Financial self-reliance is the crux of all investment goals

finance, financial investmentsIllustration: Shyam Kumar Prasad

Next year, October 2 will mark Mahatma Gandhi’s 150th birth anniversary. Gandhi had a vision for this great nation for which he relentlessly worked. Freedom can mean different things to different people. The freedom to choose, the freedom to exercise one’s rights, the freedom to live life on one’s own terms, all mean something to someone.

However, a common vein running through all of this is self-dependence. Self-dependence gives one the strength to not only claim but also enjoy one’s freedom. Gandhi was well aware of the power of self-dependence and started an entire movement tethered to it.

Independence in 21st century

Today, independence is equated with financial freedom. The increasing ability to earn money has made more than a million Indians self-reliant. However, financial independence should not stop at just earning money. In order to maintain this independence one must also learn to save and invest these hard earned earnings. It is only then that an individual can be truly financially independent and self-reliant.

Savings and investments

Intelligent budgeting and management of one’s income and expenses lies at the core of savings. We have all heard of the saying “a penny saved is a penny earned”. Budgeting is an important tool for saving. First, you need to take stock of your income and expenses. Once that is done, you need to prioritise your expenses from the most important to the least important.

This is done to ensure that you always have enough income to meet your most important expenses while shedding light on expenses that can be avoided or curtailed. The eventual goal is to ensure that your income exceeds your expenses with as wide a margin as possible. The surplus fund after meeting all the expenses would be your savings. It is only after you have assured savings that you can think about investment.

Investment starts only after savings. It basically entails buying an asset with the money saved to generate returns from it over a period of time while also taking care of risk and volatility. When it comes to investing your hard-earned money, you need to focus on a host of factors.

These include your return requirement, your risk profile, the time horizon of your goals, your liquidity requirements and taxation. Start investing early and stay invested for a longer period of time so that you can allow the power of compounding to grow your wealth.

Some of the ways to ensure financially independence are:

* Actively save every month. Some months it could be just a few hundred while the other months it could be half of your earnings. Make savings your priority by actively focusing on it.

* Diversify your investments. Invest in long-term equity and debt funds. Put some money in fixed deposits and a small amount to ensure liquidity.

* Invest in a term insurance plan if you have EMIs or dependents to take care of.

* Make sure you have retirement savings/systematic investment plans in place when you retire. This will help ensure that your life style does not dramatically reduce when you retire.

Always remember that you are the only one who can make you financially self-reliant. Start your journey of investments today to ensure a free and independent future.

Source: Quantum Mutual Fund

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Source: Financial Express