So, what does it mean to become Financially Free?

So, what does it mean to become Financially Free?

Dear readers, as I said in my last article, the most significant words that I have experienced since becoming an independent adult have been “Become Financially Free”. So, how did these words happen? And what do these words mean?

As I mentioned in my earlier post, early in our careers, (am talking about 1999-2000), like most people our age, we were merrily travelling along life’s highway, earning, spending and salting away a bit for the future, and ticking away at various “achievements” which were largely material acquisitions. But our middle-class genes also automatically built in some caution and I remember that we had started thinking about what should be the financial goal that we should be looking to build to “be comfortable”. At that time, the number “x” seemed both luxurious and unattainable and hence that was the number that we set ourselves a “target” to reach.

Of course, as a few more years passed by (by about 2005-6), the number started looking small! Not because our nest egg was getting closer to the number though, since we had continued to follow a fairly haphazard (in hindsight) approach to building wealth – a second house, some bit in the stock market, some insurance, etc. Just that “x” suddenly seemed both “within reach” and “not enough”. So, the target became larger (about “3x”) and we continued to earn and spend while saving up.

As we entered our middle years (around 2011-12) and our kids started growing up, life began to resemble a treadmill. Just that while the run in itself was enjoyable, the faster we went, the faster the treadmill also seemed to go and the ultimate destination seemed like a mirage. The target again started seeming “not enough”. That’s when we consciously decided to slow down the treadmill and asked ourselves a few questions.

  • What kind of lifestyle did we desire for ourselves and our children?
  • How much of a role should debt play in our lives?
  • What is really the corpus that we wanted to “be comfortable” for the rest of our life?

Our search for answers to these questions helped us fulfil our need for financial security as well as discover the concept of “financial freedom”. Essentially, Being Financially Free in the simplest way meant having enough money that one need not have to work for money for the rest of his or her life. That said, it isn’t as one-dimensional as that. Being Financially Free necessitates the following

  • Having enough money to ensure that all foreseen (and unforeseen) expenses are taken care of
  • Still having money post that to take care of all future events/milestones until one’s death
  • Making sure that assets are in the right form to enable one to live the lifestyle that one has planned for
  • Last but not the least, making sure that your money is invested wisely enough to ensure that it is not getting eroded by factors such as unplanned expenses, inflation, market cycles, illiquidity, concentration, etc.

This process also helped us recognize the fact that how much people go wrong in their understanding of money and their efforts to build wealth. And 2 reasons stood out

  • Underestimating the long term – both in terms of inflation as well as asset composition
  • Lack of direction – Building assets doesn’t necessarily build adequate wealth, unless one knows what are one’s milestones and goals

In our personal case, as we underwent and completed the comprehensive planning exercise for ourselves, we discovered that the “number” we were looking for to be “comfortable”, rather “financially free” was about “10x from the original number we started with, and that too in current value terms. We now know what is the number we are working towards, and we also have a clear understanding of what are our future financial milestones and how we need to plan for them.

As an aside, our personal experiences with money helped us set up Finwise, a firm that helps busy people achieve their financial goals, grow their wealth substantially and work towards financial freedom. In a way, we ourselves were our first “financial planning” customer!

I hope our story helps you understand what it means to “Be Financially Free”. Do let me know your thoughts at


Finwise is a personal finance solutions firm that helps people plan for their financial goals, follow their passions and achieve financial independence. For advice, please reach us at or +91 9870702277/9820818007.


Image credit:, shot by ab-dz

Why I will not be investing in NPS despite the removal of tax on withdrawals!

Why I will not be investing in NPS despite the removal of tax on withdrawals!

National Pension Scheme is not as popular as the government would like it to be. In order to make it on par with other investment options, changes have been made constantly and the latest was announced last week.  The biggest and most talked about change is that now NPS enjoys fully EEE status where it was earlier partly EEE and partly EET.


EEE (exempt, exempt, exempt) essentially means there are tax exemptions (up to specified limits) available while you invest, the capital appreciation when you stay invested is exempt from tax and there is not tax exemption when you withdraw.


At this point, a quick recap on how withdrawals from NPS are treated currently will help.  It is compulsory to invest 40% of your accumulated corpus in an annuity scheme which gives you pension. The remaining 60% can be withdrawn after you attain 60 years of age. Currently out of the 60%, 40% can be withdrawn tax-free while the remaining 20% is taxable.


Going forward, once the changes announced are implemented, the entire lumpsum withdrawal of 60% will be exempt from tax.  The pertinent point to note is that it is still compulsory to buy an annuity with 40% of the corpus and the pension received will be taxable. Therefore, EEE is only for the lumpsum withdrawals. While this is a welcome improvement, it is too minor to change one’s decision on whether to use NPS as a significant investment vehicle.


Taxation is evolving in recent years, as is evident with the long-term capital gains measure introduced for equity investments. I strongly believe that while it is an important factor, it cannot be the only factor in deciding on the vehicle of investment.


If you recall in my previous article I had said that I would not invest in NPS for several reasons, many of which are still applicable, hence my stand in principle remains the same. Let me recap the reasons why I would not invest in NPS, even in its improved avatar.


  • The corpus is locked in until one turns 60. I have come across numerous clients who want to retire as early as their late 40s. With NPS, your funds will not be at your disposal if you choose to retire early, the only option being to withdraw 20% of your corpus and investing 80% in annuity.


  • The annuity from NPS currently does not give good returns. It is possible to have an annuity with better returns through investments in mutual funds and if lack of knowledge is a constraint, one can engage a financial planner to help with the same. Compulsorily locking funds with the pension provider alongwith poor returns is a stiff price to pay for investing in NPS.


  • However, there is a possibility that one could still consider investing to the extent required for extra tax savings of upto Rs 50000 per year, given this change.


Lastly, if you are a central government employee, you can cheer some of the other changes like increased contribution by employer (Govt.), etc. While you stay invested, choose your asset allocation wisely and keep track of it regularly to make the best of the situation.


Finwise is a personal finance solutions firm that helps people plan for their financial goals, follow their passions and achieve financial independence. Please reach us at or +91 9870702277.