Financial Literacy to Financial Freedom

Everything revolves around money.

It’s one of the most important things in life, and surviving without it is very hard.

But despite being so important, in school, we were never taught how to manage money well. We never learned about financial literacy.

People want to achieve financial freedom, but they lack financial knowledge.

Earning money is easy, but managing it is very hard.

Many celebrities and lottery winners who received a large sum of money all at once are now even more broke than before.

WHY?

Because they didn’t know how to manage or use that money properly.

Many people struggled a lot during COVID-19 because they lacked financial literacy.

Therefore, it’s very important to be financially literate, and I believe everyone needs to learn about personal finance.

I have been reading many books and following several finance experts to learn about money and personal finance. I’m not a finance expert, but I’d like to share a few things I’ve learned so far.

 

1. Emergency Fund

Regardless of your income level, it’s crucial to have an emergency fund for unexpected situations.

If your monthly expenses, including those for your family is total Rs 50,000, then you should aim to have at least Rs 3,00,000 in your bank account for emergencies (which equals Rs 50,000 multiplied by 6 months).

This amount will serve as your emergency fund for six months, providing support during difficult times or emergencies.

Before considering any investments, establishing an emergency fund should be your first priority.

If people had an emergency fund during COVID-19, their lives would have been much easier.

 

2. Health Insurance

I’ve seen people lose all their wealth due to serious health conditions affecting themselves or their family members.

Since predicting our health is difficult, it’s very important to have health insurance for you and your family.

You pay an annual premium to the insurance company, and if you encounter any health issues, the company covers the expenses.

The insurance premium you pay won’t be refunded if you don’t face any health issues, but it provides security and peace of mind.

There are numerous health insurance companies, so I recommend searching on Google or YouTube to find the best one for you.

 

3. Life Insurance

If your family depends on you, having life insurance is essential. But you need to be careful while choosing the policy.

Insurance agents may try to sell you Endowment life insurance, claiming it’s a great investment tool, but don’t be swayed by that. Insurance is never made for investment.

To ensure your family is covered, opt for Term Life Insurance. You pay a fixed amount annually, and if something happens to you, the insurance payout goes to your beneficiary or family.

Life insurance provides security for your family, ensuring their well-being even when you are no longer with them.

 

4. Income Division

When it comes to investing, we often use the excuse that we don’t have enough income.

However, we can actually begin investing with whatever amount we have.

When you receive your salary or any other income, the first step is to divide that income into three parts.

  • Needs: 50% (rent, food, transportation, etc.)
  • Wants: 30% (entertainment, movies, leisure activities, new clothes, etc.)
  • Savings: 20% (SIP, fixed deposits, stock market investments, etc.)

Following this allocation every time you receive income makes it easier to track where your money goes.

Always remember, financial freedom depends on your financial discipline.

 

5. Investment

With inflation increasing by 5% annually, saving your money in a bank or safe isn’t a sound investment choice.

You need to find an investment source where your money can grow by 10 to 15% every year. This is the only way to beat inflation.

There are numerous investment options available, but to begin with, you can consider SIP (Systematic Investment Plan).

SIP is a long-term investment plan where you invest a fixed amount, typically starting from Rs 1,000, every month.

You can expect a return of 10 to 15% on your SIP, and the returns are reinvested automatically.

Over time, due to compounding, you’ll accumulate a substantial amount of money that you might not have imagined saving.

Another viable option is the stock market, where you can start investing with as little as Rs 1,000, but it’s essential to have the necessary knowledge.

To acquire the knowledge, you can invest in a course that teaches you how to trade or invest in the stock market.

You’ll be able to analyze and invest in the stock market within just one month of learning.

Conclusion

These are some of the tips that I learned and I’m not stopping here.

I’m reading more books, following more knowledgeable individuals in finance, and exploring new ways to invest my money.

This is an ongoing journey of learning, implementing, experiencing failures, and achieving successes.

I hope you now understand why having financial knowledge is crucial for living a better life.

Let me know in the comments which of the above strategies you plan to implement right away.

12 thoughts on “Financial Literacy to Financial Freedom”

  1. All things are necessary for improving our financial life
    So I will continue all things which you have councern me

  2. Impressive! Saugat Sir. All the strategies you mentioned above are equally important. Currently as a beginner, I would first start with SIP and others with the time accordingly. Also, I would love to hear more valuable strategies from you in future.

  3. hello sir, I am a bachelor student and I am aiming to achieve financial freedom within 4 years. I have got lot on my table. My studies, job, passion, investing money, and finally digital marketing which I hope to build a career on. but my final goal is to run a business(not an entrepreneur) so I am doing digital marketing course for something to fall back on if my business idea goes wrong. although I believe that time management can help I know it is not possible to focus on all these 5 sector of my life and succeed since I am at a very beginner level where I have to research for every small little thing. In short INITIALLY Should I focus on my job and passion OR my Job and digital marketing and investing stuff? I would greatly appreciate your quick response. Thank You

    1. Hello Raj. I would highly suggest you to focus on something that has the potential to give you the freedom you are looking for. If you follow a passion, which doesn’t enable you to earn from it, then you can’t hold on to that passion for long term.

      You need something that can help you earn. It can be through a job or acquiring a skill. I can’t advocate a specific topic for you but I would suggest you to do your own research on finding the right skillset that you also feel like learning and has the potential to guide you on the journey towards freedom.

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