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Jul 18, 2012, 01.00 PM IST
We often use the term rich and wealthy interchangeably. But do they actually mean the same. If one gets hundred rupees now as gift we say he is richer by hundred rupees, however we do not use the term that he is wealthier by hundred rupees.
We often use the term rich and wealthy interchangeably. But do they actually mean the same. If one gets hundred rupees now as gift we say he is richer by hundred rupees, however we do not use the term that he is wealthier by hundred rupees. The term Wealthy is defined as abundance of material wealth. However when we talk about this under the financial planning aegis, we could imply as someone who is financially free. Now when we say that someone is financially free the question is when can we really call ourselves as financially free? Is there a benchmark figure or number which can term us, as one who has achieved financial freedom. The answer lies in us going through the following points which can help us decide if we indeed have reached financial independence.
1) Do I have a loan:-
Today having an outstanding loan is a very common phenomenon. We have seen cases of people with huge credit card outstanding and still wanting to invest in instruments rather than settling the outstanding balance, knowing very well that on one hand the cash outflow towards credit card is about 36 percent whereas the investments might not be able to generate that kind of returns. When we were children we were taught in school that in a number line zero is bigger than minus five. So one thing which is of crucial importance is that as soon as possible keeping our goals and overall financial position in mind we need to become debt free as it not just helps us reaching our financial goals faster but also take us closer to financial freedom.
2) Cash flows:-
We have often noticed that people know about their fixed outflows but not variable outflows. The fact however is that in many cases variable outflow can really affect your networth in the long run. Today it is not just expenses that have increased but even the avenues to spend have gone up significantly. We had not seen people spending money on mobile phone applications in the past or go to malls so frequently but today it has become a very normal way of life.
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