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Achieve Financial Freedom

Do You Want to Achieve Financial Freedom ?

If yes, continue reading to know more about what you need to do to achieve Financial Freedom.

Before we get into to the ‘How’, let’s first look at understanding ‘What does financial freedom mean?’

Achieving financial freedom means

  1. You have built a sufficiently large corpus of money
  2. which has then been invested appropriately to give you a regular stream of income
  3. to meet your expenses on an ongoing basis (after taxes and inflation)

It does not mean retiring from life – It just means being wealthy enough to not worry about money and live life on your own terms.

To achieve financial freedom, one needs to keep the following:

  • Creating a diversified portfolio of assets (Equity, real estate etc)
  • Generating an annual income from your portfolio
  • An income enough to meet your expenses
  • Your income is tax adjusted
  • Your income is Inflation adjusted
  • Planning your insurance needs
  • Ensuring you have zero liabilities

Sound’s great but how much money will be required to achieve financial freedom ?

It depends on your age, your current and estimate future expenses and your current physical and financial assets.

For example, if your current expenses are Rs 1 lakh per month, you will need an increasing amount of money every month year-on-year.

In year one, to generate a post tax monthly income of Rs 1 lakh, you will need to have a pre tax income of Rs 1.42 lakhs or Rs 17 lakhs per annum.

Your investment corpus needs to be of a specific size to generate 17 lakhs in year 1, 18.5 lakhs in year2 and so on.

An example is illustrated below which shows how you will require increasing amounts of money every year on account of inflation and taxes.

# Income Required Inflation Pre Tax Tax Rate Monthly Amt
1  1,714,286 0%  142,857 30%  100,000
2  1,851,429 8%  154,286 30%  108,000
3  1,999,543 8%  166,629 30%  116,640
4  2,159,506 8%  179,959 30%  125,971
5  2,332,267 8%  194,356 30%  136,049
6  2,518,848 8%  209,904 30%  146,933
7  2,720,356 8%  226,696 30%  158,687
8  2,937,984 8%  244,832 30%  171,382
9  3,173,023 8%  264,419 30%  185,093
10  3,426,865 8%  285,572 30%  199,900

At FINQA, we can help you plan to achieve Financial Freedom.


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