When you think about the way our economy has grown and evolved in the last 77 years, you can’t help but feel a sense of pride at being an Indian. India has been one of the fastest growing economies in the world for much of the 21st century, and our global standing is a testament of that growth.
Many Indians have enjoyed the dividends of this boom and are able to think about achieving financial freedom for achieving their goals, both big and small. But freedom is not achieved without a fight, it takes discipline and planning.
As we celebrate our country's 78th Independence Day, it's a good time to think about our own financial freedom.
Here are some ways to help you gain financial independence:
Never confuse income with wealth
One must never mistake having a high-paying job with "wealth creation." Even if income plays a significant role in wealth, it does not make up a person's whole net worth. What's left over after subtracting your liabilities from your assets is your wealth.
To put it another way, let's say your monthly income is Rs. 1 lakh and you have about Rs. 50,000 in monthly expenses and loan payments. The amount you invest in your financial goals and the assets you accumulate with the remaining Rs. 50,000 are what constitute your "wealth."
Identify your goals
The most important component of financial independence is knowing your goals. Understanding the bigger picture of where you need to allocate your funds can help you plan your finances better. Whether you choose to continue your career, pursue new hobbies, or embrace an active lifestyle, planning is essential. You'd be more satisfied and joyful if you were realistic about your expectations for your lifestyle.
Establish an emergency fund
You can't anticipate unforeseen future expenses that could interfere with your financial planning, no matter how much you prepare. To safeguard against financial crises, it's essential to have an emergency fund that can cover five to six months of your expenses.
You can easily apply for a zero balance savings account with Kotak811 and start depositing money into it every month without the need to maintain a minimum balance. To maximise your savings, avoid making any withdrawals unless there's an unforeseen emergency. Over time, this disciplined approach will help you in laying a strong financial foundation.
Avail life and health insurance plans
The best way to protect oneself against the uncertainties of life is through insurance. By purchasing insurance coverage, you are purchasing security and safety for any unanticipated circumstance or emergency, allowing you to support your family and still achieve your long-term objectives.
Long-term cost savings and tax advantages are two benefits of life insurance. Health insurance plans might help you save taxes and assist you pay unexpected medical expenses.
Budget and prioritise debt repayment
The secret to financial independence is budgeting. List your income and expenses first, prioritising essentials and cutting back on non-essential expenses. Prioritise allocating your money to investments and savings to make sure you're saving for your future.
Debt can be a significant barrier to building your savings. Use strategies like paying off the highest interest debt first or the smallest balances first to systematically pay off your debts. It will free up more income for savings and reduce financial stress.
Keep tabs on your monthly expenses, both fixed and flexible, and look for areas where you may make savings. Spend no more than you need to free up funds for investments and savings.
Conclusion
When you can enjoy your life without having to worry about financial crunches, that is when you genuinely become financially independent. This Independence Day, recommit to the daily financial practices that keep you on track-whether it’s regularly reviewing your finances, making mindful spending choices, or continuously educating yourself about new opportunities.
Financial freedom isn’t a one-time achievement; it’s a lifestyle built on consistent, thoughtful actions. Take this opportunity to reinforce those habits, knowing they will serve you well in the years to come.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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