Wealth Guide: 5 Golden Rules of Financial Planning for Retiring Early in Life

Financial freedom is generally defined as “a state in which an individual or household has sufficient wealth to live on (maintain a predefined lifestyle) without having to depend on income from any form of employment.

Over the past few decades, views on financial freedom have also changed over time. For our previous generation, i.e. parents, grandparents – financial freedom meant saving for retirement and leaving a pot of savings for children or grandchildren.

Increasingly for millennials, financial freedom now means achieving financial independence early, then having the freedom to follow their calling – experimenting with a start-up, traveling the world, or enjoying the second half of life online. company of their loved ones. .

As Margaret Bonnano said, “To be rich is to have money; to be rich is to have time”.

Devang Kakkad, Associate Director – Wealth at Equirus points out that financial freedom is achievable if we follow a few golden rules of financial planning:

1. Define financial goals:

Simply put, do the math – consider building a retirement plan while being mindful of maintaining/improving your current standard of living and future inflation.

The easiest way to calculate your required retirement corpus is to arrive at your current monthly expenses and extrapolate the same over the next 20-30 years while keeping inflation in view.

Once you’ve arrived at a number you think is reasonable, it’s time to analyze your current savings and investments and figure out how much extra money you’ll need to generate.

Once you know the corpus you should be aiming for, you can then decide on the best savings and investment avenues available to you.

2. Asset Allocation:

The long-term financial goal is best achieved by following a disciplined asset allocation strategy. An ideal long-term portfolio involves a combination of multiple asset classes such as stocks, debt, real estate, and bullion.

The weight allocation for each asset class should be based on your risk appetite, time horizon and long-term financial goals.

In addition to the multiple asset classes, the diversity of products within each of these asset classes is equally important. Each asset class includes a wide variety of sub-asset classes, for example, a sub-asset class within stocks will include large companies, small companies, growth funds, global stocks, among others.

To arrive at an effective asset allocation strategy, investors must begin building a portfolio with a clean sheet of paper and a total investment corpus in mind.

In practice, many individuals/investors already have accumulated investments and may tend to alter their asset allocation strategy to justify their existing investments.

Therefore, the role of financial advisors is also important while deriving the asset allocation strategy.

3. Benefits of asset allocation:

A well-thought-out asset allocation strategy helps investors build a portfolio that closely matches their future return expectations/financial goals while minimizing risk and volatility in overall portfolio return.

The asset allocation strategy also helps investors benefit from the diversification achieved by investing in various asset classes. There are always periods of relative outperformance between different asset classes.

Since asset classes are not perfectly correlated or, in a few cases, inversely correlated, investing in different asset classes helps investors benefit from them in the long run.

4. Periodic review and rebalancing of your investment portfolio:

Regular portfolio reviews help investors assess the performance of their investments against the benchmark as well as the expected returns.

Regular portfolio reviews also help investors rebalance the portfolio as necessary to maintain the desired asset allocation, if the weight of an asset class has increased or decreased due to market movements.

5. Set up your Systematic Investment Plans, commonly referred to as SIPs:

SIP helps instill a disciplined approach to saving and investing. This basically means investing a small amount of money on a pre-set date (say the 1st of every month) in specific mutual funds.

Conceptually, SIP is the most proven and sustainable way of investing. It offers perhaps the most disciplined way to invest in equity and debt markets.


In conclusion, financial freedom is largely determined by achieving the desired corpus of investment. Asset allocation is the first step towards building a long-term portfolio aligned to achieve the investment corpus.

Once the asset allocation has been decided, investors should consider building their portfolio gradually.

Investors should actively evaluate investing through SIPs to increase their exposure to the equity/debt market and to build their long-term corpus.

(Disclaimer: Opinions/suggestions/advice expressed here in this article are investment experts only. Zee Business suggests its readers consult their investment advisors before making any financial decisions.)