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Photo: Mint

Steps that can help you find out how to make your money life worry-free

Financial freedom means having enough money to lead your life on your own terms

Financial freedom is typically associated with having lots of money. When I talk about financial independence, people say it’s a dream, which looks difficult to achieve given all the pressures. Financial freedom also means having enough money to lead life on your own terms. Financial independence takes different meanings for different people.

Take the case of Sahil (44 years old), who quit his job three years back out of frustration. He had moved jobs five years back, but the new job was not working out. He looked for another job for almost a year, but wasn’t able to get a role matching his profile and experience. When a former colleague retired and offered him a partnership in a franchisee business, Sahil agreed. As he got into running the business, he realized that he actually enjoyed it so much so that he and his business partner were able to open three more outlets in the next two years. Luckily, their business has not been affected by the covid-19 pandemic.

Since the business is expanding, they have kept salaries at reasonable levels, certainly nothing compared with what Sahil was earning in his job. He fortunately doesn’t have equated monthly instalments (EMIs) to pay, as he finished his home loan some years back and is fine with driving a seven-year-old car. He also works on part-time assignments in his field, whenever they come by. However, Sahil still needs to build a corpus for his seven-year-old daughter’s higher education. Currently, it is being partly funded by savings from his wife’s income.

Sahil feels he is on the path to financial independence. He has no EMIs, is able to have a comfortable life and is saving for his financial goals. His business (since it is into education) is not affected by any economic cycles and thus has the potential to generate cash over time to take care of his financial goals, including retirement.

Sahil has also been able to work on the qualitative aspects of financial freedom. He can continue to work well past 60, if he wishes to and has great work-life balance.

I find CXO-level professionals so tied up with work responsibilities that they do not have time for their families and sometimes are not able to really enjoy their money. They do have the best of everything, but may not have what is really meaningful. A common worry among these executives is retirement. They dread not being busy or not getting importance. Plan B is elusive to most and few are able to work out worthwhile work engagement.

Not everybody would agree that Sahil can be classified as a financially independent person, since he doesn’t actually have enough wealth to manage life without an income. This is why personal finance is so important. Here are some steps you need to take to find out what it takes to get to financial freedom.

1) What does financial freedom mean to you? Is it having just enough for your financial goals or is it to have a lot of money?

2) Once you have the requisite amount, how do you intend to spend your time? Wealth is the ability to fully experience life but you cannot travel beyond a point. You need something to keep you mentally engaged. Do think about this as well and plan for it ahead. Try to find a way to experience your future plan. If you have decided to quit your job and start an organic farm, spend weekends on an organic farm to actually understand if this would work for you, once you leave full-time employment.

3) What is the amount required to meet your financial goals and how can current investments be planned to reach them. A financial planner can help you with this as well as getting certain basics like the right health cover in place.

4) Can you make adjustments to reach financial independence? Sahil decided not to change his car till his business reaches a particular stage. Peer pressure in our society is very high and you need to be stubborn enough to not keep up with the Joneses.

5) Financial freedom is also about “un-complicating" your financial life. We tend to spread our investments in different asset classes and it is advisable to limit and consolidate investments into what is manageable.

6) Money can’t buy happiness but financial freedom has a view, which is priceless.

Mrin Agarwal is a financial educator, founder director of Finsafe India Pvt. Ltd and co-founder of Womantra

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