Six Steps To Financial Independence

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Six Steps To Financial Independence
Dilshad Billimoria - 19 March 2019

Does financial independence mean freedom from debt? Or the ability to switch jobs without creating financial panic in household functioning?  Does it mean you have enough money to pursue your future endeavours and areas of interest? All of it together defines financial independence.

There are many ways to become financially independent. And the best way to get started is to do a reality check of where you are, where you want to go and what you have available to lead you to the path of financial independence. Make sure you do a constant rain-check in the light of changing circumstances, goals, markets and events around your life.


Starting off early: Very often the whole understanding of the investment game, planning for the future, seems a distant dream, sometimes too complicated to even start and youngsters believe they need to plan for today and nothing beyond that. This being their first folly.

Starting early will only provide for better compounding of returns. Say an investor A starts investing Rs10,000 per month from age 25 – 55 years, he would accumulate Rs1,84,00,000.

Investor B has delayed his start of investment by just 5 years and started investing at 30. Note, both have invested at the same rate of return and until the same end year of 55 years. Therefore, investor B’s accumulated wealth would be `1,10,00,000.

A has made a clean `74,00,000 over B just by starting five years earlier. This effect of compounding by investing over the long term will help accumulate wealth the right way and lead to financial independence.


Higher income is not synonymous to being financially wealthy: Income is a component of wealth which if not planned well, will NOT accumulate Wealth. Therefore, the more you delay on your savings, the longer it would take to reach your goal because of a known devil called inflation.


Plan for long-term: There is no short cut to success to growing one’s wealth. The wealth accumulation game according to Warren Buffet is boring and straightforward. There is no rocket science. Truth lies in simplicity.


Goal-based planning: Having clear and well-defined goals will help an individual have a target plan in place for future. Unless we know where we want to go in our finances and in life in general, how can we turn on google maps! Planning for the future, implementation of the plan and regular monitoring will help an individual understand their future finances and plan for the same.


Work with a certified financial planner or professional: In any field, an unbiased, honest opinion is the basis of any relationship and creates trust in the long run. Understanding a problem of an investor as if it were her own, a certified financial planner will always work in the fiduciary capacity of the investor and for that charge a fee to earn. The advice is unbiased and will always guide the investor to make the right financial decisions to build wealth.


Invest with the objective of earning tax efficient returns: There are myriad investment option, each having its own advantages and disadvantages. Creating wealth in the right way,  would involve studying the most tax efficient investment option for the long run and ensure the investor earns maximum returns. Since taxes are inevitable, it is important to get the guidance for tax efficient investment options both in the accumulation phase of growing investments and in the distribution phase for an investor.

Being financially independent is all about not depending on your abilities to provide for your future.


The writer is the Director at Dilzer Consultants

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