Are you on track for Financial Independence?

Posted On Thursday, Feb 26, 2015

The Minister of Railways Mr. Suresh Prabhu announced the Railway budget today. The railway budget is a precursor to the Union budget announced by the Finance Minister. This year the Railway budget started with good news - no hike in passenger fare!

Mr. Prabhu also announced four goals for the Indian Railways (IR) -

Goal 1-Customer experience to receive a huge boost
Goal 2 -Safer Travel
Goal 3 -Modernize infrastructure
•;Goal 4 -Financially self-sustainable

While we wish IR is successful in achieving all the four goals, the fourth goal gives us a reason to introspect whether we as investors are financially self-sustained. Let us look at three factors that will help you to be financially self-sustained.

3 factors to be financially self-sustainable

 i.Avoid unnecessary debt
 Carrying large credit card balances and other consumption debts is a sign that our lifestyle exceeds our income. Such consumption borrowings come with very high interest and they hurt one’s financial wellness. Unlike a home loan which creates an asset i.e. real estate property, the interest paid on consumer debts is totally forfeited.

Getting rid of high interest consumptions debts, at the earliest possible, is the first step towards being financially self-sustainable. Once free, keep off them as much as possible.
 ii.Pay yourself first
 Saving could be viewed as the practice of paying oneself first. Traditionally savings applied to whatever is left of income after the long list of expenses. However to be financially independent that equation needs to be turned around –
Expenses = Income – Savings!

We ought to decide how much is to be saved and then limit our spending to what remains.

The habit of paying yourself first will go a long, long way in creating wealth. Most people might believe the secret to wealth and be financially self-sustainable is a high paying job. Or that it is a prospering business. However it is neither of these. It essentially lies in spending much less than what a person earns. It lies in saving adequately to create assets that can generate income for you. And that brings us to the third good habit to be financially self-sustainable.
 iiiInvest in growth assets
 Growth assets are typically those assets that have the potential to give capital appreciation over the long term as against in generating current income. Examples are equity shares, equity mutual funds, real estate and gold. Growth assets help in building wealth. Generally a balance of income assets and growth assets would be required for an investor at any life stage. The role of proper asset allocation for achieving investment success cannot be understated.

How long you let your investments compound is a major factor in determining how large they grow. So it’s good to follow the old thumb rule that says invest as early as possible, as often as possible… and as much as possible!

Therefore while Mr. Prabhu and his team are all set to achieve their goals, and we wait for Mr. Jaitley to unveil the Union Budget, it is your turn to focus on the 3 factors that will make you financially self-sustainable. Kindly consult your financial advisor for guidance on investments.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

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

Please visit – to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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