WITH THE CHANGE IN FAMILY STRUCTURE, THE CONCEPT OF FINANCIAL INDEPENDENCE HAS ALSO UNDERGONE A CHANGE IN INDIA

                                      

Till about 15-20 years ago, for an individual the idea of financial freedom was his working son and at times even other family members in case of a joint family. That concept of financial security, at least in urban India, is nearly non-existence. Other than raising their children, the parents them selves now try to put in place a plan for their post-retirement financial security that can give them financial independence. Likewise, through planning and with the help of some mutual fund schemes, every type of investor could enjoy financial freedom in life.

According to financial planners, there are some basic rules for future financial independence. Firstly one should be willing to set some clear financial goals. These could include short term, medium term as well as long term ones. The next step is to have a clear idea about the current financial position of the investor. Depending on the same, once the goals are crystalised, it would be easier to find out how much money is required to reach those goals. This is also help to set the road map to reach to reach those goals. This road map, along with the risk taking ability of the person, would also define the nature of the assets that would be required to reach those goals.

As per the nature of the goals and the plans to reach those, the investor should acquire the assets. For example, for long term goals like retirement planning or children's education, systematic investment plans (SIPs) in equity funds are the best options. Financial planners and advisors say that for goals which are more than ten years in the future, it is always advisable to go for SIPs in equity mutual funds Also regular investments done over the long run can leverage the power of compounding as well as the rupee-cost averaging process.

According to financial planners and advisors, at the start of the financial planning, even if the money being invested is small, as one's salary income rises, he should also increase the SIP amount so that a large corpus is built over time. Such an ap proach can ensure a better and secured financial future, they said.

Here are some basic rules for financial inde pendence for retired individuals and first-time earners.

FOR RETIRED INDIVIDUALS

For all the people who are in their sun set years, the flip side of financial freedom is not to run out of cash. Financial freedom also means matching one's fixed household expenses with his post tax fixed income. If a person's monthly household expenses are Rs 50,000, he should look for ways to have his retirement corpus generate posttax returns of Rs 50,000 per month. Anything extra could be used for discretionary spending or to add up to the emergency fund. According to financial planners, a judicious use of systematic with drawal plan (SWP) can turn out to be tax efficient for retired people.

They also say that for fi nancial free dom, retired people could take up some part time job without putting much stress on himself.

FOR FIRST TIME SAVERS

One of the top learnings for young earners and people learning to save should be how to manage expenses. To learn this one should learn to differentiate between `needs' and `wants'. According to one financial writer, when some one wants to buy some thing, he should just postpone the purchase for 2-3 weeks. If he can go with his life without any difficulty, it's a thing that he wants, but do not need.

If so then he should not buy it. If he has difficulty in going about his daily routine without the thing he is planning to purchase, it is a need and he could buy it. Such an exercise would also make the person in control of his finances in a better way. The next step is to set clear financial goals which are measurable, docu mented and shared with the family.

Once this is done, the person should, at least twice a year, measure how far he has reached in achieving those goals.

Such reviews also help in timely course correction in case of any divergence ­defined course. The last but not the least is to have a contingency plan for the most important goals.

For all types of investors, for a stress-free, financially independent life, it is always advisable to have a good financial planner.