Financial independence – A moonshot for the younger gen?

“FIRE is what I desire!” says a young Gen Z, when we asked them about what big financial goal they wanted to achieve in their life

For the uninitiated, FIRE is an acronym for ‘financial independence, retire early’. What FIRE essentially means is making your finances stable so that you can be independent and be able to retire early.

Sounds like a cool concept right? A “yes” from my end! However, for Gen Zs, who believe in living today and splurging on experiences, is FIRE a moonshot?

Not exactly, especially, if you as a Gen Z or millennial, focus on creating a robust financial plan that’s built on investing and risk mitigation. Let’s look at these two components a bit more closely.

Investing is when you use your money to make more money, it’s like your money is working for you. You can invest in a variety of ways, such as buying stocks or putting money in mutual funds. It all boils down to your comfort zone. A small pro tip from my end: ensure diversification.

The second, and sometimes a part that many people may tend to skip, is to have a financial back up. Have you ever thought what would happen if a sudden hospitalisation comes your way or if you suddenly pass away?

An unexpected illness can wipe you out of your savings to a large extent. And your sudden demise, oh well, can leave your near and dear ones in a financial crisis.

However if you have done your financial planning well, both these risks can be mitigated. I suggest start with buying health insurance (for hospitalisation and critical illnesses) to ensure your goal of FIRE is not derailed. Select a plan that meets your needs.

Another must-have is Term insurance. It’s affordable, simple and gives you the peace of mind knowing that your loved ones will get a payout if you pass away during the policy period. You can further customise your term plan by adding benefits which can again ensure your goal of FIRE doesn’t go off trajectory. Sounds complex?! At KlarifyLife (an education and awareness initiative of HDFC Life), we have made it our mission to demystify Term insurance for Gen Zs like you so that you can make an informed decision and secure your loved ones.

But remember this, to have a solid financial plan, you have to save first! You can start-off by not living beyond your means and trying to save each month and make sure this amount increases y-o-y. A few other useful tips:

1. Be consistent in your investing journey

2. Stay put (don’t withdraw investments unless there’s an emergency)

3. Optimise taxes (a penny saved, is a penny earned)

4. Start early (leverage the power of compounding)

5. Revisit your health and term insurance covers (don’t be underinsured at any point of time)

So, summing up, young guns, buckle up! Balance is the key. While it will require conscious efforts from your end, the goal of FIRE is pretty much achievable.