Financial Freedom Checklist


Financial anxiety is something most of us have faced at some point in time. Whether it is the bill payments we make on the last dates or the clothes and gadgets we buy even before our salary is credited — we have all experienced financial close-calls. The paycheck to paycheck lifestyle that has inadvertently become a part of our lives is one of the biggest deterrents to being financially free.

Financial anxiety feels like its a part of life now

But why conduct a socio-economic analysis when other examples of financial captivity are in front of us. Let us face it, in every group, one friend is almost always broke. While they never fail to give the money back, crippling financial anxiety is a constant in their lives. So, to help you and your friends, we have prepared a checklist to ensure that your money does not bring with it a generous serving of anxiety.

  • Get the basics right — The first thing you need to educate yourself on is the basics of money. These are some concepts that will help you understand how money works. By being aware of how inflation, interest rates and money supply affect your ability to save and spend, you will be able to make the best decisions for your money and how to invest it.
  • Account for expenses and incomes — Preparing a personal cash flow statement comes next. It lists down all your incomes and expenses, and the difference between the two is your net inflow or outflow. It will encourage you to keep a check on your spending and will encourage regular saving.
  • Take note of investments — Once you have a clear picture of your income and expenses, take note of your current investments. These will include all fixed deposits, provident funds and insurance policies you have. The intention here is to find out exactly how much you have saved for the rainy day.
  • Plan your insurance needs — Following up on that, ensure that you have adequate insurance cover. In India, insurance is considered an avoidable expense. Contrary to popular belief, it is one of the most important ones. There are multiple options available for both life and health insurance.
  • Set a goal — After you have a detailed understanding of your financial position, set a goal for yourself. Try to make it as specific as possible, also making a realistic estimate of the time frame and the amount of money with which to achieve it. Your goals can be short-term — where you will need the money within three years, medium-term — where the money is needed between three and seven years and long-term — which will cater to demands that will come up after seven years.
  • Plan for the worst case — With the goals in place, the next step is to factor in potential contingencies. Setting up an emergency fund will help you keep your finances and savings goals intact in the event of a financial crisis.
  • Allocate assets — You have come a long way in this journey. Now, you’re ready to take the next important step — asset allocation. The money you require in the short term should be invested in low-risk, high liquidity instruments like fixed deposits and debt mutual funds. Those funds you’ve set aside for the medium term can be invested in low to medium risk instruments. Lastly, long term funds can be invested in relatively high risk but still safe to invest in options like government bonds. The key is to ensure the safety of your money.
  • Ensure investments are in line with financial goals — We’re all familiar with the last-minute rush to make tax-saving investments. More often than not, one ends up losing money just to save a fraction of the tax liability. To avoid this, it is important to make investments in line with your financial goals instead of the tax-saving goals.
  • Take note of your credit score — With all of this properly handled, we move on to the credit score. To make big investments like buying a car or a house of your own, you will need to obtain credit. Credit providers give a lot of weightage to the applicant’s credit history, so make sure you have an adequate understanding of how the credit score works. As per CIBIL, a good credit score is above 750 points, so make sure you keep that in mind the next time you flash your credit card in an expensive store.
  • Review and revise — Last but not least, make regular reviews of your investments and keep revising your goals as and when needed. It will help you weed out underperforming investments and keep your finances on track.

That was a lot to take in, right? Well, following this checklist will not only help you avoid mistakes but will also help you attain financial freedom. It is something we often overlook but being free from the clutches of your wallet is worth the effort.