You might have been earning for a few years now. But are you really financially independent? Being financially independent means that you are not dependent on anyone for any of your current or future financial needs. Beginning your journey towards financial independence can be intimidating and overwhelming. You can start by creating a financial plan. This article aims to offer advice to young professionals who are seeking financial advisors to help them with their investment decisions.
Start saving to create a retirement corpus
While retirement might seem like a far-fetched plan to you right now, it’s never too early to prepare and invest for your future. Saving for retirement is an important financial goal and one must not delay it. Remember, the earlier you start investing for your retirement, the less pressure you’d feel when nearing your retirement. Your retirement corpus must be enough to not only maintain your current standard of living, but it should be enough to cater to your medical bills, unforeseen emergencies, hobbies that you may wish to take upon, inheritance, etc. There are different types of investment options that cater to retirement planning objectives such as National Certificate Savings Scheme (NCSS), Post Office Monthly Income Scheme (POMIS), mutual funds, etc.Your retirement is as important as any other financial goal such as saving for your child’s higher education or marriage.
Banking apart from investing
In addition to investing in mutual funds, you must also have a separate fund that solely caters to emergencies. This fund is known as an emergency fund. It is very important to have an emergency fund in place. An emergency fund can help you deal with unexpected and unforeseen contingencies such as home repair, the demise of a loved one, loss of job, accident, etc. As a thumb rule of investing, you must allocate at least three to six months of your living expenses towards the emergency corpus. You can invest this amount in a high-interest savings account or money market instruments that provide exceptional security and liquidity. Examples include savings schemes, liquid funds, etc.
Investing can result in long-term wealth creation
Now that you have saved and invested for any unforeseen circumstance and your retirement, you can focus on other financial goals that can help you to accumulate wealth. Different types of investments offervarying levels of risk. Remember, the higher the level of risk, the greater is the potential for exceptional returns. Understand your risk appetite, investment horizon, and financial goals and choose the right investment vehicle to achieve these goals. Equities are a great option to generate wealth in the long run. If you are a risk-averse investor and are unsure about the volatility associated with investments in stocks, you might consider investing in relatively safer investment options such as equity mutual funds. If you wish to simply preserve your wealth, then you might opt for more safer options such as debt funds, money market instruments, savings schemes, etc.
The earlier you start saving and investing for your future, the greater would be the power of compounding, and thus higher returns. So, what are you waiting for? Do not waste another moment and invest to secure your future. Happy investing!