As we celebrate India’s 78th Independence Day, and with so many discussions around Financial Freedom, I thought of sharing my journey to achieving it a couple of years ago.
I reached Financial Freedom at the age of 42. As a certified financial planner, I help individuals work towards their own financial freedom, something many are eager to achieve as soon as possible. Below, I’ve outlined some of the key areas to focus on, as well as common mistakes to avoid, to make the journey smoother.
1. Focusing on Risk Instead of Risk Mitigation Strategies
Every financial product carries some level of risk. For example, fixed-income products are subject to inflation risk, while market-linked products face market risks. The key is to pay attention to the risk mitigation strategies for each product so that you can take calculated risks when investing.
2. Chasing Returns Instead of Focusing on Goals
What matters most is achieving your financial goals, not simply chasing high returns. Ultimately, every investment is a means to meet a specific goal, and the goal should never be solely about getting X percent returns. Focus on your goals, and create a plan to achieve them.
3. Ignoring Life and Health Risks
The COVID-19 pandemic highlighted the vulnerabilities to both life and health, yet many people remain overly optimistic and do not secure adequate insurance coverage. Proper risk planning, including having sufficient insurance, is a fundamental pillar of Financial Freedom.
4. Neglecting Asset Allocation
The same amount of money can yield vastly different outcomes depending on asset allocation. It’s crucial to ensure your investments are appropriately allocated based on your goals and risk appetite. Sometimes, a small adjustment in your asset allocation can make a significant impact.
5. Not Being Aggressive Early On
Being aggressive doesn’t mean taking unnecessary risks with investments. Instead, it means saving and investing as much as possible during the first 15 years of your career. This early aggression allows you to benefit from compounding over the long term. Exercising control over your wants can help you maximize your savings.
I’ll share more insights in future posts.
Until then, happy reading and happy planning!
