Guide to Achieve Financial Freedom: Tips, Strategies, and Math

Achieving financial freedom is a goal that many people aspire to. But what does it mean to be financially free? Essentially, it means having enough money to cover your expenses and live the life you want without having to rely on a paycheck or worrying about debt. Achieving financial freedom requires a combination of good financial habits, smart investing, and a willingness to take calculated risks. In this guide, we'll cover the key steps you can take to achieve financial freedom and build the life you want. In this guide, we'll explore tips and strategies to help you achieve financial freedom, and we'll break down the math to help you understand how much you need to save and invest.

Percentage Rules:

1. The 50/30/20 Rule: This rule suggests that you should divide your after-tax income into three parts: 50% for needs, 30% for wants, and 20% for savings and investments. This way, you can ensure that you cover your basic expenses, have some fun money, and save enough for the future.

2. The 25x Rule: This rule suggests that you need to save 25 times your annual expenses to achieve financial freedom. For example, if your annual expenses are ₹40,000, you need to save ₹1 million to achieve financial freedom. This assumes that you can withdraw 4% of your savings each year without depleting your principal.

Mathematical Explanation:

Let's take the example of Apar, who wants to achieve financial freedom in 15 years. He currently has ₹50,000 in savings, and his annual expenses are ₹40,000. To calculate how much he needs to save, we'll use the 25x rule.

Apar's annual expenses are ₹40,000, so he needs to save 25 times that amount to achieve financial freedom. That's ₹1 million. Since he already has ₹50,000 in savings, he needs to save an additional ₹950,000 over the next 15 years. That's ₹63,333 per year, or ₹5,278 per month.

Now, let's say Apar wants to retire in 20 years instead of 15 years. Using the same calculations, he would need to save ₹1.3 million, which is ₹350,000 more than his original goal. That means he needs to save ₹17,500 more per year, or ₹1,458 more per month, to achieve his new goal.

Examples:

1. Cut Expenses: One way to increase your savings rate is to cut your expenses. For example, if you're currently spending ₹5000 per month on dining out, you can cut that down to ₹3000 per month and save ₹2000 per month. Over a year, that's ₹2,4000 in savings.

2. Increase Income: Another way to increase your savings rate is to increase your income. For example, if you're currently earning ₹50,000 per year and you get a 10% raise, your new salary will be ₹55,000. That extra ₹5,000 per year can go straight into your savings account.

3. Invest Wisely: Once you have savings, you need to invest them wisely. Look for investments with low fees and a good track record of returns. Diversify your portfolio to reduce risk, and avoid trying to time the market.

Conclusion

Achieving financial freedom is possible with the right mindset, discipline, and planning. By following the 50/30/20 rule, the 25x rule, and other strategies to cut expenses, increase income, and invest wisely, you can reach your financial goals. Remember, financial freedom is not a destination, it's a journey. Stay focused, stay disciplined, and keep moving forward. To know more about investing you may watch videos by simply clicking on below button.

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