Jai was a young man who had recently opened his first cafe. His wife had recently quit work after conceiving their first child. When everything seemed right to her, a pandemic called COVID caused havoc in her happy land. Suddenly business collapsed. to an all-time low. Instead there were hardly any orders or customers – otherwise life filled with space, something that was not fully thought through. Income fell to almost zero, but liabilities did not. He still had to pay rent, EMI on the loan he had taken for setting up the cafe, etc. With no savings or other source of income, the situation worsened, but his father came to his rescue and helped Jai pay off the liabilities. difficult year. There have been many people in Jai’s place over the past year, but they weren’t lucky enough to have someone help them. The pandemic has indeed brought to the fore the need to be financially independent.

Financial independence can be defined as the state of having enough income to pay the expenses of one’s life for the rest of one’s life, without being employed or dependent on others. But in reality, it can mean different things to different people. It is a state where one can meet at least the basic needs in all the seasons of life without being dependent on anyone. This is a phase where the money you have accumulated works for you to generate an annuity every month. “But why is this necessary?” Many may ask. The reasons are myriad, some of which include:

In the earlier generation there used to be a village system which gave a sense of financial and emotional security and each one helped each other when needed, this system collapsed and then the joint family system collapsed. Now nuclear families are in trend. One has to fend for himself, and this is creating imbalances in both the financial and emotional and social systems. The stability which was the basis is now gone, hence the need for preliminary financial planning to meet the basic as well as aspirational needs. With goal setting everyone needs to plan early.

Today loans are available for everything – personal / vehicle / travel loans, etc. But there is no loan available for life after retirement. Life expectancy is increasing, while the productive earning period of a person’s life is significantly reduced. The new norm is to retire by the age of 50 and live till the age of 90. Also, life starts before 50 and expenses have increased as holidays, fulfilling one’s aspirations/hobbies and medical expenses. You need to save enough for a comfortable post-retirement phase.

It is often seen that a person who is financially secure works more efficiently, grows faster and excels in career and remains happy and stress free because then the motivation to work shifts from the place of necessity. No, but by choice.

Financial independence can be achieved by following good financial habits and planning and investing properly. The right age to start financial planning is when you give pocket money to your child, when today’s world is all about instant gratification, we need to teach them that delay in gratification keeps them from working and waiting for it. Inspires to enjoy the anticipation of a greater reward. It helps in bringing dedication, self-control and self-discipline at an earlier age thus making them better human beings and prudent financial investors. As the saying goes – best to invest, best to harvest.

Starting early allows investors to reap the benefits of compound returns, the time value of money increases over time and with a small amount you can build a large corpus. Patience, discipline and dedication are the qualities to stand by your goals along with an earlier beginning to build wealth and achieve true happy and secure freedom that is not destroyed by any unprecedented event like a pandemic.

You have celebrated the independence of the country many times, but when are you going to celebrate the beginning of your financially independent future?

Views are personal: The author Purnima Iyer, Executive Director, Om Apex Investment Services Pvt. Ltd.

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