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7 steps to achieve financial freedom

7 Steps To Achieve Financial Freedom

How To Achieve Financial Independence?


In this article, we are going to discuss 7 Steps To Achieve Financial Freedom. In today’s changed financial ecosystem, a long-term prudent investment is required to achieve financial independence.

We have already covered what is mean by financial freedom in our earlier blog.

7 Steps To Achieve Financial Freedom

  • Financial independence refers to a state where we have enough resources at your disposal to meet your expenses as well as fulfill your future financial goals.
  • Your monthly earned fixed salary may be barely sufficient for meeting monthly expenses and paying EMIs for like home, car and also planning for children education and marriage etc. In such case, then how one can actually achieve financial Freedom or independence? 
  • But, it is definitely possible, with careful financial planning and follow-up actions, one can build a wealth to break the dependency on the monthly salary. 

Following 7 Steps To Achieve Financial Freedom which would help you move towards your financial independence.

7 Steps To Achieve Financial Freedom

1.Start Early

  • The first step we should take on this financial freedom journey is start as early as possible, stop unnecessary delays. The more we delay, the more challenging it will become for us to achieve financial independence. 
  • A smart approach would be to make sufficient savings and investments in early stages of our career. The regular source of income allows us to build a corpus of funds that is sufficient to take care of all our expenses.

2. Save and Invest for Long-term

  • Savings is the most crucial and most important aspect of wealth creation and achieving financial freedom. Start with saving part of your salary by cutting your discretionary expenditures.
  • This can be done by committing to invest at least a minimum of 20-25% of your salary. The more you save now, the more your money compounds. The power of compounding should not be underestimated.
  • The appreciation you will receive on 20-25% of your salary if you save consistently and invest intelligently, is far beyond the expectation.
Be Financially Independent by Proper Financial Planning

3. Have a Healthy Portion of Equity Investment in Your Financial Portfolio

  • Equity investments have rewarded investors by multiplying investments in a relatively short span compared with other investment avenues.
  • If one starts early, plans properly and invests meticulously, one can endeavor to create sufficient wealth, helping to achieve financial freedom at a quite early age. 
  • In current volatile markets also, one can find opportunity to build a wealth through equity by staying for a long period in the market. For more details, you can refer our blog : 4 things to note for the investors in volatile markets.

4.Adopt SIP ROUTE; Avoid LUMP-SUM investments

  • If one is unable to commit lump-sum investments, systematic investments in equities would enable an investor to create wealth that can take care of his/her early retirement.
  • SIP route helps you average your purchase price and helps you with better returns with relatively lower risks. So by SIP route, one can get the advantage of stock purchases at the discount.
  • SIP option has made it possible for investors to bring the much-needed discipline in their approach towards investment while making the magic of compounding work in their favor. 

5. Plan Your Financial Goals

  • Have different investment strategy for your financial goals like home, marriage, health, education etc, Quantify them and set the time horizon for the same.
  • You should do research and give enough time to make informed decisions, don’t follow a herd approach and invest time and effort to know about the fundamentals.
  • Prepare your action financial plan for changing scenario and stick to it during the investment horizon. This will prevent you from making an impulse decision.

6. Manage Risk

  • You should have liquid funds to meet any emergency situation. Define you contingency fund requirements and work towards accumulating the same.
  • The idea is your financial plans should not get hit by any contingency which anyone can face at any time of life, be it health issues, job loss, repair and renovation to your physical assets.
  • Try to build a reserve which will sustain you for 6 months should you not receive any inflows in this duration. Refer major Personal Finance Risks.

7. Keep track of Your Investment & Review

  • Once you have created an investment plan, keep it on track. Review your portfolio from the standpoint of the rationale that formed the basis of your investment. Though short-term volatility is bound to happen, you should focus on the fundamentals of invested stocks.
  • Don’t be too inflexible just because you have put in time and effort for your previous research. So be ready to keep that flexibility to amend your portfolio with changes in fundamentals. Remember overconfidence may be hazardous to your wealth. 


Our Indian Independence has entailed dedicated and passionate pursuit of freedom by our freedom fighters. In the same way, a whole-hearted commitment to financial planning will ensure you achieve financial freedom or independence as well. 

VG Siddhartha CCD Founder Story from Financial Angle

VG Siddhartha – Cafe Coffee Day Founder Story (Financial Angle)

Lessons for Retail Investors to be learnt from Cafe Coffee Day Financial Analysis


In this article, we are going to discuss VG Siddhartha – Cafe Coffee Day Founder news and its analysis from a financial perspective. Lets also see the lessons to be learnt from the story for Retail Investors.

VG Siddhartha – Cafe Coffee Day Founder Story (Financial Angle)

VG Siddhartha CCD Founder Story from Financial Angle
Cafe Coffee Day Stock and Company Financial Analysis

Current news of VG Siddhartha

  • VG Siddhartha, popularly known as the Coffee King of India, left everyone baffled after he went missing from a river bridge near Mangaluru on Monday night, July 29, 2019.
  • You must have already read the news – The body of Cafe Coffee Day founder VG Siddhartha has been found by local fishermen in the Nethravathi river early wednesday morning, July 31.
  • The CCD owner reportedly wrote a letter to the Café Coffee Day family stating the reasons that drove him to take the extreme step.
    • In the letter, whose authenticity is under suspicion, the CCD promoter said that it was getting difficult for him to continue under the prevailing conditions and that the pressure had become too much on him.
    • He referred to Private Equity player that had forced him to buy back shares for which he had borrowed money from a friend.
    • He also alleged harassment at the hands of a former Income Tax official.

Business Outlook

  • Mr Siddhartha’s family has been in the coffee business for more than 130 years.
  • On taking it over, VG Siddhartha set up the Cafe Coffee Day chain in 1996 and also became one of the world’s biggest coffee traders, as well the as owner of Asia’s biggest coffee plantation.
  • He owned about 30,000 acres of plantations and his Amalgamated Bean Company (ABC) is India’s largest exporter of green coffee.
  • Cafe Coffee Day has more than 1,700 stores, mainly in India, but also in Malaysia, Egypt, Czech Republic and Austria. 
  • The IPO of Coffee Day Enterprises Ltd was launched in 2015 and the company was listed on BSE and NSE on November 2, 2015. The intensions behind IPO was mainly Raising the funds for :
    • Repayment of existing debts to reduce the debt pressure
    • Expansions and opening of new outlets
  • Siddhartha and his group firms held a 53.93% stake in the company, of which 75.70% was pledged as of June 30.

Coffee Day Enterprises’ Debt Ratio Analysis

  1. The company was having a total debt of Rs.6,328 Cr and the total funds raised through IPO was Rs.1,150 Cr which can be used for repayment of debts.
    • The company was raising funds through short-term debts, launching commercial papers and continue to for their successive renewals. So there were no proper plans for repayment of debts.
    • As on March 2019, the company’s total revenue was Rs.4,264 Cr. and net profit was almost Rs.143 Cr. It means profitability of the business was also going well.
    • However, even after 4 years, Cafe Coffee Day had total borrowings of Rs 6,547 Cr as of March 31, 2019, up 30% from the previous financial year.
  2. In between, VG Siddhartha had sold his stake in mindtree the details of which will be released in June 2019 results.
  3. Debt to Equity :
    • D/E ratio of the company is 2.59. It means for every Rs.100 raised through equity, the promoters have raised a debt of Rs.259.
    • Thus, D/E ratio of the company is far more than 1, which is not a poistive sign for the company.
  4. Interest Coverage Ratio :
    • Whenever D/E ratio is more than 1, we should analyse company’s interest coverage ratio. In general, interest coverage ratio of the company should be kept above 2.5, but it is having ratio 1.25 which is too lower than the allowable limit.
    • Because interest coverage ratio below 2.5 states that the company is paying only interest payment part and not in a position to repay the principal repayment from its operating profits or EBITDA.
    • We should keep a track of company’s interest coverage ratio trend, whether it is increasing or going down in successive quarters. In case of Coffee Day Enterprises, interest coverage ratio was consistently going down Q-o-Q, which signalled the rising debt pressure for the company.

Liquidity Crunch after NBFC crisis

  • After IL&FS crisis, fund raising had become a tough process. CCD is severely affected by the slowdown in the economy and liquidity crunch after NBFC crisis.
  • In addition to it, VG Siddhartha’s offices were raided by income tax officers in September 2017. All these reasons invited a big trouble for CCD for raising new funds from lenders.
  • Key Lenders : VG Siddhartha had borrowed from Aditya Birla Finance, Kotak Mahindra Bank, AK Capital, STCI Finance, APAC, RBL Bank and SSG Asia against pledged shares of the listed firm.  Apart from NBFCs, banks like Axis Bank, Yes Bank and RBL Bank is having exposures to Coffee Day Enterprises.
  • For liquidity problems reason, VG Siddhartha was in a great need of cash and thus sold his stake in Mindtree to L&T for around Rs.2,100 Cr. Details of the deal will be included in company’s June 2019 results.
  • After income tax raid, many private equity investors have shown disinterest for the company and ask regarding the buyback of their shares. So VG Siddhartha was carrying a lot of pressure of buyback of shares.
  • The Coffee Day enterprises Ltd stock has fallen 20-30 percent in successive 2 sessions 29 and 30 July.
  • Though having Rs.12,000 Cr worth assets with VG Siddhartha, the debt repayment of worth Rs.6,547 Cr could not be managed due to failure in creating liquidity. VG Siddhartha set an Asset-rich but poor-liquidity example. He owned about 30,000 acres of coffee plantations. If almost 70-80 percent of the working capital is going into the assets like real estate investment then it is a matter of liquidity concern for the company.
  • The business should execute and follow the asset light model like RIL in case of Reliance Jio. The working capital should be managed by properly so as to retain sufficient liquidity with the company.

Steps for building a financial plan

6 Steps To Create A Financial Plan

How To Build A Financial Plan?


The financial planning process is a logical procedure. One can create its own Financial Plan by going through all the steps carefully. In this article, we are going to discuss 6 steps required to create or build a financial plan.

Financial planning is the on-going process to help you make prudent decisions about spending, investing, and transferring your income and assets to help you achieve your financial goals. For the details, Refer : https://finplanyadnya.in/

Steps To Create A Financial Plan :

Steps To Create A Financial Plan
Steps To Create A Financial Plan

These 6 steps for creating a financial plan are given below, and explained in detail:

Step 1: Determine Your Current Financial Situation

  • In this first step of the financial planning process, you will determine your current financial situation with regard to income, savings, living expenses and debts.
  • Preparing a list of current asset and debt balances and amounts spent for various items gives you a foundation for financial planning activities.

Step 2: Develop Financial Goals

  • The purpose of establishing the goal is to form the foundation or purpose of planning itself, in order to begin with the financial journey with the clarification of a financial destination. Too many people save and invest money with no specific goals in mind.
  • The second step of the financial planning process is defining your goals, which entails writing down or formalizing your financial goals, attaching costs to them and determining when the money to accomplish those goals will be needed.
  • Only when you set goals—and analyze them and decide if you’re willing to make the financial commitment necessary to achieve them. Then only you can reach them.

Step 3: Convert Financial Goals to Plan

The third step of the process is developing an action plan to achieve your goals. A solid personal financial plan includes an informed and controlled budget, determines your investment strategy and reflects your unique personal goals. This step involves importantly three sub-steps, which are:

  1. Linking your current assets with your goals
  2. Linking your current and future savings to your goals
  3. Create alternatives – Developing alternatives is crucial for making good financial plan. Although many factors will influence the available alternatives, possible courses of action usually fall into these categories:
  • Continue the same course of action – Stick with current investment & savings plan.
  • Change the current situation – Tweak your current situation to make it more future goals oriented.
  • Take a new course of action – Completely change your current financial strategy and overhaul needed in all financial aspects.

Based on these steps, you should have your Final Goal strategy ready with you, where you should be able to answer the following:

  1. What is the corpus required for the goal?
  2. How much investment is needed for each goal?
  3. Priority of Goals
  4. Are my Goals practical?

Step 4: Evaluate Alternatives

Once you have final goals strategy, next step is to scout for right assets for each goal. However, firstly you should know about all the types of financial assets available:

  1. Equity
  2. Corporate Debt
  3. Govt. Debt
  4. Small Savings Scheme
  5. Real Estate
  6. Insurance
  7. Gold
  8. Crypto Currency

You should select the assets, depending upon the following factors:

  • Your Risk Profile – Every individual has different risk profile at different point in life. Some individuals may be conservative risk takers by nature and some may be due to bad experiences. Someone may be a high risk taker when young and become a low risk taker as age progresses. So, there are all kind of individuals, it is important to know what kind of individual are you at that particular point of time and accordingly you should consider and select the assets for investments.
  • Risk of each asset under consideration – Uncertainty is a part of every decision. Some decisions involve a very low degree of risk, such as putting money in a savings account or purchasing items that cost only a few hundred Rupees. But certain assets come under very high risk such as Crypto Currency, Futures etc. In many financial decisions, identifying and evaluating the risk is difficult. The best way to consider risk is to gather information based on your experience and the experiences of the experts.
  • Pros/Cons of each asset – Apart from risk, there are many other aspects as well for selection of asset such ease of investing, liquidity, cost of ownership, ease of tracking, lock-in period, ease of redemption, etc. All these factors are also required to be considered too, before selecting the asset.

Based on your goals and above mentioned parameters, you should finalize the asset type for each of your goal.

Step 5: Create and Implement a Financial Action Plan

  • To this point, the financial planning data has been gathered and analyzed, financial planning statements have been created, goals and objectives have been measured and financial gaps (if any) are found.
  • The next step in the financial planning process is implementing the financial plan’s recommendations. Though this is not the last step in the process, most of the hard work is behind you.
  • You need to create an ‘Action plan’. Your financial planning action plan should include all of the tasks that you will need to accomplish, in order to improve your financial situation.

For example:

  1. Exit from any current investment (if required)
  2. Methods of Investing – Systematic/Lump sum
  3. Timelines of Investments
  4. How to automate investments & budget to simplify tracking
  5. Tax Planning – Make sure your investments are tax efficient
  6. Estate Planning

When implementing a financial plan you will probably need to rely on the expertise of a few specialists such as Tax Professionals, Insurance Agents, Mutual Fund/Stock distributors, etc.

Step 6: Re-evaluate and Revise your Plan

  • Financial planning is a dynamic process that does not end when you take a particular action. You need to regularly assess your financial decisions. Changing personal, social and economic factors may require more frequent assessments.
  • When life events affect your financial needs, this financial planning process will provide a vehicle for adapting to those changes. Regularly reviewing this decision-making process will help you make priority adjustments that will bring your financial goals and activities in line with your current life situation.

4 Money Rules

Some money rules that can have a great impact on your finances and on your future, if followed properly, are:-

1] Never take Loans for Depreciating Assets –

Consider before taking a loan or borrowing money for investing in a depreciating asset like car or mobile phone, other electronics items. Think twice before you choose this option. Avoid it further if it’s not an urgent need.

Such investments never add any value but only take away a huge chunk of your money. Borrowing money to pay for a depreciating asset is a sin of personal finance.

Always check does the debt have a direct and measurable positive impact on your future income? If the answer is yes, the debt may be worthwhile after careful assessment of risks. A crop loan taken while sowing looks up to a possible good harvest; an educational loan enables seeking a qualification that can offer better earnings, a home loan can reduce your current rental expenses and makes your emotionally more stable. These types of loans have a positive income effect and carry important social benefits.

2] Live below Your Means –

Living below your means requires you to pick and choose. You can have a life without draining your wallet, all it takes is some prioritizing. If you want to get on the quickest path to reaching your goals, you have to start living below your means. The best way to do that is to keep your priorities in line. Spending less than you earn leaves you with a surplus, and that surplus is the foundation on which long-term wealth is built.

Here is how you can do it –

  1. Create a Financial Plan to know your goals and start saving first for them
  2. Create a practical monthly budget and stick to it. Keep small rewards for small success
  3. Avoid using Credit card. It is tough to track your expenses with it.
  4. Increase your income. Try freelancing, blogging, online jobs to earn extra income.

It’s not about the amount of money you make; it’s about adjusting your habits and lifestyle in order to improve your life both now and in the future. Once you start making small changes to your spending routine or earnings, you will realize how big of an impact it can have on every aspect of your life.

3] Build your Emergency Fund –

The best way to save for unexpected financial shocks is to have an emergency fund. This is money you want to keep somewhere you can access quickly and easily.An emergency fund is a bigger, longer-term savings fund.

The earlier you start saving, the more time you have to build up the funds to cover an emergency and reach your goals. If you leave yourself with no cushion, only one unexpected expense can send you into debt. Emergency funds help us cope with financial challenges. These challenges may result from job loss, medical emergencies, or other unforeseen circumstances.

The size of a healthy emergency fund may vary based on personal debt levels and spending habits. Generally, one should save enough money to cover between three and six months worth of living expenses. Your emergency fund can shield you from relying on credit cards to fill in financial gaps.

4] Pay Yourself First or Savings First –

If there’s one primary lifestyle quality that marks those who have built wealth over time, this is it. Paying yourself first is a simple rule which can do wonders for your Financial Health. It simply means, first save and then spend. Treat savings like an electricity bill which needs to go without fail. Why? Because this approach increases the likelihood that you’ll actually save a substantial amount. It converts saving money from a “desire” into a necessity. Your retirement and your emergency fund savings become a bill that MUST be paid every month.

Automate your savings. Otherwise, you’ll get to the end of the month and realize you’ve spent more than you intended. So using your budget, figure out how much you can save each month. And then have the money directly deposited into your savings account and/or other retirement savings accounts.

SIPs are an excellent way to achieve this. Calculate the amount you want to save every month and create SIP of that amount in different Mutual Funds. Make sure your SIP hits immediately after your salary gets credited.

4 money rules.png

6 Common Money Mistakes During Retirement Years

A happy and stress free retirement is the ultimate sign of a successful financial and retirement planning. There are a few mistakes that people make during retirement years. These mistakes should be identified and avoided. Some of them are listed below:-

1] Over Allocation to Fixed Deposits –

While financial security is a big focus on retirement, getting out of the market isn’t a safe bet either. People, because they focus on not losing money, forget the risk of outliving your money, inflation risk, credit risk, so they put themselves at risk in every category except losing money. Retirees put money in fixed deposits that earn a low rate of return.

Be realistic about how long your money will be invested. At age 65, your life expectancy is, on average, another 20 years, but if you make it to 85, then you’ve still got another 6-7 years of expenses left to cover. So, don’t worry about losing your money over the next six months, but instead ask yourself how you can make it last another 25-30 years. It may make sense for you to separate your assets into different pools, and invest a little aggressively.

The average FD returns below are pre-tax returns. These returns would go down after tax depending upon your tax slab.

FD vs Inflation

2] Almost Zero Allocation to Equity Asset Class –

Many retirees’ are overly cautious because they don’t have a lot of money and are afraid of losing it. Without an appropriate level of exposure to equity, you will likely need to save far more money to reach your long-term goals, leaving less room in your budget for anything else you want to accomplish.

Holding a certain amount of equity could potentially boost returns for that level of risk.  Ideally, you should bring down the equity component of your investment to protect the corpus and reduce risk as you approach retirement. However, it is equally important to invest a certain portion in equity. If you are too much conservative, then it will lead to losing the value of your money.

3] Underestimating Inflation Impact –

When it comes to financial planning, people usually ignore two things- the current time value of money and how money loses its value over the time. While we are focusing on increasing income with time, it is also essential to pay attention to the rise in expenses and drop in the value of money because of overall annual increase in prices of common goods and services behind the same.

Ignore inflation rate and you will notice that your savings gradually erode away while your monetary plans go haywire. Inflation is one of the most critical factors that can disturb your retirement plans. It is essential to factor in inflation into your retirement planning program. Also, realistic projections of future inflation rates are critical to building a strong retirement corpus.

For example, if a person needs Rs. 30,000 for monthly expenses right now, and considering 7% inflation, then after 25 years that persons’ monthly expenses would reach around Rs 1,60,000.

4] Buying Retirement Plans from Insurance Companies –

Insurance companies were not designed to fund retirement or provide retirement plans. Insurance companies were never meant to be an investment vehicle, and it’s certainly not the best way for retirement planning. While insurance companies make it possible to fund your retirement, there are risks involved as well as huge fees to consider.

So if not a retirement plans from insurance companies, then what?

If one is in your 30’s or 40’s, and has more than 20 years to go for retirement, invest the retirement investments into a mix of asset classes, that is equity, debt and maybe gold.

If one is nearing retirement, i.e. one is already in 50’s and have less than 10 years to retire, invest up to majorly into debt such as debt mutual funds and high yielding but safe corporate bonds, keep small portion into equity to make the portfolio a little aggressive, and the remaining maybe in gold.

5] Depending on Children for Retirement Needs –

No matter how well you think you know your children, money can make them unrecognizable in an instant. For that reason, it’s never safe to assume your children will be the same generous, giving types that they are today.

Your children may be unable to support you even if they want to. Handling your finances allows more privacy. You don’t want to be a burden to your children. You know your retirement needs better than your own children.

Retirees depending on children
6 common money mistakes during retirement years

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