How to achieve financial freedom: What is financial freedom for a family? It is to accumulate sufficient corpus by a certain age to cover lifetime expenses as well as requirement of financial goals at family level.
You would have surely planned your finances and invested money in certain products so far. However, it is extremely important to see whether this arrangement is taking you on the right trajectory towards financial freedom.
The comprehensive plan usually incorporates a combination of several investment schemes to achieve the target of financial independence.
Let’s understand with an example of a married couple in their mid-30s with 1 kid targeting financial freedom. Their income, expenses and current investments are as follows at family level:
| Salary (Post Tax) | Rental Income | Dividend Income | Total Income | |
| During the year | 38,00,000 | 6,00,000 | 3,00,000 | 47,00,000 |
How to achieve goal of Rs 2.50 lakh passive income and Rs 28.30 crore corpus.
Nehal Mota, co-founder and CEO, Finnovate, says: “The stated goals of the family (before adjusting for inflation) are to accrue (i) Passive income of Rs 2.5 lakh monthly for retirement (ii) Higher education and wedding goal for child of Rs 1 crore and Rs 25 lakh, respectively.
To achieve that goal, the total corpus of the family should be Rs 28.3 crore cumulative of all goals) with keeping secondary property of Rs 1 crore intact.
For that, with yearly allocation of Rs 16 lakh (5 per cent increase every year) and targeting 11 per cent CAGR, below is the outline for them to attain their goals.
| Assets | Current Mix | Recommended Mix | Systematic Investments (annually) | Remark |
| Equity | 50% | 75% | 60% | Basis goals and risk profile |
| Mutual Funds | 40,00,000 | 55,00,000 | 12,00,000 | |
| Stocks | 20,00,000 | 35,00,000 | ||
| Debt | 50% | 25% | 40% | Basis goals and risk profile |
| FD | 60,00,000 | 16,00,000 | ||
| Bonds | – | 10,00,000 | ||
| PPF | – | 3,00,000 | 3,00,000 | 1.5 Lakhs per PAN |
| NPS | – | 1,00,000 | 1,00,000 | 50,000 per PAN |
| Total Financial Assets | 1,20,00,000 | 1,20,00,000 | 16,00,000 | |
| Secondary Property | 1,00,00,000 | 1,00,00,000 |
Nehal says, “It is crucial to periodically review and rebalance based on market conditions as well as the vicinity of their goals. The key is to align the products with the needs and risk profile of investors,”
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