Here's how you can achieve financial freedom

It has been 74 years since India achieved political freedom, independence from the British Raj. India has seen tremendous economic development over these years and a large section of the population has been lifted from abject poverty. Unfortunately, a large majority of Indian citizens are yet to achieve financial freedom and are still prisoners of their financial burdens.

Achieving financial freedom means having enough savings, investments, and cash on hand to afford the lifestyle one wants for themselves and their family—and a growing nest egg that will allow a person to retire or pursue the career they want without being worried about where the next income/cash flow will come from, or if it is adequate to meet monetary needs. Financial freedom is achieved when one finds themself in a financial position where one does not need to work unless they want to. This also means freedom to make life choices that are not constrained by finances.

We live in a society where money is the medium of exchange so it is a very important and undeniable part of our existence. We all need a certain level of income to be able to survive and have the basic necessities of life: “Roti , Kapda or Makaan “. Beyond survival, the more financial savings one has, the easier most areas of our lives become. Financial freedom is to have enough savings and cash on hand, which can grow faster than the inexorable rise in the cost of living. This also reduces the dependence on rising incomes from one’s job or profession to meet this rising expense. Financial freedom is about money. It’s about living debt-free, saving and investing, building assets, and spending on things that bring one joy.

Attaining financial freedom can be very tough especially when one has growing debt, cash emergencies, medical issues and struggles with overspending. Achieving financial freedom is the ultimate goal for many. Unfortunately, most fail to achieve it. However, this can be countered through careful management of money.

To avoid becoming a prisoner and achieve financial freedom, one must understand their RELATIONSHIP WITH MONEY, SAVINGS and SPENDING. It is also important to understand the difference between savings and Investment. It is not only important to save money but also to invest the savings, so that the amount saved grows faster than the growth in expenses. That is true investing. All one needs is knowledge, a disciplined and sensible approach and patience and to avoid doing things which create financial imprisonment.

The solution to avoid financial imprisonment is simple and not based on where one is in their life. Whether a person is wealthy or poor, an employee or self-employed, a college graduate or not, they have the same access to the tools the rich have been using for generations to create perpetual wealth for themselves and their families.

Like those seeking to lose weight, the answers may often seem simple (e.g. burn more calories than you consume; save more than you spend; save first and spend later). But getting in shape isn’t easy for most people. It takes self-discipline and conscious effort. Money is no different.

Following are some comprehensive steps to achieving financial freedom:

• Set life goals, both big and small, financial and lifestyle

• Create a blueprint for achieving those goals.

• Make a budget –balance your income, savings and expenses

• Pay off credit cards in full, carry as little debt as possible, and keep an eye on your credit.

• Adequate protection against life/health disabilities, death of the breadwinner of the family

• Set up an emergency fund

• Create automatic savings via SIPs for specific goals: retirement, buying house, children’s education, and marriage plans etc.

However, the first step is always setting up one’s life goals. A person should have goals and make these goals specific, in terms of time frames. It is ideal to write down these goals, they can serve as a guide to achieve it. Similarly, the budget and the plan to achieve financial freedom should be put down in writing.

Inadequate savings force people to chase high returns. They make not one but two mistakes of saving less and risking more. One needs to remember that there is no substitute for high savings.

When one has their finances in order, they can enjoy less stress, better health, and a more peaceful work and home life. They are able to do more of what they love and be free from worry and guilt. It also enables living with dignity because one is not ruled by the fear of survival. There is absolutely nothing money could buy that would make a person feel as good as financial freedom feels.

(The author is chairman at foundation of independent financial advisors)