Initiate financial planning based on your earnings. Start by earmarking 20% of your earnings towards savings
Know your cash flow by simply being aware of your monthly expenses and how much cash you are left with at the end of the month
While the concept of financial freedom seems to resonate well with Indians, most of them are unsure about how they can achieve it. A recent survey by Scripbox, an online mutual funds platform, found that 72% Indians are unaware of how much to put aside or invest in order to achieve financial freedom. A majority, 76%, agreed that there’s a need for more education in the financial planning space.The company surveyed 2,000 individuals across major cities between 26 and 45 years of age.
Of the respondents, 56% said they lacked the knowledge to handle personal finances effectively, which seems to be true because the number of millennials going for loans to meet lifestyle expenses is only increasing. “Most millennials lack the initiative to earmark a portion of their earnings towards savings. While we talk about starting early, millennials also should actively seek financial advice and make short-term to long-term financial goals," said Archit Gupta, founder and chief executive officer, ClearTax.
The survey found that only one in five women exhibit confidence in their knowledge of financial planning and how much they’d have to put aside in order to achieve financial freedom. As much as 65% women between the age group of 26 and 35 said that they didn’t know where to start or whom to turn to for financial planning advice. A study conducted by ClearTax in 2018 revealed that 90% of the women in India do not optimize their tax-saving benefits through investments. Most women put off their investments decisions, or seek the help of their male counterparts. “It is iron that the same women who manage their household finances with such accuracy have not been entrusted with decisions about investments. The lag is simply because for generations, women were told that money matters were not their domain and for many, that misplaced legacy still carries on," said Parul Ohri, founding member and chief editor, Momspresso.com, a content sharing platform for women.
Lovaii Navlakhi, managing director and chief executive officer, International Money
Matters said men are equally responsible for this stereotype against women. “Women seem to rely on ‘daddy strong’ to guide them on their finances till they are married and then their husbands take over. In a way, maybe the men in their lives are equally to blame for creating this stereotype," he said. There is a need for women to break free from the societal norm and work towards securing their financial lives.
Of the people surveyed, more than half said that they don’t know how to go about investing and this is despite many platforms breaking down investment products for average investors.
The first step towards achieving financial freedom is to get a good financial picture. Start with understanding your assets and liabilities. “Know your cash flow by simply being aware of your monthly expenses (one-time or recurring in nature) and how much cash you are left with at the end of the month. The next step is to ensure you start investing a portion of your disposable income. Start small but start early when it comes to investing to enjoy the magic of compounding in your later years," said Pravin Jadhav, whole-time director, Paytm Money, an online mutual funds platform.
According to another survey conducted by mutual funds platform Groww, 30.7% millennials lacked investing awareness and hence could not plan for retirement. Loans, liabilities, and low cash flow stopped as much as 53.4% millennials from achieving early retirement. Gupta said that individuals must initiate financial planning based on their earning. Start by earmarking 20% of your total earnings towards savings and be disciplined. “Most millennials typically seek financial guidance from their parents. They need to blend that information and make it more contemporary. There is a wealth of information available online. Individuals should seek out professional advice, educate themselves about the basics of investment planning, returns and financial goals," said Gupta.
If you think you need to have a lot of money to attain financial freedom, you may not be right. Navlakhi said that financial freedom is the ability to take life decisions without worrying about the finances. “Each person’s purpose in life and reason to feel meaningful is different. Some of it surely has to be with the money you have, but in mind, it goes well beyond that," he added. Understand that making your own money or earning is just one part of the game; it is equally important to save and put aside some money into investments in order to achieve financial freedom.
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