Thread by @RenukaJain6

Why financial freedom?*

There can be many reasons-

The most pertinent being - getting retired after achieving the age of 60 years.

To pursue your own business or hobby or dream.

To become your own boss.

1. Steps to financial freedom*

*1. Set Goals*

The most challenging part is to set a date when you want to achieve financial freedom. This depends on the current savings, level of debts to be repaid, the age you want to retire, etc. Now, count the number of years left.

2. First to attack*

First to attack is credit card bills. Followed by other high-interest loans like consumer loans, personal loans, etc. Housing loans should be paid lastly as the interest rates are low on these loans. Moreover, the interest on housing loans gives IT relief

3. Forced Savings*

Forced savings work the best. Often we save what is left after meeting our monthly expenses. It should be the other way round. First, save and then manage your monthly expenses with the money left after saving.

Here SIP most important

4. Act cautiously on highly depreciating assets*

Consider two friends Anil and Sunil who joined the firm at the same time in the same Payscale with almost similar lifestyle expenses.

The only difference was when the first car they purchased.

5. Anil bought a new car costing Rs 5 Lacs with a loan bearing interest rate of 10% pa

✡Sunil bought a new luxury car costing Rs 15 Lacs with a loan bearing the same interest rate of 10% p.a.

After 10 years they both sold the cars, Anil for Rs 1 Lac and Sunil for Rs 2 Lacs

6. Sunil will pay Rs 5 Lacs more on interest compared to Anil due to a higher loan amount. But Sunil will also get Rs 1 Lac more at the time of selling the car. Thus net impact will be Rs 4 Lacs. Returns of 15% till retirement i.e. 25 years will make a hole of Rs 1.32 crores.

7. Anil will start earning returns on Rs 10 lacs from the first day till the date of retirement, for good 35 years. This amounts to Rs 13.31 crores

*Overall Anil’s at the time of retirement will swell by Rs 14.63 crores compared to Sunil.

8. Power of compounding

With returns of 13% p.a. Investment of Rs 20 lacs turns to Rs 2 crore in about 19 years but 20 lacs to 4 crores will take only 25 years.*

9. With returns of 13% p.a. Investment of Rs 20 lacs turns to Rs 2 crores in about 19 years.

With returns of 26% p.a. Investment of Rs 20 lacs turns to Rs 16 crores in the same 19 years!

With doubling of Rate of return the final sum got multiplied by 8 times.

10. Investment*

As far as the investment avenues are concerned apart from the stock markets there is no other avenue to earn higher returns so as not only to beat Inflation but increase your wealth in real terms.

11. How to select a good advisor?*

✡Try to avoid short term trading or Derivatives. As per Warren Buffett, Stock derivatives are the financial weapons of mass destruction.

✡ *Dont trade ever on Free Stock tips*

✡ *Never trade on Tips given free on TV or other media*

12. Don’t forget to keep an emergency fund of at least six months' monthly expenses ready and health and life insurance.