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Can the salaried ever achieve financial freedom? Here are 3 easy steps to do so

Just setting aside money every month from your salary is not enough if much of it goes into bank deposits. Your investments need to beat inflation

October 25, 2022 / 08:51 AM IST

Wealth creation. A comfortable retired life. An expensive holiday. A good life.

Mouth-watering as these prospects seem, it’s difficult for many salaried people to imagine having all these. Take the case of this gentleman, Ron, whom I met recently in my investor education course.

Ron has a good debt equity mix, sticks with mutual funds and has done some level of goal (financial) planning. Ron’s contention was that financial plans were easy to make, but many things derailed the plan regularly.

Challenge No. 1: Expensive medical treatment, little insurance

  • Check if the expected weighted average return on his portfolio is more than 7 percent per annum.

  • Evaluate each investment and check if it is beating inflation

  • If his portfolio is not beating inflation, change the asset class mix. Ron certainly needs to increase the equity allocation in his portfolio, based on his financial goals

There are many factors involved in management of finances and one needs to be prepared for things not going to plan. Least possible loans, having the right covers with an extra amount for unexpected situations and the right blend of products which give good returns on an inflation adjusted, post tax basis will certainly go a long way in making the journey to financial freedom smoother.