Financial Independence


It is quite absurd that more than half of the world’s population retire poor. This not only includes the community living below the poverty line but also the affluent group of people enjoying fat pay-cheques and extraordinarily lavish lives.

The prime cause is the lack of financial education…or rather….financial discipline. Financial education mingled with discipline results in financial independence, which is the ultimate goal.

An individual is said to be financially independent when his passive income exceeds his expenses to an extent that he no longer has to work for it. By passive income, we mean that part of income that demands negligible labor.

Passive income can be generated by investing in assets that provide a regular stream of cash flow such as bonds, shares with high dividend yield, rental yields, business ownership, royalties, etc.

Many people relate financial independence to ‘high income’, which is true to some extent but not wholly. A high income may contribute toward financial independence but it’s not a requisite.

A decent income complemented by financial discipline is the formula for financial independence.

A person making 10,000$ and spending 5,000$ is likely to generate more wealth than a person earning 20,000$ and spending 18,000$ out of it, assuming both started earning at the same age.

This is evident from the lives of celebrities like Michael Jackson, Mike Tyson, Pamela Anderson, and of course Amitabh Bachchan who ironically hosts the show ‘KAUN BANEGA CROREPATI’. These celebs were almost on the verge of bankruptcy because of their reckless and extravagant lifestyle.

A popular term ‘FIRE’ which means ‘Financial Independence and Retire Early’ has been used in discussions quite often lately. In simple terms, it means that a high saving and investment rate combined with an unwillingness to impress others can build a massive corpus that may aid early retirement.

Why Is Financial Independence Important?

  • The primary motto of financial independence is freedom. Freedom involves freedom of choice as well as freedom of time.
  • Freedom of choice gives you the liberty and confidence to continue with your profession or go out there in the world and explore things that you might not have tried otherwise. This is because when you fail, you have the cushion of financial independence to fall back upon. Freedom of time is what we all want.
  • Most people abhor their lives just because of the lack of ‘time freedom’. The monotonous and draining 9–5 job with no control over their time prevents them from living life on their terms. Financial freedom enables a person to have control of their time and spend time with their loved ones who make them happy. After all, happiness, and not money, is what we are striving for.
  • Financial freedom enables you to safeguard and protect yourself and your family from future unwanted events and dismays. It acts as insurance coverage for your family in times of need.
  • According to The Hindu, the average life expectancy in India is 69 years. Surprisingly, the average retirement age is 60years. This means 30–35 years of sincere and dedicated hard work just to enjoy the remaining 9 years of retirement. Even that is not certain, as most people cannot finance their retirement completely and end up broke.

Why Is It Difficult??

“If you buy things you do not need, soon you will have to sell things you need.” These words by the Oracle of Ohama- Mr. Warren Buffet aptly summarize the entire blog.

Most people are stuck in a vicious never-ending loop of income and expense and are unable to break the shackles to focus on long-term wealth generation.

Financial discipline is a habit and our habits are guided by emotions and not rationality. According to a research report conducted by THE FINANCIAL EXPRESS, 77% of working India relies on personal loans to make ends meet.

Most of them don’t require loans. It’s just the urge to impress the community that drags them beyond their budget and capability.

People make pointless efforts to protect their false sense of prestige and social status, and in the process, forget their goals and ambitions. Today, nobody wants to trade their present luxuries and magnificences for future comfort and security.

The modern-day line ‘Live in your present’ has been wrongly interpreted by the youth. Also with the rise of social media, where people showcase their ‘perfect’ lives, people have become conscious of their lifestyle. They do not realize that life is not perfect and that they are being drawn into a hollow fallacy.

How To Achieve Financial Independence??

There isn’t any set pattern to follow to become financially independent. However, the following points might help you advance your journey toward financial success.

#1: Set A Goal

The basic and foremost step towards financial independence is to set a goal. The journey becomes easy when the destination is clear. Otherwise, you’ll end up nowhere.

Define what is financial independence for you and why it is important for you. Every individual has a blueprint of his/her life. You cannot replicate what others want from their life. Some might want to retire at 40, others at 50. Choose your goal and stick to it.

#2: Take Steps

Secondly, take relevant steps towards your goals. Create assets that generate regular cash inflows during the rest of your lives. Take care of your finances in the present and your finances will take care of you in the future.

Stay away from liabilities. We can’t stress further on this line. Live a humble life. That doesn’t mean you need to compromise your comfort. Just try to be in control of your finances, do not lose grip over your spending habits.

#3: Start Now

Start investing at the earliest to reap the maximum benefits of compounding. Albert Einstein, arguably one of the world’s greatest people that have ever lived, once said, “Compounding is the 8th wonder of the world; he who understands it, earns it; he who doesn’t, pays it.”

Time is your biggest friend and it can turn out to be your biggest enemy if you let it slip from your hands.

“The best time to start investing was yesterday; the next best time is today”- not sure if this is yet another ‘Warren Buffet quote’, but it serves the purpose. Below, we compare two people to prove the importance of time in investing. A ten-year late start to your investment journey may reduce your corpus by almost 65% assuming a decent 10% year-on-year growth.

#4: Plan

There is no thumb rule as such in investing, but it is advisable to invest at least 20% of what you make through monthly SIPs. The higher the percentage, the lesser the age at which you can retire.

But make sure, before you start investing, you build an emergency fund of at least 6 months by investing in a liquid fund to build a safety cushion for your investment.

The 15–15–15 rule says that investing 15,000/month for 15 years at an expected annual growth rate of 15% can make you a crorepati. So, there’s no excuse not to become financially independent. In finance, procrastination leads to degradation.

Below is an investment calculator attached so that you can plan your route to financial independence.

(Investment Calculator › financial)


In the end, it boils down to hitting the right balance between having fun and being a miser. It’s never recommended to just focus on saving money and eventually die in the process.

Relax a bit, go party with friends, travel the world, and make memories, because memories make life worth living. But make sure you’re not burning cash.

Many people think that they need a thorough education in finance but it is just a myth. You don’t need to be a financial expert to achieve financial independence.

Discipline, prescience, patience, and a proper understanding of one’s goals differentiate the financially independent from the financially burdened.