“Attaining Financial Independence through Strategic Planning”

Financial freedom refers to the independence that comes from not having to work for money. This is the stage where we may choose whether or not to engage in income-generating activities such as a work or a company but not worrying about monthly expenses.
Well the way is to focus on a goal where your money starts working for you, making enough income to free you from the need to work a regular job to cover your everyday expenses.
You may question if this is even possible. The simple answer is ‘yes’. It is possible to achieve financial independence through proper planning. So what is Financial Planning?

Financial planning is the process of checking your present financial condition as well as your future objectives and needs, and then making investments to attain those goals and fund your future requirements. And the financial plan contains a strategic investment strategy with the goal of creating cash flows for you in the form of capital appreciation or income creation (such as dividends and interest).

How can you prepare a successful financial plan?

Drawing up a financial plan requires an in-depth understanding of your own personal circumstances. When it comes to financial planning, one size does not fit all. The procedures below will guarantee that your financial plan is tailored to your needs and is effective in providing you with financial independence.

1) Goals:

The first stage in each action is to determine its ‘why’. So, before you create a financial plan, you should consider why you need it. What are you aiming to accomplish? As a first step, establish your goals that align with your state of financial freedom. After identifying your goals, place a monetary value to each of them to determine how much cash flow is ideal for you.

2) Risk assessment:

The next stage is to determine how much risk you are willing to take with your assets. At this point, you must determine how much risk you are willing to accept with your investments, taking into account your dependents and the financial commitments you have to them. This method of assessing your risk appetite will give you an idea of the types of financial products you can choose.

3) Investment window: 

Just as it is vital to estimate how much risk you’re willing to accept, you also have to figure out how long it will take to become entirely financially independent. Determining how much time you have left to attain the value of your goals can help you determine how much to invest to come closer to your target cash flow from the assets.

4) Budget:

In order to save, create a budget that identifies your spending as ‘needs,’ ‘wants,’ and ‘desires.’ Understanding these various expenses will allow you to decide on drawing a right balance between the amount you need to spend and the amount you should invest.

5) Invest, not save:

Saving is not sufficient. Money saved in your savings account will remain idle. Invest the money you saved from your budget. To make this money grow, you should invest it in a variety of financial instruments that are appropriate for your risk appetite and investment horizon. Certain expenditures, like as tax payments, can be minimized by strategically investing in tax-saving equipment. Remember that investing in equities mutual funds cannot be avoided because they historically offer the highest returns.

6) Start early and stay invested:

The last step toward reaching financial independence is to begin investing as early in life as possible and to remain disciplined in your investments regardless of market ups and downs. For example, how much may a Rs 10,000 SIP begun at ages 25, 30, 35, and 40 grow to when you reach age 60?

Conclusion:

Finally, remember that attaining financial freedom is entirely up to you and is quite achievable if you plan early in time and invest over a long period of time. Do consult your financial adviser or mutual fund distributor about the best investment alternatives depending on your specific needs.