Poornima Iyer, Executive Director,Om Apex Investment Services
Jay was a young man,who had recently opened his first Cafe.His wife had recently quit working after conceiving their first child.Just when everything seemed perfect to him,a pandemic called COVID struck and caused havoc in his happy land.Suddenly business plunged to an all time low. There were hardly any orders or customers rather – otherwise full of life place, something that was totally un-thought off.The income became almost nil, but the liabilities didn’t. He still had to pay rent, EMI on the loan he took to set up the café, etc.Having no savings or second source of income worsened the situation, but his father came up to his rescue and helped Jay pay the liabilities and get through the tough year. In the past year many people have been in place of Jay but weren’t as fortunate as him to have someone help them.The pandemic has truly brought forth the need to be financially independent.
Financial independence can be defined as the status of having enough income to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others.But in reality,it might mean different things to different people with the common foundation that it’s a state where one can afford at least basic needed necessities without being dependent on someone under all weathers of life.It’s a phase where the money you have worked to accumulate,works for you to generate an annuity each month.“But why is it important?” many may ask.The reasons are innumerable, some of which include:
The earlier generation used to have the village system which gave a sense of financial and emotional security and each one would help the other in case of need,this system crumbled and then the joint family system crumbled.Now with single families being the trend each one has to fend for himself,and this is leading to imbalance both in financial as well as the Emotional and Social Systems.Stability which was the base is now gone,hence the need for Early Financial Planning to meet the basic as well as aspirational needs of each and every one needs to be planned early with goal setting.
Today loan is available literally for everything -personal /vehicle/ travel loan,etc but there is no loan available for life post retirement.Life expectancy is increasing,while the productive earning period of a person’s life has gone down considerably.The new norm is retire by the age of 50 and live up-to the age of 90.Also,unlike before life starts at 50 and expenses have escalated in the form of vacations, fulfilling one’s aspirations/hobbies and medical expenses follow.You need enough savings 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 lives happier and stress free because then the motivation to work doesn’t come from a place of necessity but by choice.
Financial independence can be achieved by following good financial habits and properly planning and investing.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 delaying gratification leads them to enjoy the anticipation of greater reward while working and waiting for it. It helps to bring about dedication,self control and self- discipline at an earlier age thus making them better human beings and prudent financial Investors.As the saying goes – Early to invest, best to harvest.
Starting early allows investors to garner the benefit of compounding returns, the time value of money increases over a period of time and with a small amount of money you could create a big corpus.Patience, discipline and dedication to stand by your goals are the virtues needed along with an earlier start to create wealth and achieve true happy and secure independence that doesn’t get eroded by any unprecedented event like a pandemic.
You have celebrated the country’s independence so many times, but when are you going to celebrate the day marking the start of your financially independent future?
Views are personal:The author is Poornima Iyer, Executive Director,Om Apex Investment Services Pvt. Ltd
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