It is no secret that we need money to lead a stable life. Irrespective of whether you aspire to be a traditional 9 to 5 working professional or follow an unconventional career path, financial stability is one of the primary goals to be achieved.
So, how much money do we need? Let’s assume a number, say Rs. 5 crore, would be enough. But, while it can be more than enough for one, it can fall short for someone else. Thus, it is imperative to understand life doesn’t work that way. Every individual has different aspirations, limitations, and cost of living.
Instead of looking for a universal wealth bracket, it is imperative for you to understand your needs and decide on a feasible financial goal you want to achieve. While earning a sizable amount can help, creating passive income sources would be the most significant contributor towards attaining financial stability and, ultimately, meeting the number you have in mind.
Financial planning is a key enabler
While the amount needed will vary from one person to another, financial planning is a crucial enabler to help you achieve the money you seek. For example, if you have chosen an unconventional career for yourself, say a freelance writer, there can be high volatility in your monthly earnings. While one month can be exceptional, the next month can be disastrous.
So, what can you do to maintain and keep increasing your annual savings and ensuring financial stability for yourself? First, you need to have a stable financial plan in place and follow it diligently.
Here are the three critical aspects of financial planning –
People often confuse investing with saving. But it is imperative to understand that the former is much more than merely stacking money in your savings account. While it is great that you are saving a majority of the income you earn, it is even more essential to allow money to grow itself.
But it won’t help you succeed in passive income planning. For that, you will have to diligently understand all the investment modes, like mutual funds, gold, stocks, etc., and find the best ones capable of generating long-term passive income for you.
- Financial protection and retirement planning
How much money you need after retirement will depend on your current annual expenses and retirement needs. Retirement planning enables you to secure your tomorrow. It also provides financial protection for your family and helps during emergencies too.
- Tax saving
When your yearly income increases, it doesn’t necessarily add to your annual savings. A significant part of your earnings goes towards tax. As you grow financially, it is vital for you to keep the taxation aspect in mind and work towards minimising tax outflow. The Indian taxation system has specifically introduced Chapter VIA deductions to help you optimise your spending and investing habits.
The answer to how much money you need is financial planning. It would enable you to understand your finances better and optimise them to ensure you reach your goals sooner.