The Game Plan for Achieving Financial Freedom

Posted in Investment By Friyana Munshi - Jan 8,2023
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“The question isn’t at what age I want to retire 

It’s at what income.” — George Foreman 

 As the world keeps progressing, the age-old tradition of retiring at 60 is slowly and steadily dying out. The younger generation is set to pave the way towards an early permanent break from work. We all earn to sustain our daily necessities, experience life with a higher standard of living, and get through the years in financial comfort. What if there were ways to amass wealth, quit our tedious jobs early on, and enjoy the fruits of our labour for longer?  

Early retirement can help you engage with your hobbies more and live an enriched life. Expanding your corpus to cater to all your needs for the coming decades is essential for early retirement. To leave your professional life behind in your 30s or 40s, you must have a well-structured monetary plan. Your financial freedom is within your grasp. Try FIRE to attain it! 

FIRE

No, we are not asking you to burn away your money. The Financial Independence Retire Early (FIRE) principle is a policy that helps you understand the practicability of retiring early. It goes beyond savings and investments, approaching a peaceful and independent lifestyle. This idea was first coined in ‘Your Money or Your Life’ by Joseph R. Dominguez and Vicki Robin, the best-selling book of 1992.  

FIRE can be depicted as a formula that considers your net retirement fund and the potential continuous withdrawals. As per the principle, reducing your expenses on automobiles and electric gadgets is advisable as their value is likely to depreciate with time. With a good secondary income source, you can further increase your funds. 

However, FIRE is not the perfect manual for early retirement. It fails to consider major economic aspects such as inflation and emergencies. Furthermore, it assumes that the individual’s income is large, from which they can draw out a certain percentage. 

So how can one calculate the exact amount required to retire early? There is no single answer to this question. But here are certain ways to ensure you have sufficient funds and a monetary plan to consider retiring early. 

The Fivefold Path to Financial Freedom:

1. Set the pace and plan

Retiring with a corpus sufficient to maintain your living standard is possible. Retiring early with the same funds might not be beneficial for everyone. You must define your retirement age and set down a plan tailored to achieving the required corpus. Making a preliminary analysis of your financial requirements post-40 and saving accordingly can be an excellent way to start planning. Adhering to set financial goals with discipline and aligning your living standards with your cash flow is important. You can also take certain budget-cutting measures that will greatly impact your funds in the long run. These include expenses made on transportation and dining out. Minor changes like opting for home-cooked meals and using public transport services can help save a lot more than we realise. Cancelling unnecessary subscriptions can also help build your funds. 

2. 50-70% of your income goes into the saving pot

The path to financial freedom is steep and if you are ready to take the hike and hustle, start with savings. Investing and saving a sizeable portion of your income, about 50% to 70%, will help multiply your funds and ensure monetary security for your future. It is essential to consider various investment plans before settling on one. Careful consideration and thorough research are essential where money is involved. Suitable investments can help build your retirement corpus significantly. Experts suggest putting your money in an extensive portfolio, consisting of a bit of all types of financial tools. A wide range of instruments is available to you at your fingertips like mutual funds, fixed deposits, and bonds. Utilise these and grow your capital substantially. An easy way to invest in these easily is to go on Bajaj Markets and choose the fund that fits right into your long-term plan.

3. Low-risk options for a secure future

Which investment plan should one put their money in? The question might have popped into your head, and we understand why. With the wide range of options, the choices can confuse you. However, what is imperative is that you find plans that can fetch you great returns and not be too risky simultaneously. Investing in low-risk funds ensures more stable growth, where your funds are least affected by macroeconomic changes. Systematic Investment Plans (SIPs), Post Office Monthly Income Scheme, and fixed deposits, are some low-risk investments and savings options that you can opt for. Debt funds also provide more returns for lesser risks and can be liquidated easily. Select your investment tools carefully and grow your funds stably.

4. Gather sufficient funds to tackle any emergency

Besides the expected expenses, it is imperative that you remain mindful of emergencies wherein you require cash urgently. It could be a sudden medical emergency or the loss of a loved one; emergency funds support you through challenging times. While, early retirement is an enticing thought, one must only opt for it if absolutely certain that they have enough funds to cater to any such urgent necessities.  An emergency fund should consist of enough money to sustain you for six months at your current standard of living while keeping inflation rates in mind. Ensure that your funds have easy liquidity and can be accessed easily when required. Stay one step ahead of mishaps by securing your future from emergencies!

5. Don’t forget to consider economic variables

World economics can have huge impacts on your capital. Do not underestimate global issues like recession or inflation. Such problems can cause a downturn in the country’s monetary policies and fiscals. You can expect changes in tax schedules, stock markets and investment options at any time. If retiring early is on your list, make sure to remain vigilant of the ongoing changes in the country’s economic policies. Ensure that your income and expenses take inflation into account. Additionally, keep an eye out for potential liabilities and income sources in your annual budget. 

 

Early retirement is not just a pipedream. You can make it a reality with the right plan and better financial understanding. So, put down your goals and achieve your target with discipline and effort in the right direction. Get started now and map out your journey toward the ideal retirement life. 

And if you are looking for ways to get started on your investments for the long run, come on over to Bajaj Markets! Find products ranging from mutual funds to fixed deposits from various service providers. Get the right plan to effectively build your early retirement corpus!  

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