Achieving the dream of financial freedom
Financial freedom is something all of us want but few of us manage to achieve. Is there a hidden secret?
A lot of people ask for a lot of different kinds of financial advice. Sometimes, the advice is about inputs, as in, I have X amount of money, what should I do with it. Sometimes it is about outputs; I need X amount in five years so what do I need to do to ensure that happens. Sometimes it combines both. All these are fine and have quite well-established and sensible ways of selecting a solution.
However, there's one such demand for advice that is really hard to respond to, and that is, 'financial independence'. This may appear to be a vague term but actually signifies a roughly similar thing to different people, which is, not having to worry about money ever.
This is a common-enough dream. Since the daily grind of earning money dominates our lives, a permanent relief from this is the freedom that most of us desire. Of course, there are many degrees of financial freedom, and the ultimate one is not having to work to earn money for the rest of one's life. Of course, there are many who do not have to work. There are those with large inheritances, and there are those whose burden we taxpayers are committed to carry all our lives, but it takes most of us an entire working life to reach that stage; if at all we ever reach it.
However, the simple fact is that if we save and invest with a modicum of planning, lesser degrees of financial freedom can be achieved earlier in life, and can be just as good. For salary-earners, achieving even a mild form of financial freedom early in life is more important now than it was a decade or two ago. India is clearly passing through a jobs crisis. There are any number of people in the urban middle-class who have suddenly lost their jobs. Youngsters are finding their first jobs difficult to find, or have to take low-quality employment. Middle-level executives are being shunted out of their employment because employers think they can be replaced at lower cost.
This widespread crisis in financial confidence is different from how things were a few years ago. Most salary earners were confident in their jobs and were quite sure of frequent raises, either in their current jobs or better ones. They may not have had actual financial freedom, but effectively felt like they did. One can't really say when the employment situation will change for the better. However, those of us who change their attitude towards money, savings and personal finance, will be much happier, and will be able to deal with this new, uncertain world much more easily. While all these job-related problems are going on, the only people who are relaxed and not stressed are the ones who have enough savings. Unfortunately, the proportion of younger salary-earners, those in their 20s and 30s (who save), is quite low. In fact, the young generation is almost uniformly dedicated to negative savings! As soon as people start earning, they take on some EMIs, essentially spending future savings today.
This sounds like the same crusty advice that older people always give to the young, but it happens to be true. Whether the jobs environment improves or doesn't, saving as much as possible at the beginning of one's career immeasurably improves one's happiness level later. Today, those who have even a year or two's expenses (including any EMIs) worth of savings feel much more relaxed about careers. Not just that, I've seen that those who are financially secure in this way are also able to negotiate in their employment better than those who cannot take any risks.
This is actually as close to financial independence as most of us can get. It sounds like an obvious thing, but the first step in having enough savings is to save, and the second step is to save enough. Unfortunately, many of us don't get started for years after we start earning. Given the hyper-persuasive consumer culture that surrounds us, it's not easy to start, there's no other way to achieve financial independence.
Happy Investing
Source: Valueresearchonline.com
Financial freedom is something all of us want but few of us manage to achieve. Is there a hidden secret?
A lot of people ask for a lot of different kinds of financial advice. Sometimes, the advice is about inputs, as in, I have X amount of money, what should I do with it. Sometimes it is about outputs; I need X amount in five years so what do I need to do to ensure that happens. Sometimes it combines both. All these are fine and have quite well-established and sensible ways of selecting a solution.
However, there's one such demand for advice that is really hard to respond to, and that is, 'financial independence'. This may appear to be a vague term but actually signifies a roughly similar thing to different people, which is, not having to worry about money ever.
This is a common-enough dream. Since the daily grind of earning money dominates our lives, a permanent relief from this is the freedom that most of us desire. Of course, there are many degrees of financial freedom, and the ultimate one is not having to work to earn money for the rest of one's life. Of course, there are many who do not have to work. There are those with large inheritances, and there are those whose burden we taxpayers are committed to carry all our lives, but it takes most of us an entire working life to reach that stage; if at all we ever reach it.
However, the simple fact is that if we save and invest with a modicum of planning, lesser degrees of financial freedom can be achieved earlier in life, and can be just as good. For salary-earners, achieving even a mild form of financial freedom early in life is more important now than it was a decade or two ago. India is clearly passing through a jobs crisis. There are any number of people in the urban middle-class who have suddenly lost their jobs. Youngsters are finding their first jobs difficult to find, or have to take low-quality employment. Middle-level executives are being shunted out of their employment because employers think they can be replaced at lower cost.
This widespread crisis in financial confidence is different from how things were a few years ago. Most salary earners were confident in their jobs and were quite sure of frequent raises, either in their current jobs or better ones. They may not have had actual financial freedom, but effectively felt like they did. One can't really say when the employment situation will change for the better. However, those of us who change their attitude towards money, savings and personal finance, will be much happier, and will be able to deal with this new, uncertain world much more easily. While all these job-related problems are going on, the only people who are relaxed and not stressed are the ones who have enough savings. Unfortunately, the proportion of younger salary-earners, those in their 20s and 30s (who save), is quite low. In fact, the young generation is almost uniformly dedicated to negative savings! As soon as people start earning, they take on some EMIs, essentially spending future savings today.
This sounds like the same crusty advice that older people always give to the young, but it happens to be true. Whether the jobs environment improves or doesn't, saving as much as possible at the beginning of one's career immeasurably improves one's happiness level later. Today, those who have even a year or two's expenses (including any EMIs) worth of savings feel much more relaxed about careers. Not just that, I've seen that those who are financially secure in this way are also able to negotiate in their employment better than those who cannot take any risks.
This is actually as close to financial independence as most of us can get. It sounds like an obvious thing, but the first step in having enough savings is to save, and the second step is to save enough. Unfortunately, many of us don't get started for years after we start earning. Given the hyper-persuasive consumer culture that surrounds us, it's not easy to start, there's no other way to achieve financial independence.
Happy Investing
Source: Valueresearchonline.com
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