Financial independence or FI is a major movement nowadays with many globally working towards achieving it. The extension of it is Retire Early (RE). Together, this is called the FIRE movement.
Many are trying to move on from their savings and investments to planning a secure financial future that would secure you for the long run. Instead of limiting financial planning for the near future, you must view your finances with a long-term purview. Financial planning for the next 20 years is equivalent to growing a nest egg that will earn you adequate returns regularly and last your lifetime.
You must take the following steps to be financially independent in the next 20 years.
Don’t procrastinate your investments. Start now. Set aside a part of your earnings for an emergency corpus. Then, decide how much you must invest in what proportion. Factor time in your investments without which you cannot benefit from the power of compounding. An early start and prudent allocation will help you gain a sizeable sum in the future.
Pay attention to your savings. Ever heard of the saying, “A rupee saved is a rupee earned”? It is not enough to start early if you do not save and invest aggressively. Money creates money, which implies that the initial investment amount must be big enough for you to earn more on the same. Considering how inflation eats up into our earnings and lowers the value of money year after year, you must consider stepping up your investments regularly to give way to a massive portfolio in the future.
Inflation is no doubt an inevitable evil, but is also a reminder of our need to pay more attention to securing financial freedom. One mistake we continually make is not accounting for inflation while estimating our future expenses or while assessing how much money we would need in the long run, say 15-20 years later. The result is unwarranted penury and dependence on our loved ones for money. Healthcare expenses are going up, thus, implying the need to have a health policy in place to pay expenses for our treatment. Be financially prepared so that you do not find yourself economically inept in paying for your essential expenses during your old age.
Right asset allocation
Starting early and investing more is futile unless we park our earnings in the right investment options. Poor and irregular investment habits will impede your way to financial freedom. Financial emancipation comes from investing rightly other than investing early and regularly.
Securing financial freedom in the next 20 years is not a myth. It is an essential truth that we must realize and strive for and ensure that we have enough money in our hands.