How to Achieve Financial Freedom in India?

Hey there! 👋

The recommendations are as of current date and circumstances. It may not make sense in the future say in 20 years.

I’ve been on this fascinating journey toward financial freedom, and I want to share everything I’ve learned with you. Trust me, if I can figure this out, so can you!

What Do I Mean by Financial Freedom?

Look, it’s simple - financial freedom is when your money works hard enough that you don’t have to.

Imagine waking up every morning knowing your bills are covered, not because you have to rush to work, but because your investments are quietly making money for you. Sounds dreamy, right?

I think you can live in the present if your future is secure. Otherwise the mind will not let you sleep peacefully.

If you were a wild animal or a bird you will not worry much about the future but you are not.

We have a family to take care of. We can’t just stroll all day hunting that days food.

Read is marriage a trap?.

Unlike wild animals we do have something called a market economy which is quite useful if it is healthy.

Indian Market is Growing

Let me tell you something amazing - our Indian stock market has been giving returns of around 15% on average. Yes, you read that right!

I remember being skeptical at first, but the numbers don’t lie.

While past performance doesn’t guarantee future returns (my financial advisor would kill me if I didn’t mention this 😅), the growth potential in our market is incredible.

Playing It Safe

Remember how our parents always praised government schemes? Turns out they weren’t wrong! These schemes give about 7-8% returns, which isn’t too shabby.

Think of it as the dal-chawal of your investment portfolio - not exotic, but reliable and satisfying. I think one should aim at having at least 15% of his wealth in governement bonds which are more reliable than the stock market.

Beating Inflation

Here’s the thing - prices keep rising by about 6-7% every year. Remember how a coffee used to cost ₹5, and now it’s ₹15? That’s inflation for you!

It is not that the coffee is costly today but the money has lost its value!

So if you store your a huge sum of cash in a safe suit-case somewhere then in 10 years it will be of very low value.

If you store it as gold then it is another story but cash loses value. So never keep money as cash for a long time.

Let Me Share My Math With You

Here’s what blew my mind when I figured it out. Let’s say you’re like me, spending about ₹20,000 monthly. Want to know the magic number for financial freedom? It’s ₹20,00,000 invested in a balanced mutual fund giving 12% returns.

Let me break this down:

• Your monthly needs: ₹20,000
• Yearly needs: ₹2,40,000
• Put ₹20,00,000 in a balanced fund
• Get ₹2,40,000 yearly (12% of ₹20,00,000)

Voila! Your expenses are covered! 🎉

I’m doing these calculations for one monk. If you are a family of 4 or more then you would require a larger initial capital.

A mere ₹20 Lakhs is enough for me. But the expenses for other people differ. Some spend ₹50k a month, some even a Lakh.

While doing this calculation make sure you estimate expenses on the higher side. Also, inflation is not considered here.

How I’m Building My Freedom Fund

1. Mix It Up

   You know how we shouldn’t eat just one type of food? Same with investments. I do:

   • 65% in equity or mutual funds (for growth)
   • 20% in government schemes (for safety)
   • 15% kept aside for emergencies (because life happens!)

2. Slow and Steady

   • Started with small SIPs (even ₹500 counts!)
   • Increase them whenever I can (yearly auto step-up)
   • Resist the urge to splurge on returns (hardest part!)

3. Stay Protected

   • Keep some emergency cash (saved my neck multiple times!)
   • Got myself insured (health and life)
   • Review my investments every few months

Ready to Start? Here’s Your Action Plan

1. Find Your Number

   Grab a cup of chai and list down:

   • What you spend monthly
   • Add some buffer for inflation
   • Calculate your target amount

2. Take the First Step

   • Open that demat account (it’s easier than getting a driver’s license!)
   • Research some mutual funds
   • Start your first SIP (even if it’s small)

3. Keep an Eye on Things

   • Check your investments once in a while (say once in 3 months. Not everyday please)
   • Adjust when needed
   • Don’t panic with market movements (I learned this the hard way!)

Some Friendly Advice

1. Start Now

   Seriously, I wish I had started earlier. The sooner you begin, the easier it gets. It’s like planting a tree - the best time was 20 years ago, the second best time is today!

   

2. Stay Strong

   Markets will go up and down (like my weight during festivals). Don’t let emotions drive your decisions.

3. Keep Learning

   I’m still learning something new every day. Follow some good financial blogs, join investment communities, listen to podcasts during your commute.

   Do not get influenced by people who promote a particular stock. This is because many finfluencers want a certain stock to move up so that they can sell them quick.

Let’s Wrap This Up

Listen, financial freedom isn’t some distant dream. If a regular person like me can work towards it, so can you. Sure, it needs patience and discipline, but isn’t your financial freedom worth it?

Remember, you don’t need to get everything perfect from day one. Start small, learn along the way, and keep moving forward. Trust me, your future self will thank you for starting today!

While these numbers and strategies work for me, make sure to do your own research or chat with a financial advisor before jumping in.

Each person’s journey is unique!

Also read How to Save Money in India?