This is the second Independence Day we have celebrated under the shadow of the COVID-19 pandemic that has upended the lives of people and organizations across the globe.
As the economy, and the people who make up the economy got hit by a series of lockdowns and health emergencies most of us ended up re-evaluating the priorities in our lives.
A wake-up call
Our 2020 wealth survey indicated that people focused on building an emergency fund as the pandemic caught many flat-footed in terms of having a fallback plan.
In 2021, though, holistic financial planning has become the buzzword for many. In fact, in our survey we found 41% of the respondents saying they want to prioritise building a financial plan. A 1.5x jump from 2020. The interest in financial planning is important considering early retirement is not as simple as it potentially seemed pre-covid.
As Scripbox CEO, Atul Shighal mentioned while speaking to the Economic Times, the reality is that most people will have to work well into their 60s to amass wealth that will be enough to sustain a decent living standard for a period of 30 years or more.
So what lessons can we take away this month as we celebrate our 75th independence day and wonder about our own financial independence? Here they are:
Your wealth creation success is going to depend a lot more on how much you save rather than chasing the highest return instrument, no matter the asset class.
In an unpredictable world, choosing your assets carefully is not just important but necessary. Having an emergency fund and then some more, in fixed income-based instruments is a given.
Most of your wealth creation will take time and your oldest investments will grow the most. So, who starts first, literally wins. If they stay invested for long enough in something that grows beyond inflation.
If you want freedom from having to work for a living, the price is saving a lot. Perhaps a lot more than you are saving now. It’s as simple as that. So far, for the vast majority retiring by 40 is a pipedream unless we are willing to put saving and investing first, even over our lifestyle.
Since freedom from working is difficult, choose to work in fields where you won’t dislike working. Spending some time planning your career to align with what interests you will mean that you won’t be looking for the exit door all the time.
A good idea would be to choose how likely you are to continue in your job rather than just how much will you get paid. Remember, the longer you stay employed, the more you can save.
Investing well is a boring activity. You choose the right investments, keep investing regularly, do some periodic checks with some expert help, take corrective action if necessary, stay invested in what’s working, and repeat and rinse.
Quick wins in new, but ill understood, instruments like cryptocurrency are exciting but if you don’t know what you are doing, it’s better to stay out. Sometimes not doing something is better.
We faced fragility and uncertainty, but we are still standing
Most of us have never known such uncertainty and fragility in our lives. While most of you reading this have the luxury (or perhaps burden!) of working from home and still receiving a paycheque, others weren’t so fortunate.
Let’s acknowledge the efforts of the millions who don’t have the freedom to work from home. It is thanks in large part to their efforts that life hasn’t been disrupted even more.
This pandemic tested the inherent fragility of our economy and for the most part, things didn’t break down completely.
As we celebrate this Independence Day and the country unlocks, let’s also be thankful that our economy and systems took this fragility test and came out still standing, if a bit shaky. Uncertainty may be the by-word for the nation and the world at large but our optimism is still cautiously high.
Want to work seriously towards financial freedom and a retirement worth looking forward to? Here's what can help you most.