We are just 3 days away from our 73rd Independence Day. The celebrations have already begun and many people I know, have already planned a short vacation for the long weekend.
Honestly, we find it quite surprising that many people plan for their vacations way in advance, but hardly bother about planning for financial independence.
A major reason for lack of planning for financial independence, can be attributed to misconceptions about it. People assume that financial independence means having a well-paying job or wealth inherited from family.
We often come across statements from people having a false illusion of financial independence like:
“I have a well-paying job that makes me financially independent.”
“I have enough in my bank account which will last for my lifetime.”
“I am from a well-do family.”
But believe it or not, a well-paying job or money inherited from family is not the real meaning of independence.
Anybody can lose a high-paying job anytime. Remember what happened with Lehman Brothers post American sub-prime crisis in 2008? Almost 25,000 employees were left jobless when the world’s fourth largest investment bank shut its shop.
In fact, we personally know a person who had given up his stable and prestigious position at a leading Indian private bank, to join Lehman Brothers at a senior designation, just one year before the Lehman Brothers crumbled.
So in such a situation when people with a well-paying job loses their jobs, they are forced to live off their savings which will eventually run out. Rising inflations and economic recessions can wipe out of years of savings quickly.
Even money inherited from previous generations does not really mean financial independence. Miss-management of money can destroy fortunes. The best examples are Vijay Mallya and Singh brothers of the Ranbaxy fame who had inherited huge fortunes but destroyed everything due to lack of proper money management skills.
So what exactly is the real meaning of financial independence?
Financial independence means creating a steady or rising cash flow through additional sources of income, so that you are no longer dependent on your monthly salary or monthly income.
We’re sure you must be thinking about the best way to achieve financial independence. Well, it is no rocket science.
For this one needs to buy and create assets that generate additional sources of income. Once the cash flow from the additional sources of income is equal to or greater than one’s monthly expenses, then the person becomes financially independent as he/she will no longer have to work for money. And when one no longer has to work for money, he/she becomes financially independent.
This is the real meaning of financial independence.
Now that you know the real meaning of financial independence, we want you to ask yourself three questions.
How long will it take for me to achieve financial independence?
What actions I have taken till now to achieve financial independence?
What additional actions should I to take to achieve financial independence?
Do share your thoughts on same by writing to us at [email protected].
Read more: How Long-term investing helps create life-changing wealth – TOI.