Roadblocks to financial independence and ways to overcome them

Rahul Jain

The concept of financial independence is not new. It always existed and is something that all of us, as individuals, seek to achieve.

Simply put, financial independence or freedom means having enough funds to address all your goals and expenses overcoming the psychological fear of not achieving your financial objectives, being prepared for contingencies and living life on your terms, without having to depend on anyone for monetary assistance.

Though the inflation-beating potential of equities is well-known, its inherent volatility often makes investors look the other way, giving preference to fixed-income instruments.Note that though they offer assured returns, they are not enough to counter the effects of inflation, resulting in short-fall of your desired corpus.Hence, it’s imperative to have a healthy allocation of equity in your portfolio. This can be easily done through mutual funds.

Adopting the SIP (systematic investment plan) route to kick-start equity investment not only helps you build wealth in a disciplined and sustained manner, but also helps you remain invested across market cycles.

Investors who continued their SIPs in equity mutual funds, following the sharp March sell-off, have gained significantly from the recent rally, where benchmark indices have recovered much of their losses. During the market correction, with a drop in NAVs, investors with equity SIPs, could also acquire more units at lesser costs.

Being Unprepared for Uncertainties

Exigencies in life, can catch you off-guard and thwart the most well-laid of plans. The COVID-19 pandemic is a case in point as to how such black swan events could take a toll on your finances and health. A big part of financial freedom lies in being prepared for such uncertainties.

Insurance is your most trusted ally while dealing with emergencies that can come knocking anytime. While a term plan provides your dependents with a large financial cushion in your absence and helps them take care of their needs, health insurance prevents out-of-pocket expenses and a dip in savings in case of a medical contingency.

On the other hand, a personal accident cover provides a sound back up in case a mishap impairs your earning ability.

Also, a critical illness plan helps take care of astronomical costs of treatment of a critical ailment that can wipe out a significant chunk of your finances in no time and impinge on other goals in the process.

To Sum Up

As evident, the road to financial independence is long-drawn and has various aspects. Discipline, coupled with regular evaluation and review, can help you reach your destination overcoming all hurdles you may face along the way.

(The author is Head Edelweiss Wealth Management)

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.