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I Love You - Financial Freedom!



Finance Guru Speaks: This is a special article on the occasion of Valentine's Day and it is written on the demand of some of my readers!


Valentine's Day is celebrated on 14th Feb every year and it is considered to be the best day to express your love and care for your loved ones. Have I told something which you are not aware of? 😉
Financial Freedom
Financial Freedom
Then, why are we discussing Valentine's day in this Website which is related to Personal Finance and Investments?

Well, the answer lies in your LOVE! I absolutely love my Financial Freedom and always encourage my audience to walk on the path of this freedom.

Financial Freedom is not a destination, rather it is a continuous journey where you keep a track of your Assets and Liabilities and maintain your required Standard of Living.

I am very sure you know the meaning of Assets and Liabilities.

Assets generate Income whereas Liabilities generate Expenses.

Let's understand with simple examples.

If you are getting Monthly Rental from your Property then it is considered to be one of your Assets.
However, the Amount (EMI) paid on your Personal Loan is considered to be your Liabilities.

Assets and Liabilities
Assets and Liabilities
As shown in the above figure, the number of Assets should be more than the number of Liabilities inorder to stay Financial healthy and free.

Follow some basic steps to stay on the path of Financial Freedom:-




1. Maintain an Emergency Fund equivalent to 6 to 8 months of your monthly Income or 12 to 14 months of your monthly Expenditure. Keep this Emergency fund in the mix of Bank Deposits and Debt Mutual Funds.

2. Keep yourself adequately insured. Buy Term Insurance for covering your Life, Health Insurance to cover Critical Illness & Hospitalization expenses and Accident Insurance.

3. Don't mix your Insurance with your Investments. Keep them separate and allocate the money as per their purposes.

4. Always try to get out of your Debts and Loans in the below sequence. For example, first pay your Credit Card bills/loans, followed by any Business loans and so on.
Loans and Liabilities
Loans and Liabilities
5. If you are young, then consider investing more in Equities. More specifically, invest in Mid Cap and Small Cap Mutual Funds if you don't have time or skills to directly buy Shares. Keep on rebalancing your Equity investments as per your age and risk-taking capabilities.
You can slowly move some portion of Equity Investments towards Hybrid and Debt Mutual Funds as per your age & dependencies.

6. Keep a check on your Expenses. Differentiate between necessary and unwanted expenditures.
Reduce unwanted expenses and build assets to fund your necessary expenses.

7. Do Goal-Time-based Investing. Meaning, every penny you invest should tie against some goal to be achieved in a timeframe. It can be your plans to buy Car in next 2 years, House in 4 years, Higher education in 3 years, Retirement Planning in 20 years, etc. In this way, you can attach some purpose against your investments.

8. Start moving money from your Equity funds to less risky avenues like Debt Mutual Funds, Fixed deposits, etc. once you are 1 to 1.5 years away from achieving the goal. You can use Mutual fund features of STP (to move money from Equity to Debt Mutual funds) or SWP (to regularly withdraw the money and move to Fixed Deposits). I have provided many articles on the topics of STP and SWP. You can follow the links to know more.

9. Keep your investments diversified across different Assets (Equity, Debt, Gold, Real Estates, etc.)
Don't get carried away from the returns of any particular investment category. Remember, Fund Ratings & Interest Rates keep on changing and hence, it's better to diversify your portfolio to avoid risks.

10. Keep on educating yourself & your family about Investments, Tax Savings, and Personal Finances. It is a continuous process and it will help you in the longer run.

For the benefits of our Readers, I have collected some of the best books and money related games on this Website. You can visit GET RICH section to find out this Financial & Educational Wealth.

It goes without saying that the above points are just indicators and not an exhaustive list. 

The meaning of Financial Freedom can vary for different people, however, the Bottomline is whether your Assets are working or not in your favour. If you are slogging days and months and only relying on your monthly income, then surely you need to rework on your investment strategy.

Discipline and regular investments are key factors to achieve your financial goals.

So, on this Valentine's Day, let's be in LOVE with your FINANCIAL FREEDOM! 💗😊

Images Courtesy: www.financeguruspeaks.com

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Thanks for your interest. Keep visiting.


Sincerely,
Finance guru Speaks

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