Financial fitness’ is important for every individual, and one needs to start early and maintain consistency, like physical fitness. For financial independence, apart from earning well, it is important to build a good corpus so that one can meet financial needs even in the absence of a regular income.
Regular saving and investing are key to building wealth in the long run. For example, a regular saving of Rs. 30,000 per month over a period of 30 years can help in creating wealth of around Rs. 10 crore (return of 12 percent pa assumed for illustration). This is sufficient wealth for any one to meet all his needs and live peacefully, even if there is no other regular income.
Regular saving is possible only if the person is able to avoid temptations to splurge, and can plan finances with diligence. It is often said ‘money saved is money earned’. Saving is the basic requirement to start on the financial independence journey. Once the amount is saved, it is important to try to manage it as per financial goals. For this, again it is important for one to understand different aspects of each financial goal and how to work towards achieving them.
Like fitness, habits formed early in life play an important role throughout the life. There is lot of temptation to satisfy material needs, particularly when one starts earning and becomes financially independent. In real-life experiences, we have seen people becoming serious about saving and investment only when they are in mid-thirties or later, typically after marriage and kids.
However, lot of time and opportunity is lost by then and it becomes difficult to catch-up.
Hence, it is important to inculcate financial intelligence at an early age. Ideally, financial education should be part of curriculum at high school level. Large number of school kids study sciences and other engineering fields and never get to understand basics of personal financial management. It is important to scientifically explain’ benefits of saving’ and ‘methods to achieve financial goals’ so that one can understand how it actually works. Once they start working and get sucked into daily routine of earning bread, it becomes more and more difficult to bring-in financial discipline.
Financial independence has many virtues, apart from ability to survive during a financial difficult time. Financial independence allows one to choose profession of his or her liking and live stress-free life. Both are important for quality of life that one is able to live. Research has shown that people are able to perform well when they are doing something that they like. Financial independence allows one to choose the professional opportunity carefully, avoiding costly mistakes. One can even turn entrepreneur if there is an opportunity and person has the temperament for it.
Financial independence helps in removing lot of unwarranted stress from life. One can also pursue hobbies or take required breaks from work to destress, which may be difficult otherwise.
The author, Anurag Garg is Founder and CEO at Nivesh.com. The views expressed are personal
First Published: Oct 18, 2021 7:15 PM IST
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