How to Ensure Your Financial Freedom This Independence Day

Independence Day 2023 Theme:

Every year on August 15^th, India rejoices with pride and patriotism to celebrate Independence Day.

Our Prime Minister Narendra Modi will raise The National Flag at the storied Red Fort on August 15 to officially begin India's 77^th Independence Day celebrations. The stage is set for the military parade, cultural performances, and speeches from government officials in honour of Indian Independence Day. Many schools and colleges will be celebrating the 'Azaadi ka Amrit Mahotsav', with the theme 'Nation First, Always First'. The Government's initiatives to encourage patriotism and nationalism are consistent with this notion.

On July 22^nd of last year, PM Modi began the 'Har Ghar Tiranga' campaign, a day he deemed historically significant because it fell on the same day as the adoption of the National Flag. 'Har Ghar Tiranga' is a campaign that is being undertaken under the auspices of the 'Azaadi ka Amrit Mahotsav' festival to encourage people to hoist the tricolour flag at their homes to mark India's independence.

Honourable Prime Minister Mr Narendra Modi urged the citizens of India on social media (made an announcement on 'X', formerly known as Twitter), "In the spirit of the #HarGharTiranga movement, let us change the DP of our social media accounts and extend support to this unique effort which will deepen the bond between our beloved country and us." This initiative has been taken to inculcate the feeling of patriotism and to increase awareness about the National Flag of India.

15^th August refers to the day of independence - the day of freedom. Today, why not talk about the financial planning strategies that could assist you to trade your way to financial freedom!

Financial freedom is not about having a lot of wealth, rather, it is about careful planning and smart investment choices to meet one's objectives and safeguard the financial future of their family. The pursuit of financial freedom is universal, yet the means to achieve it varies for everyone. Financial freedom means liberating oneself from perpetual money-related stress. The aim is sustainable wealth that supports your goals, whether it's enjoying your desired lifestyle or having the financial strength to weather unpredicted crises.

'How do I achieve financial freedom?' - It is a prevalent question concerning every earning individual in today's world.

However, some individuals have a misconception that if you are earning a decent income, you are financially independent, or you have attained financial freedom. That's not true. These two terms may look similar, but there is a slight difference. To be precise financial independence paves the way for you to attain financial freedom. The reason financial freedom isn't as easily attainable for everyone is lack of knowledge to identify the right approach towards a complex commodity like money. One cannot talk of achieving financial freedom by hoping to earn in the future. The goal of becoming financially free will remain a dream without a proper financial plan in place.

On this 77^th Independence Day, Here we are going to enlighten you about 5 such key financial planning to unlock your path to financial freedom:

1. Assess your financial position and establish S.M.A.R.T financial goals

Having an overview of your current financial situation is the first step in strategic financial planning. This will enable you to determine your degree of risk tolerance, your financial needs, and the potential investment horizon. Having a specific set of financial goals in mind is crucial since financial freedom is a subjective concept. Your choice of goals will be influenced by your age and financial standing. You have sufficient time in your hands to accomplish your goals and the freedom to take a higher risk if you are in your 20s or 30s.

Set financial goals that are S.M.A.R.T. (Specific, Measurable, Adjustable, Realistic, and Time-bound). Classify your financial goals as short-term, medium-term, and long-term with a time frame, say 3 years, 5 years or long term for 10 years etc. This will provide you with a sense of direction. It is only by setting up some concrete financial goals that you will be able to plan how to go about fulfilling them. You can then search for investment options that allow you to reach your financial goals.

2. Invest wisely and begin early

If you want to achieve financial freedom, it is extremely vital to plan investments and lay emphasis on savings (follow the budgeting exercise). Investments planned and rightly timed can prove to be the game changers in your way of financial freedom. Understand the nature of investments thoroughly and assess its suitability based on your risk profile, investment horizon and alignment to your goals.

In order to take advantage of the power of compounding, you must begin investing early. Consider starting to invest with your first or subsequent paycheque and develop the wise financial habit of investing on a regular basis. If you are hesitant to invest huge sums, you may simply begin investing in mutual funds using SIPs, which allow for small monthly contributions as low as Rs 500. Ensure to choose worthy investment avenues based on suitability criteria such as your risk tolerance, investment horizon and financial objectives.

[Read: How to Choose Mutual Funds For Your Investment Portfolio]

Additionally, you must review your investments on a periodic basis to eliminate the consistently underperforming holdings and prevent any downfall in your portfolio performance.

3. Lead a debt-free life

Understand that it's okay to opt for credit as long as you have the intention to repay your loan in time. Avoid borrowing loans or frequent usage of credit cards to fulfil your short-term requirements; this can derail your financial well-being. Due to the ease of access, many individuals avail of loans from unregulated lenders, instant loan platforms that charge a higher interest rate.

However, to attain financial freedom, you must ensure to reduce or pay your pending debts as soon as possible and stop living paycheque to paycheque. You could follow debt reduction strategies like the Snowball or Avalanche methods. Maintaining a debt-to-income ratio of less than 40% will give you a better perspective on managing your debt to avoid any credit score complications.

4. Protect your financial future with adequate insurance cover

When you are young, you do not realise the importance of having an insurance policy. In fact, insurance planning is a vital aspect of financial planning. You must have adequate insurance coverage to indemnify risk to life and health.

Medical emergencies, accidents, etc., are unexpected happenings that require us to be ready financially as the bills are higher. Having protection against these kinds of financial exigencies through insurance coverage can help you tide over the situation and not be financially burdened after. A term insurance cover for life safeguards your family's financial requirements in your absence (untimely demise), whereas a health insurance cover assists you with highly expensive medical treatments. Protecting your and your family's financial future is a crucial step that leads to financial freedom.

Apart from insurance cover, you must also consider maintaining an emergency fund as a safety net that suffices for 12-24 months of household expenses, including loan EMIs.

5. Financial literacy

No matter how much hard-earned money you make or how much savings you hold, if you are financially illiterate or lack financial knowledge, you may never attain financial freedom.

From budgeting to personal financial management, financial literacy is the ability to understand and apply various financial skills. Financial literacy will help maintain a secure financial future and prevent you from investing in the wrong financial products. As a result, the more work you put into enhancing your financial knowledge, the more you will become a better planner and manager of your own money. You can easily become your own financial planner if you arm yourself with financial knowledge.

To conclude...

The Indian National Flag, or Tricolour, holds a lot of significance with each colour that it carries, as it is the symbol of our national pride. Similarly, each of the above-mentioned financial planning strategies holds significance in the journey towards achieving financial freedom!

On this occasion of 77^th Independence Day, while we celebrate our nation's freedom, let us solemnly swear to take responsibility for our finances and work towards achieving our financial freedom.

Wishing You All a Very Happy Independence Day!

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.