Celebrating Independence Day, Let’s swear for financial independence
India got it’s Independence on 15th August, 1947 and we are celebrating 74th Independence Day of the nation on 15th August, 2020. We are celebrating the 74th Independence Day but a few of us have real financial freedom and the majority of us are stuck under the trap of debt, the real gift to the nation on this Independence Day would be to know and spread the set of Principles which may assist us and people around us to achieve the financial freedom.
1. Pay Yourself First (Savings): Every person of whatever age group with whatever earnings, if he follows the first principle Pay Yourself Self first then he would move very rapidly towards financial independence and never going to fall into the trap of debts. On this 74th Independence Day, we all should swear to save at least 20% of our income for the future and follow the principle, Expenses= Income – Savings. George Samuel Clason in his book “The Richest Man in Babylon” first published in 1926 has beautifully described the importance of the principle “Pay Yourself First”.
2. Contingency/Emergency/Rainy Day Funds: Emergency funds are those funds which we create/keep aside for meeting out the obligations arising due to the unforeseen, unavoidable, unpredictable circumstances i.e Job Losses, Medical Emergencies, and Financial Crisis around the corner etc. We all should pledge to create at least 6 months of our income as contingency funds and invest those funds intacting money paramount and liquidity.
3. Health Insurance: We are living in 21st century wherein medical science is progressing very rapidly, so, the cost of medical treatment is also inflating exponentially, as millions/ billions of dollars are spent by the corporates on research and development and hospitals are turning to multi-star hotels, expenses of such revamping are to be borne by the consumer, i.e us. Human life is having the utmost importance in our life, sometimes, we even borrow the money to save our dear and near ones for providing them the best available medical practices. In the country wherein, the government is unable to provide health insurances to every citizen of the nation although they have taken steps forward by the launch of Aayushman Bharat along with other existing schemes CGHS, SGHS, ESI etc, every citizen of India shall take an oath to take adequate medical insurance for his/his family needs so that medical bills do not drag a person into debt.
4. Term Insurance: The most beautiful and uncertain aspect of the life is life itself, we might be doing very well in our life but on a sudden day, we might not have a life to live, life loss is irreparable but we should make sure that our loss shall not affect the financial health of our dear ones. Availing term insurance equivalent to 10-15 times of our annualized income may be a true move towards the financial independence of our families, in case of loss of our life.
5. Trash your Credit Card: Young Indians are availing the credit cards very rapidly, and corporations which are engaged in the business of unsecured loans distribution through credit cards are among the fastest-growing corporations in India. A credit card allows a person, to defer the payment of his expenses, without any additional interest, as the same is made by the credit card company to the merchant of goods/ services, hence, people do purchasing even when they had no money to spend. This practice of spending now and paying later, soon becomes the sin habit and we always spend on avoidable expenses very heavily, resulting not allowing us to save for future and never attaining the financial freedom.
6. Discounted Sales: We all love discounts and why not, we get products at a price lesser than their usual prices resulting into saving of money. But, do we really save the money or we actually overspend the money, whenever there is sale on any e-commerce platform i.e Amazon, Flipkart, Myntra, etc or in any giant retail store chain, we visit the e-commerce website or the general store chain to just check out what they are offering and we end up buying the products, we really didn’t need for example dresses, shoes latest mobile phone although the old was functioning very well. Most of the young Indians have many dresses in their wardrobe, those have been used once or twice only and which were purchased in one out of these discounted sales at a very lucrative prices which we couldn’t resist to reject. I, am not against shopping during those discounted sales but we should be practical and mindful, while shopping and avoid spending money on material objects which we don’t really need.
7. Buying Consumer Goods on EMI: In 21st Century, emerging behavior change of consumers is buying consumer goods i.e Televisions, Mobile Phones, Cars, White Metal goods etc through financing and paying price of these goods in Equated Monthly Installment (EMI). Bajaj Finance Limited, engaged in the consumer finance business, is an exemplary witness of the same, which has shown many fold growth in their business and created astonishing wealth for their shareholders since 2007-08. They, made money because we, consumers, had started buying the consumer goods or in the words of Robert Kiyosaki, liabilities on EMIs and had forgotten our traditional kahavat “Jitni Chadar Ho Insan ko Utne Pao Pasarne Chahiye”. The best step towards financial independence would be not buying consumer goods on EMIs.
8. Invest for growth along with the growth of GDP of the Country: As an Indian, I believe, we are very hardworking and our country had grown manifolds since Independence and it will further grow manifolds from hereon. Our Honorable prime minister, Shri Narendra Modi has set a target to make India, a USD 5 trillion Dollar economy by 2024, I strongly believe India will be a USD 5 trillion Dollar economy and will also be 10 Trillion Dollar economy in next 10-15 years, as we have the largest young workforce of the world. Trusting the abilities of the people of the nation, we should start owning the giant corporations of the Nation which are going to play the biggest role in taking the country’s GDP forward. Investing in mutual funds is one of the finest ways of owning large corporations with diversification. Around 2 crores Pan Card holders are registered with AMFI who had invested in one or more schemes of mutual funds while approximately 35 Crores Indian have Insurance policies, depicting the lack of financial awareness among the people of the nation.
Concluding Remarks: As a responsible citizen of the nation we all shall look forward for achieving the Financial Independence and pledge to aware people around us how they can achieve the Financial Independence.
Authored By- CA Kanj Goel- [email protected]