The journey to Financial Independence

“If you are born poor, it’s not your mistake, but if you die poor it’s your mistake.” – Bill Gates

The year 2020 began on an optimistic note. The scenario changed drastically after the outbreak of the pandemic which created fear, panic, and uncertainty across the globe. It inflicted a lot of pain economically too due to strict lock down measures – people losing jobs, closure of industries, increase in bankruptcy, eviction for nonpayment of rent, and the list goes on. 

The silver lining was the timely intervention by most of the central banks. They used various monetary policy tools and supported the distressed economy by providing ample liquidity to the system. When coupled with the fiscal measures undertaken by various governments, it added positive sentiments and confidence to the economy. With vaccines getting the regulatory nod, the outlook for the year 2021 looks much better than 2020.

As we reflect on the past year and do some introspection, we would realize the importance of adapting ourselves to changing times and the importance of financial independence. Lessons learnt must be engraved in one’s memory and must not be lost since this will shape our attitude towards better planning to help us face future challenges with ease and confidence.  

One of the important and fundamental steps is to have sufficient financial resources to wade through critical times and this can only be achieved through proper financial planning.

In simple terms “Financial Planning” means apportioning your income for your expenses, savings, and investments such that

1. You are not affected financially even during medical or other emergencies or even when there is loss of regular income

2.You can meet all expenses and achieve your dreams comfortably, like spending for education, wedding, holidays, and purchase of property

3.You can retire from actively working for money and still continue to have a good standard of living

As with any plan, these can come true only with a proper strategy. The strategy must consider your age, income, commitments, existing assets and liabilities, risk appetite, disposable income, number of dependents, etc.

No two individuals or families are alike. One size cannot fit all. So, the strategy for your friend or neighbour cannot work the same way for you as well.

To summarize, you must apply the following to achieve financial independence

1.Analyze your personal balance sheet and your income and expense statement

2.Plan for unexpected disruptions to your regular income

3.Identify your expected financial commitments and goals

4.Identify the cost of an ideal retired lifestyle

5.Invest appropriate amounts in the various asset classes

6.Stay invested to harness the power of compounding

Let us all welcome this new year with a resolution to set our financial goals and to work towards our financial independence!!