Before we embark upon any journey we need to plan.
We need to break up our journey into identifying various destinations where we need to be at different point of time during our travel. Time to reach those destination and how much money we would need for a particular milestone. Thus we need to break up our goal to reach Financial Independence in terms of Financial goals with duration when substantial finance is needed. For e.g. see below for a person aged 39:
| High level financial Goal | Year | Years to Goal | Corpus Needed |
| 1st Child's Higher Education | 2017 | 8 | 5,00,000 |
| 2nd Child's Higher Education | 2019 | 10 | 5,00,000 |
| Retire at 55 | 2025 | 16 | 1,50,00,000 |
| Graduation 1st Child | 2022 | 13 | 5,00,000 |
| Graduation 2nd Child | 2024 | 15 | 5,00,000 |
| Marriage 1st Child | 2025 | 16 | 10,00,000 |
| Marriage 2nd Child | 2027 | 18 | 10,00,000 |
Once we have identified all our high level financial goals / significant expenses during various stage of our life and money needed then. Next vital step is to ascertain what is our current status with respect to financial health. In short how much we have now and how much we owe to others ver a period of time. Hence next is to prepare our Asset and Liability status on date. See sample Assets & Liabilities
| Instruments | Amount |
| Real Estate (Self Occupied Property) | 45,00,000 |
| Equity | 9,00,000 |
| Gold - ETF* | 37,000 |
| Index - ETF* | 17,000 |
| Mutual Funds - Equity | 2,60,000 |
| Mutual Fund - Debts | 3,00,000 |
| Cash in Bank / FD | 3,00,000 |
| Total Asset | 63,14,000 |
| Instruments | E.M.I.* | Remaining Term years | Amount |
| Housing Loan | 2,40,000 | 10.0 | 24,00,000 |
| Personal Loan | 60,000 | 1.5 | 90,000 |
| Car Loan | 12,00,000 | 1.5 | 18,00,000 |
| Total Liability | 42,90,000 |
Having identified our major financial milestones and current asset and liabilities. Next step is to determine cash flows. So lets continue our preparation for this lovely journey to financial independence. Next post would contain how to prepare simple cash flow.
....*Disclaimer for all writing on the blog as well as some short forms used
ETF : Exchange Traded Fund
EMI: Equated Monthly Installment
Amount in INR
Amount and target quoted above are indicative only to highlight example and not actual corpus one may need to achieve his financial goals. Various head used under sample table aren't exhaustive and can be of different kind and types based on individuals goals.
No comments:
Post a Comment