About Me

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Neeraj Chauhan is a Certified Financial Planner and CEO of The Financial Mall. The Financial Mall is a financial supermarket & in operation for over 20 years. It manages total financial affairs of clients through wealth management and financial planning Process.

Wednesday, August 14, 2013

When will you celebrate your financial independence ?

While you’re going to celebrate Independence Day, take some time to nail down the day you want to become financially independent.

What exactly is financial independence or, as some call it, financial freedom? That depends on your own definition. When you’re financially independentyou work because you want to, not because you have to.

Wikipedia says Financial independence is a term generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities.[1] For financially independent people, their assets generate income that is greater than their expenses.

Declaring your Financial Independence Day is a better idea than trying to come up with “the number” you need to retire, especially if you’re in your 50s or 60s and don’t have much time to pump up your savings.

6 Ideas to your Financial Independence.

1. Assess your situation in life. The conventional path to achieving financial independence is a lifetime of sound money-management decisions. A young adult who sticks to a proven wealth-building plan can reasonably expect to reach the goal by retirement age. Create a road map for your goal.

2. Pay off your debts in full. Whether it’s high interest consumer debt or a rock bottom rate loan, many of us are carrying a debt burden of some kind.  Clear your debt that’s really the foundation.

3. Create multiple sources of income for retirement. Never forget about your primary career.  Even if you only want to achieve financial independence in order to make a quick exit from the working world, you’ll get their faster if you can grow your career, and turn the increased earnings into passive income streams.

The passive income stream can include interest and dividends from your investment portfolio; rental property; royalty; freelance or consulting work; an annuity; and perhaps a guaranteed pension. These passive incomes can play a key role in helping you reach your goal.

4. Develop “guerrilla frugality” habits.  Each time you get a raise or a promotion, try to resist the urge to increase your spending to match your increased income.  Of course, you should probably increase your spending some, especially if you’re just starting out in your career.  But try to increase your savings more than your spending.

Keeping expenses low while working full time will make it easy to live that way in retirement and reduce the amount of savings you’ll need for a comfortable retirement. “If you spend like a millionaire, you’ll end up a pauper,” Spend like a pauper and you have a shot of becoming a millionaire.

5. Save 20% of your gross income. The key to achieving financial independence is to save and invest money regularly. Saving 20% can be tough for many people, but not for others. If you can’t save 20%, try for 15 or 10%. Practice discipline in all money matters.

6. Invest in diversified assets. That means selecting, different assets like real estate, equity, debt – and holding onto them. Review their performance twice a year, then re-balance your portfolio if the markets shift and you discover you have a higher percentage in one of these asset classes than you want.

I encourage you to take the time to consider what your path to your Financial Independence Day might look like. Because the sooner you start, the better your chances are of reaching that goal, and the longer you'll be able to enjoy the fruits of your effort and sacrifice. Making the right financial decisions today makes a world of difference in your golden years.

Wish you a very Happy Independence Day!!!

Sunday, January 20, 2013

Don't let Gen X becoming Gen Lost

Some people have used the term, “the lost generation,” to describe today’s “twenty some things” (and those in their early 30s). However, if you learn some basics about personal finance and apply a little common sense to managing your financial affairs, you will be able to describe you financial future in far more satisfactory termsThe strong foundation that you lay can go miles in sparing you from frequent bouts with the money blues.

Young adults in their 20s and early 30s face a variety of challenges in their quest for financial security. Some of these challenges are similar to those faced by previous generations, while others are unique to the times. If you are just starting out, here are four financial tips to help you manage your money and plan for your future:   

1) Invest in your future. You may have graduated from university and have a good job, but who knows where tomorrow’s opportunities may lie? Ongoing technological changes in many fields will require continual upgrading of education and specific work skills. One way to improve your job and career prospects in the coming decades is to give a high priority to furthering your education. The more varied and flexible your skills, the more attractive you will be to prospective employers.

2) Start an emergency/opportunity fund. The uncertainty surrounding the world of work will quite likely mean your working life may be punctuated by a series of job and career changes. If you need to go to school full-time to change career paths, you may have stretches of time without stable income. Building up an emergency fund (while fully employed) to cover three to six months of “bare bones” living expenses can help you control work-related transitions. This type of savings fund can also be used for opportunities such as starting your own business.

3) Save early and continuously for retirement. If you aren’t aware of it yet, welcome to the reality that saving for a comfortable retirement is a responsibility that falls squarely on your shoulders. With no social security in India you have to support yourself, it is difficult to predict what kind of government benefits will be available 30 – 40 years from now. While that may seem like a long way off, the key is to make time your ally.

Remember, what you accumulate during your working years will likely be the primary source of your income for your retirement years. Even if inflation stays low and averages just 6 percent annually far into the future, prices will still double about every 12 years, cutting the purchasing power of your retirement funds. If you have access to a tax-advantaged plan, either individually or through your employer, it makes sense to start saving now. The earlier you begin, the less money you will have to put aside each month to reach your savings goal.

4) Use credit cards wisely. Even before they finish their education, young adults are often targeted by credit card companies. While credit cards are often a great convenience (it’s virtually impossible to conduct some transactions, such as making online reservations, without one), they have the potential to create debt problems. Over-spending on credit can create an illusion of wealth because payments can be stretched out far into the future. Paying off the full balance each month (except for emergency situations) is the best way to control your use of credit.    

Find yourself, don't get lost in fiscal indiscipline. In the end, all of us have to learn to “just say no” when the urge to spend money hits. Until a solid nest egg is built (that will go far in protecting one from life’s constant emergencies), veto all unnecessary trips to the mall, cancel freaky nights out on the weekends, until the financial goal is reached. With a comfortable nest egg, solid management skills, and some amount of self-control, almost anyone will be able to deal with most financial surprises that arise. It’s not so hard.