Everyone has an opinion on financial independence, but not all know what it means. Simply put, a stage in your life where you have adequate funds to achieve your life goals is financial independence. In theory, you achieve financial independence by investing right after entering the job market for years. However, there are more steps involved in retirement planning. Make sure to use an online calculator for retirement while following the steps for financial freedom. The steps are:
- Purchase adequate life insurance cover:
Your savings are not adequate to take care of your family’s day-to-day expenses when you are not around. One of the best ways to secure your family’s financial future is purchasing an appropriate life insurance cover. A term life insurance cover can financially serve your family in your absence. The family members can claim the financial benefits of the insurance for meeting their financial needs after your passing. Furthermore, if you leave behind debt and liabilities, your family can pay them off using the claim money. Life insurance will help you achieve your plans for your loved ones and you.
- Buy a health insurance cover:
Hospitalisation or an illness can drain your savings and sometimes lead to debt. Therefore, you must also opt for health insurance apart from life insurance. Medical insurance plans are imperative for yourself and your family because hospitals are expensive. Using facilities like base policy and super top-up can save you from the pressures of hospitalisation. Treatment for critical illnesses like heart attack, cancer, and kidney failure can dent the financial well-being of your family. Health insurance plans can help you pay your medical bills when you are ill and hospitalised.
- An emergency fund is a must:
Building an emergency fund is a must while planning for financial freedom. Prepare yourself for financial crunches caused by disability, job loss, or illnesses. Build an emergency fund to avoid redeeming your investments. The emergency should cover medical expenses, EMIs, children’s tuition fees, insurance premiums, and utility bills.
- Build a retirement corpus:
Apart from an emergency corpus, build one specifically for your day-to-day expenses when you stop working, i.e., a retirement fund. Your physical ability and earning capacity will reduce when you retire. Your retirement corpus should help you take care of expenses when you are not working anymore.
- Consider investing in equity funds:
Equity funds allocate funds to equities and their related securities according to the name. These funds are ideal if you are investing to acquire wealth over time. They invest in the equity market, so they are risky. You can start your investment journey by investing in equity funds and switch to debt funds as you near retirement. You will enjoy high returns by investing in equity funds for equally high investment risks.
- Consult SEBI-registered financial advisors:
Planning your financial life can be a daunting task. However, you don’t need to plan your finances alone. Contact a financial expert registered with SEBI. They can help you formulate strategies for wealth accumulation.
- Use online tools:
Assess the different scenarios that can earn you higher returns. One of these online tools is the retirement calculator. These calculators can help you plan for your retirement fund. You can learn more about these calculators by Googling “What is retirement calculator.”
Conclusion:
Apart from these seven, there are several other steps for achieving financial freedom. Before planning for financial freedom, consider your time horizon and risk tolerance and calculate returns using a retirement calculator.
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