Can you believe a study found that nearly half of India’s elderly population relies on their families for income? Nearly 40% wish to continue employment!
Indeed, it’s true—and quite shocking! That’s the reality in India. Many people depend financially on their children and relatives, shedding light on a financial literacy gap.
Financial dependency refers to depending on others to meet financial needs. It might be temporary, like during studies or job loss. Or it can be enduring, as seen in marriage or retirement.
Financial dependence can be a blessing and a burden. It brings safety, comfort and ease, but also might bind your freedom, opportunities and abilities. Thus, breaking the chains of financial dependency is essential.
So, let’s understand what financial independence is, some financial independence tips, and strategies for financial freedom.
Understanding financial independence
As the name suggests, financial independence is a condition where you can meet your financial obligations without depending on anyone else. It means having ample funds, savings, and assets that cover your everyday expenses, desires, and unexpected events.
In other words, you can achieve financial independence when your finances are not tied to income from work or business or financial support from an external source anymore.
Becoming financially independent does not miraculously make you rich. Rather, it signifies having enough money for present and future needs. Additionally, it means you are in charge of your finances, deciding how to spend, save, or invest them.
Also, breaking financial reliance can help you achieve personal finance freedom, bringing more flexibility, security and happiness.
Why is there a need to stop financial dependence?
Today being financially independent is not just a preference, but a profound necessity.
Here are some of the factors that drive the need for financial independence:
- Rising costs of living: The price of necessities such as food, housing, and medical care is constantly going up. It becomes hard to afford them, especially if you are on a low or fixed income.
- Unstable economy: Our economy is unpredictable and uncertain. This makes relying on a secure and steady income tough. You could face a job loss, pay cuts, or fewer benefits at any time.
- Changing lifestyles: Lifestyles and wants are changing, particularly for younger people. Your desire for more freedom, options, and change, which may not align with a traditional lifestyle.
- Personal aspirations: Apart from that, you may need a lot of money to fulfil your aspirations, like buying a car, home, wedding, travelling, or retirement.
Is it hard to escape financial reliance?
Financial independence is not impossible to achieve. It only demands a lot of self-control, commitment, and perseverance. It also demands a shift of attitude, habits, and actions. It may require some patience, but it is certainly rewarding.
You must be ready to:
- Establish reasonable and clear financial objectives and monitor your improvement frequently.
- Plan your income and expenses and spend within your capacity.
- Save and invest your income and increase your wealth gradually.
- Decrease or eliminate your debt and avoid needless or excessive lending.
- Learn and enhance your financial knowledge and abilities.
Also read: How to live more with less: The art of mindful consumption
Why do people become financially dependent?
People become financially dependent because of many reasons:
Perspective:
Some people assume their money matters are consistent and will remain so. Thus, they never strive for change. Only those welcoming the potential of financial growth seek out legitimate methods to achieve it. It all starts with shifting your mindset.
Not enough earnings:
When your paycheck does not cover living expenses, depending on others financially becomes inevitable. Surviving long-term on a lower paycheck is impossible. Thus, people tend to depend financially on others.
No savings:
When you have no savings, you may face a financial crisis when a money problem arises. And they always do. You depend on others when you seek financial help. Sadly, some people who help you treat you badly or make your life miserable when you cannot repay them.
Job loss:
Job loss is the primary reason why grown-ups rely on others financially. When their cash flow dries up, they turn to others for day-to-day financial support.
Fear:
Financial fears lead to dependency. This fear, painting a bleak future, discourages you to change. It sparks fear of a pointless life. That fear forces you to financially depend on others for your well-being.
Must read:Breaking free from financial procrastination: Empowered money management
Breaking the chains of financial dependency
Though people are financially dependent, there are many ways which can help them escape financial reliance or break the cycle of money dependence.
Here are some strategies for financial freedom or financial self-sustainability:
Emergency fund
An emergency fund is a safety net fund that you set aside for any urgent or unexpected expenses that may arise in your life. These expenses can be related to medical loss, job loss, or car repairs.
Having an adequate emergency fund will ensure that you don’t need to borrow money or dip into your savings or investments when such situations occur. This will bring you independence from financial struggles.
Adequate insurance cover
Insurance acts as a shield that protects you from any unpredictable events, like death, fire, illness, injury, theft, etc. Having enough coverage means you will have sufficient money to bounce back and continue life as usual.
Savings and investment
What is the way to enhance your wealth and meet financial goals? Save and invest. Invest your money into numerous assets like bonds, stocks, or mutual funds. This can bring extra income or increase in value over time.
Further, saving and investing regularly can increase your income, expand your net worth, and make your financial future safe. Thus, helping you in achieving economic independence.
Also read: Investing on a budget? Top low-cost investment options to consider
Retirement planning
It is the process of preparing for your life after you stop earning or working. It involves estimating how much money you will need to maintain your desired lifestyle and how you will get that money. Retirement planning helps you relax and enjoy your golden years without money worries or stress.
Bottomline
Want personal finance freedom? To escape financial reliance, you need to consider some essential aspects, such as emergency funds, insurance, savings and investment, and retirement planning.
Remember, financial independence is not a destination but a journey. It is a lifelong process. It is not a gift but a choice. It is up to you to make that choice and to take that journey. So, why wait, start now! Trust me, it’s worth the prize.
