Financial Freedom may have different connotations for different people. For the youth brigade, it could mean being free of the tradition of getting “pocket money” and earning their own livelihood. For professionals who have been working for 20 years or so, it could mean contemplating an early retirement without stressing over future expenses and money matters.

No matter which side you are on, fact remains that to be truly financially free, one must have some concrete financial goals and plans in place – but more importantly, they should also be disciplined in their investing habits in order to fulfil those plans.

The Crux of the Matter:

It is imperative to first understand that financial freedom is not about being extremely rich or hoarding money. A person may be earning Rs. 20 lakhs per year and be financially free, while another may be a millionaire and still not have sufficient money to realize his goals. Apart from your income, it’s your saving and spending habits and a number of other factors like the situation of those financially dependent on you, the overall movement of the economy, etc. that impact your monetary status. Thus, the only real control you have is to plan ahead and start investing smartly from as early as possible.

Regular and Progressive Investing:

While investing from a young age is good, it may not be enough. The real trick lies in investing regularly. You do not need a large sum of money to invest – regular monthly SIP (Systematic Investment Plans) for a long term is a good way to start your journey to financial freedom. Developing this as a habit instead of ‘chore’ can help you in the long run.

Having said that, it is also important to increase the amount of your investments as your income increases. Over time, as you grow older, your needs and expenses will also change. Starting a Systematic Investment Plan (SIP) of Rs. 5,000 per month in a suitable mutual fund could be enough for a 20-year-old who has just started working; but it won’t be for a 35-year-old with a family of 4 to look after. Progressive investing acts as a catalyst to the compounding process, which in turn bears fruit in the long term. It can be done by further diversifying your investments and by increasing your SIP amounts as you begin earning more.

The Value of Discipline:

The magic of disciplined investing – both regularly and progressively - can be experienced in the long term.

Let’s take two scenarios: In the first scenario, you maintain a constant monthly SIP of Rs 5,000 for 15 years in a fund that gives an assumed average annual return of 12%*. By the end of the term, you would have saved Rs. 9 lakh (5000 x 12 x 15) and earned a return of around Rs. 25.23 lakh.

In the second scenario, you increase your monthly SIP amount by 5% every year. Everything else remaining constant, you would have invested around Rs 12.95 lakh and earned a return of Rs. 32.65 lakh. So, a 5% increase can bring a difference of Rs. 7.4 lakh.

The numbers say it all!

Steer-clear of debt traps and investment baits:

Managing personal finance can be a tough job in today’s world where there is an overwhelmingly large amount of information, advice and tips available on investment tactics. Unfortunately, some of these are potential traps and can mislead you into accumulating debt and sacrificing your financial goals. Keeping yourself regularly in sync with your investment choices and updating yourself with research is one habit that will help you push your money to its optimum potential and can keep you aware of those potential debt traps.

The Road Less Travelled?

When it comes to life and adventure, the proverbial “road less travelled” might be exciting. But when it comes to finance and monetary decisions, taking a well-travelled route is likely to bring reasonable results. Impulsive or risky financial decisions can lead to disasters and affect your life as well as those of your loved one. Therefore, it is advisable to take the help of a competent, experienced financial expert who can assess your economic status, your risk profile and suggest investment options that are best suited to your goals. Such professional support can help immensely in making your journey to financial freedom smoother and more advantageous.

It's never too late to streamline your investments and pave your road to financial freedom. If you haven’t started already, “Now” is always the best time to begin. To embark on your investment journey with determination and discipline towards a financially stress-free future.

Aditya Birla Sun Life AMC Limited /Aditya Birla Sun Life Mutual Fund is not guaranteeing/offering/communicating any indicative yield/returns on investments.

This calculation is based on assumed rate of returns and it is meant for illustration purposes only. The calculations are not based on any judgments of the future return of the debt and equity markets / sectors or of any individual security and should not be construed as promise on minimum returns and/or safeguard of capital. This calculation alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.