FINANCIAL FREEDOM: PERSONAL FINANCE AND STEP BY STEP GUIDE TO ACHIEVE FINANCIAL FREEDOM

In India, we all are working hard and earn money. Still more than half of the country is struggling for a decent life. We all are working hard to improve our lives. In India, from 2011 to 2019, 5.7 crore people improved their status from Lower middle class (Earn 201 to 750 Rs/day) to middle class (Earn 751 to 2300 Rs /day).

After Corona, most middle class people lost their jobs, some people’s salaries were reduced and small businesses suffered losses. In 2021, as per the PEW research, around 3.2 crore middle class people pulled back to lower middle class. Also 7.5 crore people increased in the lower class (Earn less than 200 Rs/day).

One bad year demolished the ten year hard work of people and pulled them back financially. You may ask, due to corona, the whole world suffers. Yes, the whole world suffers from the financial crisis, but India contributes 60% of that financial disaster. 60% is the big number, because India’s population is only 20% of the whole world's population.

What is the reason for this big number? Major reasons are,

1. Lack of Financial education which is not taught in our schooling.

2. Most people have only one source of income. The famous quote of Warren Buffett (World’s top wealthiest person and an investor) is “If your salary is your only source of income, you are one step away from poverty”.

3. Not aware of saving money and investing that money to beat inflation. Another famous quote from Mr. Warren Buffett is “If you don’t find a way to make money while you sleep, you will work until you die”.

Above three reasons are all correlated and apart from this, there is another big hidden reason which prevents us from financial freedom. That reason is that they are spending money on liabilities such as house, car and in the investment which gives less return than inflation. What! Is house a liability? Though land value appreciates, we need to spend money to maintain the house and the building value depreciates over time. So, a house is a liability.

Chapter 1 explained about the tools one needs to follow to find out our current financial status. Chapter 1 also explained how to find out the seriousness of debt with interest coverage ratio and also explained about some simple ways to repay the debt. In chapter 1, importance of term insurance and medical insurance also explained. Chapter 2 explained about various fixed income instruments such as FD, EPF, PF, ULIP policies and bonds Vs inflation. Also, chapter 2 explained how to calculate the returns of ULIP policies using Excel. Chapter 3 explained various variable income instruments such as Real estate, Gold and stocks. Chapter 3 deeply explained, how the stock market works and how the stocks listed in the stock market? And how the stocks are traded in it? Also, Chapter 3 explained about the requirements to invest in the stock market and explained various ways to invest in the stock market.
Chapter 4 explained A to Z about index funds (Nifty 50) with its past performance and future expectations. Also, Chapter 4 explained the advantages of index funds over individual stock picking and active mutual funds. Chapter 5 explained how inflation differs between rich people, middle class people and poor people. Chapter 5 also guides you to find your journey in the last 20 years is either rich or middle class or poor. Chapter 6 explained about financial freedom and the 4x rule to calculate the SIP investment required to achieve financial freedom. In Chapter 7, we conclude the book.