The importance of earning money does not need a sales pitch. However, finance experts have been dealing with this constant demand from investors to learn money management. With the inflation rate picking up pace, it is important to understand what capital you have now will look like ten years down the line.

Furthermore, making the right call at the right time is the key to survival in a market economy. You must be on top of your finances so that you can achieve financial independence, retire early, and pursue your passion.

• Understand taxation hacks so that you can accumulate more capital.
• Consider inflation when you account for the value of your savings.
• Make use of the 50-30-20 rule to ensure you exercise financial prudence.

To achieve financial independence, you must start by mapping your financial status with that of the economy, setting an achievable goal, and striving hard to achieve it.

1. Understand your goal

This step is the most important because it will decide the next steps that you must take while making your investments or taking any related measures.

• Based on your calculation, let us suppose you need Rs. 5 crores by the time you retire to lead the lifestyle you desire.
• Once you have decided on the amount, the next step is to tally your present annual income and calculate the age at which you can achieve your goal.
• Factor in 3-5% as the rate of inflation. Also, consider the savings you already have, and what they can yield by the time you dream to achieve financial independence.
• Do not be overwhelmed. Yes, the goal seems somewhat ambitious, but that is why we are strategising in the first place.

2. Pay off your loans

If you have taken loans in the past, it is testimony to the fact that you are ready to take the next step in investing. However, sorting out all your liabilities should be the first priority at this stage, otherwise it would be a constant bother on your way to financial independence. You do not need to hurry, but you need a plan to pay off your debts and prevent yourself from falling into a debt trap due to poor financial choices.

3. Emergency funds

Having an emergency fund will make sure that you do not have to worry even if you are going through a rough phase, such as patchy employment. The emergency fund must be 3-6 times your current monthly income. So, if you earn around Rs. 30,000 per month, your emergency fund should be between Rs. 90,000 and Rs. 1,80,000. If you are looking for a safe investment option, you can consider fixed deposit. They offer guaranteed returns and a fixed interest rate throughout your investment tenure.

4. Expense tracking

The best way to maintain good financial health is by tracking your expenses. Once you have identified the issue, try mending your ways and cut down on your expenses. Furthermore, make use of the 50-30-20 rule, wherein you keep 50% of your income for your needs, 30% of your income to be used judiciously towards your wants, and 20% for savings.

5. Expand financially

Like all investors will tell you, earn more to suit your lifestyle rather than cut down on expenses and boost your savings. Savings are important, but more important is replenishing them regularly.

6. Plan your taxes

To achieve financial independence, you need to plan your taxes well. The best way to do this initially is to consult a finance expert, but you must gradually learn to strategise on your own. Study the latest tax regime and identify the provisions that allow you to reduce the value of your property, thus leading to lower taxes.

7. Choose the right insurance

Ideally, your health insurance should be about 10 times your annual income. However, read through the policies carefully because if the number of dependents increases, the insurance might not cover the costs.

8. Invest wisely

Investing wisely includes getting ahead with strategies like tax harvesting, which can minimise your losses and even convert them into profit by investing in better-performing stocks. You can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 7.95% p.a.

9. Keep track of investments

You need to be informed at all times about how the market functions and its performance. Consulting an expert can help you in your initial days until you grasp the market rules.

10. Believe

Finally, believe in your goals. If you have thought about achieving financial independence, that alone speaks of your economic farsightedness and wisdom.