If we have decided to achieve financial freedom, we should start saving and investing money in good invest plans where we will get more returns and our money should be reasonably secured.
Same time our focus will always to keep achieving the monthly contribution so at target age the financial freedom corpus can be collected. This all continues based on the plan which we have made at the starting point of saving corpus for financial freedom. While making financial plan we need to consider the present earnings and tentative future earnings. It’s difficult to assess the future earnings as things are not in our hand and we don’t know what will happen in future.
Setting up higher goals will reduced the duration to get financial freedom
Setting up higher goals for saving is directly impacting the duration to get the financial freedom. As much we keep more monthly contribution we will get more compounding effect which will help us to reduce the duration to get financial freedom. This will make us free to enjoy life at earliest.
It’s very important that at what age we have started monthly savings. Contribution at initial age will give us the best returns due to compounding effect. Investment at later age will have shorter duration and the benefit of compounding effect will be less.
We can see here the average interest earning per month on investment of Rs 1 Lakh. If we invest this one lakhs for 5,10,15,20 and 25 years with consideration of 8% average return on investment annually compounded. In 5 years duration it is giving average monthly returns of Rs 782/- per month which is reasonably good. As much we give more duration to investment the avarage monthly returns will increase like for 10 years will give us Rs 966/-, in 15 years will give us Rs 1207/-, in 20 years will give us Rs 1525/- and in 25 years will give us Rs 1950/- average monthly income. To understand better see the table.
It is very much evident that investments at early age will give more benefit as in longer duration interest earned amount is much-much higher as compare to shorter duration.
Whether age impact to achieve financial freedom ?
It’s true that age is playing major factor to achieve goal of financial freedom but as we seen in article “what is right age for financial Freedom” that if we can able to generate faster income by innovative ideas then the age will not impact much and we can able to achieve goal much before targeted age.
It also true that our spending needs are changing in different life spans.
If our age is in between 20-25 years, at initial days we feel little pain to save monthly contribution as our earnings are less and we are more focused to enjoy bachelor life. We are in more fun, to explore more things in life which will increase our spending habits. During this period savings for financial freedom known as best saving as it will give best compounding effect in 20-25 years. Saving in initial 5-8 years will give best returns on investments. If our investments gets fixed long duration then our monthly returns will be very much high due to compounding effect.
In this period if we more focus on earning by doing service or business or any side works it will be very helpful to multiply our saved money in longer duration.
If our age is in between 25-30 years, we are in process to setting up base for our family life like searching life partner, marriage, setting up basic things for family etc. This is very crucial time as your earnings are less and you need more money. During this period if we can able to save planned monthly contribution for financial freedom corpus, it will give very good returns on investments.
If our age is in between 30-35 years, we are in process to grow in our carrier or expanding business. In this age our earnings will increase significantly and we can able to generate more income which will help us to contribute more. At the same time this ages is for expansion for our family tree hence again our spending will be more. It’s good time to buy house for our shelter. Saving money in this duration will also give us reasonable returns.
If our age is in between 35-40 years, we will be at good level and our earnings will be very much high. During this age we will be more mature to handle the things and as our earning will be higher we can make as much contribution as per financial plan. Saving during this time have less average returns on investment but as the contribution during this period will be more hence it will help a lot to create corpus.
If our ages is in between 40-45 years, our earnings will be at peak and our focus to save more money will only help us to create target corpus. During this age we can make best effort to save and invest as much amount as we can. Investment during this period will give us nominal returns as compare to other periods as our investments have less investment duration but it will gives fruits during time when we are enjoying financial freedom time.
Also this is time to review our earing pattern as now we are left with very few years if we want to become financially free. This is time to explore ideas to earn money from other sources either by side business or by online or any other source from there we should get good earing by making less efforts. Also work on the business ideas where we will get passive income source with a very little investment.
If our age is in between 45-50 years, its time to review the status of financial freedom corpus and accordingly based on our earnings we can revised our financial plan if target corpus not achieved. We need to update our plan and find out at what age we can able to collect required corpus for financial freedom.
It’s also time to review our present and future expected expenditure and till how long we should continue with earning by work.
During all these ages our priority is to save and invest money for our future comforts. The saving & investment plan should be in such way that the pressure should be minimal so we can able to save the monthly contribution comfortably. While preparing the financial plan the care should be taken and make plan in such a way that saving can be done with little comfort.
If we make reasonable financial plan and regularly review the earing status and further based on real condition corrective measures can be adopted to enhance the earning well in advance the achieving goal will be easier. While making plan we should review the earning sources status so the upcoming pressure can be avoided.
Life is precious and present & future both are equally important. Our positive attitude and doing the things with taking less stress keep our goal easy. Having this, these all should not impact any adverse effect on our health as we required good health to enjoy our life.