Posts Tagged ‘financial instruments’

Independence and freedom are amongst the most inspirational words in the English dictionary in my opinion. They evoke a sense of hope, inspiration, choice and joy all at the same time, and could mean very different things to different people.  For example, a very large number of investors whom I work with, when asked about their financial goals, indicate that they would like to achieve financial freedom. When I ask them what financial freedom means to them, their answer is: When I do not have to work for the money and can actively decide how, when, and with whom I choose to associate in my professional life.

Financial freedom can mean different things to different people. Financial planning allows them to be financially free i.e. decide how they wish to lead their lives. Over my years of running a practice, here are two examples of people I work with, who we believe financial planning has helped achieve the freedom to do what matters most to them.

Dr. Kumar (name changed) is a cardiologist and runs a hospital in suburban Mumbai. Irregular and long work hours mean that there is very little time to spend with his two young kids and his wife. What he really looks forward to, is spending time with his family and enjoying the kids’ growing up and continuing to stay connected with his wife. Booking and planning his holidays each year – one long international holiday, another week to ten day long domestic holiday and some weekend breaks are what he absolutely loves. The finances for these holidays are a part of his financial plan. Whilst there are clearly earmarked long term investment strategies for his longer term goals like retirement and education for the children, there are also separately defined strategies for shorter term holiday goals through the use of financial instruments that can give him the most optimal returns for these goals, on a post tax basis. Debt mutual funds of varying maturities can be used very efficiently for shorter term returns.

Sanjay and Rashmi (names changed) are currently 39 and 37 respectively and they have a daughter who is 6 years old. Sanjay runs a small sized family business and Rashmi works with a chartered accountancy firm. When most couples are just about beginning to save for their financial goals, and are looking to save for their retirement and childrens future, both Sanjay and Rashmi have already achieved their financial goals ie even if they do not save any monies from here onwards, and let their existing portfolio grow, they will be achieve their financial goals. This has been possible through a combination of a conservative lifestyle with controlled expenses, a savings rate in excess of 40% of total income, controlled use of leverage on a home loan that has been prepaid aggressively, and a diversified portfolio across equities, fixed income, real estate and gold, that is rebalanced regulary.

So what does financial freedom mean for you? Choose your financial freedom the way you want it.

This article was written by Vishal Dhawan, CFPCM 


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