While the homes are lit up and streets are filled with excitement during Diwali, you too may organise and activate your financial journey during this auspicious period. Making a habit of disciplined investment, particularly through SIPs in mutual funds, may be one way to do so.
Table of contents
Understanding financial independence
Financial independence is a state where an individual or household has accumulated enough financial resources—such as investments, savings, passive income, pensions, or other income-generating assets—to cover their living expenses without needing to rely on active employment or a traditional paycheck.
This means they can maintain their current lifestyle and meet essential expenses through income derived from assets, allowing them the freedom to make life choices based on preference rather than financial necessity. Financial independence offers control over one’s time and decisions, reducing stress about money and freeing the individual from living paycheck to paycheck.
Real financial independence consists of several pillars: clarity of goals, regular saving, informed investing, emergency cushions, and long-term planning. These may, over time, instill confidence, durability, and a feeling of security.
Also Read: What are Mutual Fund Units?
Steps to potentially attain financial independence
In order to work towards potentially achieving financial independence, here are some steps you may follow:
- Set clear financial goals.
- Create a budget and adhere to it.
- Establish an emergency fund for unforeseen expenses.
- Make well-informed investment decisions.
- Start investing for retirement as early as possible.
We will discuss each step below, focusing on how mutual funds and SIPs may assist you in this journey.
Setting clear financial goals
Start by enumerating your goals in life: home purchase, education of children, vacations, business ventures, retirement. For each goal, you can try to record:
- The time horizon: short (1 to 3 years), medium (3 to 7 years), long (7+ years).
- The amount required (factoring in inflation).
- The order of priority: which goals you wish to finance first.
Having clear goals may help prevent unfocused investing and anchor your choices during ups and downs in the market.
Budgeting and adherence
Your budget is like a map for your money. Without one, you may end up overspending, under-saving, or losing track of your objectives.
- Write down your sources of income (salary, business income freelancing, passive income etc.).
- Write down expenses: fixed (rent, EMI, insurance, electricity) and variable (food, entertainment, shopping).
- Invest first, before discretionary expenditures.
- Utilise budgeting apps or easy-to-use spreadsheets.
- Re-measure monthly: for shifting income or surprise expenditures.
Building an emergency fund
An emergency fund is your safety net for sudden life events, job loss, medical emergency, urgent home repairs, or other unplanned costs. Without it, you may be forced to liquidate investments at unfavourable times or take on high-cost debt. Financial advisers generally recommend keeping 3 to 6 months’ worth of essential expenses in your emergency fund.
If your income is unpredictable or business-driven, some suggest extending to 6 to 9 months. It is recommended to leave this fund in liquid and lower risk investments (savings accounts, overnight mutual funds, liquid funds). The goal is relatively stability of capital and quick access rather than long-term growth.
Investing wisely
Once your emergency fund is set, excess funds may be invested in growth-oriented avenues. Among them, SIP in mutual funds, especially equity funds, may be a suitable choice for potentially building wealth in the long term.
Why SIP?
- It encourages discipline by automating monthly investments.
- It may help manage volatility through rupee-cost averaging, where more units are purchased when markets are down and fewer when they are up.
- Over time, potential compounding may work in your favour if you stay invested.
For such a goal based mutual fund approach, try mapping each goal to a fund category. Here are some possible avenues:
- Long-term goals: Equity-oriented funds
- Medium goals: Hybrid or balanced funds
- Short goals: Debt-oriented funds
Consider rebalancing your portfolio after significant life events or once a year to maintain alignment.
Planning for retirement
It is advised to begin retirement planning early. You may consider pension tools (such as National Pension Scheme or other similar plans) and mutual funds to potentially build a corpus. As you age, you may gradually shift toward relatively stable instruments to mitigate the impact of volatility on the invested capital. By the time you near retirement, your asset mix could tilt toward lower risk assets, yet maintain some equity exposure to potentially combat inflation.
Also Read: How To Choose a Mutual Fund For Financial Goal
The role of women in financial decision-making
Here’s a powerful trend: women in India are increasingly participating in mutual fund investments. As of December 2024, women made up 24.2% of unique mutual fund investors and contributed 33% of individual investor’s AUM, as per a report released on March 2025 by Crisil and Association of Mutual Funds in India (AMFI)*.
Women’s AUM has more than doubled over five years, from Rs. 4.59 lakh crore in March 2019 to Rs. 11.25 lakh crore in March 2024. These statistics indicate that women are not only participating but are meaningfully investing and holding for the longer term.
This wave may redefine domestic decision-making. Where women spearhead financial planning, households might be likely to save more, plan ahead, and remain relatively more stable during recessions, suggests research. As you usher in Diwali, you too may take charge of your finances, become curious, attend investor webinars and become more self-assured in navigating mutual fund investment choices.
FAQs
What is financial independence, and why is it important?
Financial independence means having sufficient income, savings, and investments so you're not always relying on a salary or external assistance. It’s deemed important because it provides choice, stability, and the ability to live by your values and plans.
How can setting financial goals help in achieving financial independence?
Objectives can help ground your choices, reduce impulse spends, enable you to budget your money wisely, and act as milestones that gauge your advancement.
What are the best practices for budgeting effectively?
While there are no universally best measures, you may monitor income and expenses, save a portion first, utilise tools to track, review monthly, and change when income or expenses fluctuate.
Why is having an emergency fund crucial for financial security?
It can offer a financial cushion in times of crises, urgent repairs and unplanned expenses. It can help you navigate such events without liquidating long-term investments and interrupting their potential growth.
What are some investment options to consider for long-term potential wealth creation?
Among options: mutual funds via SIP or lumpsum, index funds, pension plans (e.g. NPS), equity-linked instruments may be considered.
How can women take charge of their financial future?
Women can educate themselves about investments, actively participate in household financial decisions, seek financial advice, use fintech tools and platforms, and develop long-term discipline in investing.
What steps should I take to plan for a comfortable retirement?
You may start early, allocate part of savings to retirement instruments, review and adjust your asset mix over time, and ensure you build a corpus that offsets inflation and life expectancy.
How can celebrating Durga Puja inspire financial empowerment?
Durga Puja celebrates the triumph of strength, wisdom, and renewal. It may also symbolise your resolve to renew your financial life, taking control, setting goals, and investing relatively steadily for your future.
*Source: From savings to wealth creation: Women taking charge of investments, CRISIL and AMFI
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.
The content herein has been prepared on the basis of publicly available information believed to be reliable. However, Bajaj Finserv Asset Management Ltd. does not guarantee the accuracy of such information, assure its completeness or warrant such information will not be changed.The tax information (if any) in this article is based on current laws and is subject to change. Please consult a tax professional or refer to the latest regulations for up-to-date information.
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