a legacy behind for your family. The money you leave behind can give your family and future generations a great life.

Investing for Financial Freedom:

Investing in financial freedom can be done in two ways. You set aside disposable income in an investment like FD, NSC, PPF and so on to earn interest. You can also buy an asset like a land plot or an apartment and sell it for a profit. (Set aside money by buying assets which increase in value).

How does this work out? You save money instead of spending it. You then invest the money based on the risk profile. A conservative investor may invest in PPF, NSC, FD or Debt Funds; while an aggressive investor may invest in stocks or equity mutual funds.

Get Financial Freedom with the Power of Compounding:

Compounding power is basically return on return. Wealth grows exponentially. The profit earned gets reinvested and the profit earning process gets accelerated.

Let’s understand the power of compounding with an example. You invest Rs 100 in investment and earn 8% interest a year. The principal amount is Rs 100 and the year-end earnings are Rs 8. Now, you don’t spend this amount, but instead, reinvest the money. The principal amount for the following year becomes Rs 108 and the earnings you get are (8% of Rs 108) which is 8.64. This is 0.64 (8.64-8) more compared to the first year. This looks a small amount but can make a huge difference in investments. This is the magic power of compounding.

Let’s say you invest Rs 1.5 Lakhs each year for a period of 15 years. We assume the PPF interest rate of 7.9%. How much will PPF investment grow in 15 years?

Year

Opening Balance (Rs)

Amount Deposited (Rs)

Interest (Rs)

Closing Balance (Rs)

1

0

150000

11850

161850

2

161850

150000

24636.15

336486.15

3

336486.15

150000

38432.40585

524918.5559

4

524918.5559

150000

53318.56591

728237.1218

5

728237.1218

150000

69380.73262

947617.8544

6

947617.8544

150000

86711.8105

1184329.665

7

1184329.665

150000

105412.0435

1439741.708

8

1439741.708

150000

125589.595

1715331.303

9

1715331.303

150000

147361.173

2012692.476

10

2012692.476

150000

170852.7056

2333545.182

11

2333545.182

150000

196200.0694

2679745.251

12

2679745.251

150000

223549.8749

3053295.126

13

3053295.126

150000

253060.315

3456355.441

14

3456355.441

150000

284902.0799

3891257.521

15

3891257.521

150000

319259.3442

4360516.865

Take a look at the chart. You get nearly Rs 44 Lakhs after 15 years.

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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