Financial freedom: “If I had so much crores of rupees, life would have been set.” This line is often heard in common conversations. Some want 1 crore to set their life, some 10 or 20 crores. Someone also takes 50 crores less to someone. In such a situation, the question arises that whether such a huge amount is actually needed for financial freedom?
Of course, awareness about financial freedom has increased in the last few years, but there has been confusion about it. Especially the question that how much money is enough to live in retirement or comfortable? Let’s find the answer to this question.
Is there only enough savings for retirement?
In today’s era, it is not enough to save only. The reason is inflation, which reduces the value of your money over time. In the last two decades, India has had inflation at an average of 6%. This means that if you have ₹ 10 lakh today, then in 15 years its purchasing power will be reduced considerably. About ₹ 4.18 Lakh. That is, after 15 years, you will need about ₹ 22-24 lakhs to buy things worth ₹ 10 lakh.
In such a situation, it is necessary that your savings should be invested in a place where the return is equal to or more than inflation. Options such as government schemes, fixed deposits or diversified mutual funds can give returns up to 6-8% if they are chosen thoughtfully.
How much money is enough for financial freedom?
Personal finance experts believe that financial freedom does not depend on how much money you have. It depends more on what your needs are and how you can meet them without stress.
This means that not everyone needs ₹ 10 crore or ₹ 50 crore for financial freedom. The answer to this question is hidden in your lifestyle and expenses. If your lifestyle is restrained, then ₹ 5 crore can be enough for you, otherwise ₹ 50 crore will be insufficient.
What is ‘Financial Freedom Number’?
You can easily remove the figure for your financial freedom. Experts explain its very easy formula:
Financial Freedom Number = annual expenditure × 25
It is based on 4% rule. This means that if you have invested your money wisely, then you can withdraw 4% of it every year and your original amount will be safe. Let us also understand this by example:
- Suppose your monthly needs are ₹ 80,000.
- Annual expenditure = ₹ 9.6 lakhs
- So your financial freedom number = ₹ 9.6 lakh × 25 = ₹ 2.4 crore
This means that if your invested capital is ₹ 2.4 crore, then you can withdraw ₹ 9.6 lakhs every year and still your capital will not end.
Then why do people want ₹ 10- ₹ 50 crore?
If someone wants a luxurious lifestyle, such as walking abroad, big vehicles, luxury houses also increase. In such a situation, the financial freedom number can be ₹ 10 crore or more. But if your needs are limited and practical, then you can enjoy financial freedom even in less money.
Financial Freedom is not just an economic condition, but also mental state. This is the state when you work with your choice, not needed. Where decisions are taken from self -sufficiency, not from fear. In such a situation, the question is not for the financial freedom, ‘How much money is you need?’, The question is ‘How much do you want?’
Also read: Saving Tips: Want to save without compromising lifestyle? These are 6 easy ways