Financial Planning
Escape the 9-5 by 45: Your financial freedom game plan
Dream of early retirement? Discover smart tips and tricks to achieve financial freedom by 45.
Key takeaways
- Set clear financial goals, budget wisely, and save aggressively to build a strong foundation.
- Invest smartly across diversified assets and build an emergency fund to stay financially resilient.
- Increase your income, manage debt responsibly, and protect your wealth with Insurance to stay on track.
Imagine waking up every day without worrying about money. You don’t have to depend on your salary to pay your bills. You have enough money to live life on your terms. Well, that’s financial freedom! Achieving financial freedom by 45 might seem challenging, but with careful planning and effort, it may be possible. If you want to learn how to achieve financial freedom by 45, then read on.
Here are some tips you can follow if you want to know how to obtain financial freedom:
Set goals
Start by setting clear and specific financial goals. Ask yourself:
- How much money do I need to retire at 45?
- What kind of lifestyle do I want?
Now, calculate how much money you need to invest, starting from your current age.
Create a monthly budget
Begin by creating a monthly budget to plan how much you require to pay your bills and for savings. You can follow a simple process- the 50-20-30 rule. As per this rule, you can allocate your income as:
- 50% for needs like food, utilities, rent, etc.
- 30% for wants such as travel, shopping, entertainment, etc.
- 20% for savings and investment.
To reach your financial freedom faster, consider increasing your savings and investment budget. This can be achieved by reducing expenses in the other two income allocations.
Save aggressively
Saving is the first step to financial freedom. So, how to achieve financial freedom by 45? Well, you need to start as early as possible! The earlier you begin, the more time your money gets to grow. You can set up automatic payments to help you save diligently. However, it's important to monitor these payments regularly to avoid potential issues.
Invest wisely
Savings alone would not help you attain financial freedom; you also need to invest your saved money wisely. Diversify your portfolio by investing in different investments such as:
- Stocks
- Mutual Funds
- Bonds
- Fixed Deposits
- Public Provident Fund (PPF)
- Employee Provident Fund (EPF)
- National Pension Scheme (NPS)
- Real Estate
- Gold
Case study: How Rajeev built ₹1.5 crore corpus through SIP
Rajeev, a 28-year-old software engineer, wanted to achieve financial freedom early. So, he began investing aggressively with ₹10,000 per month in an equity mutual fund through a Systematic Investment Plan (SIP). He expected his investment to generate an average annual return of 12%.
Rajeev stayed disciplined and didn’t stop his SIPs during market dips. As his salary grew, he increased his SIP amount by 10% every year. This way he stayed invested for 17 years. So, by the time Rajeev turned 45, his mutual fund investments had grown to approximately ₹1.5 crore.
Case study: How Sunil built ₹3 crore corpus through SIP
At 28, Sunil, an IT professional, set a bold goal—to achieve financial freedom by the age of 45. He committed to investing 40% of his salary towards this dream. Starting with a monthly SIP of ₹25,000 in an equity mutual fund and increasing it by 10% every year, he aligned his investments with his growing income.
By staying consistent and earning an average return of 12% per annum, Sunil built a corpus of around ₹3 crore over 17 years. His story shows that early financial freedom is not just a dream—it’s a plan.
How he made it happen:
Early planning: He set his goal at 28 and gave his investments time to grow.
Disciplined saving: Stuck to his plan through market ups and downs.
Rising SIP strategy: Increased his SIP by 10% every year to match income growth.
Build an emergency fund: Life is unpredictable, and unexpected events can occur at any time. Events like a medical emergency, car repair expenses, broken appliances, or a job loss can affect your monthly budget. Having cash in hand can ensure you don't have to break your investments. Save at least 3 to 6 months’ worth of your salary as an emergency fund to help you manage such situations without stress.
Get Insurance
Saving and investing your money is not enough and It is also important to protect it and getting Insurance would not only shield your money but also cover your family.
Medical costs in India are rising at a rate of 14% annually. A Health Insurance can help cover hospital bills and medical expenses. It’s recommended to have a health cover of at least 50% of your annual income. So, if you earn ₹30 lakhs, a ₹15 lakh policy could be a good choice. However, you should have a minimum cover ₹5-₹10 lakhs, depending on your city, lifestyle, and medical history.
Term Insurance ensures your family is financially safe if something happens to you. Experts suggest getting a life cover of 10–15 times your annual income. E.g. if your income is ₹10 lakhs per year, you should have a Term Insurance of ₹1–1.5 crore.
Increase your income
If you are wondering how to get to financial freedom, income from a job may not be enough. You might have to look for other ways to increase your earnings. You can do this by upgrading your skills, switching jobs, starting a side business, or making passive investments.
Manage your debt
You must learn to use debt carefully. That includes all Loans that you take—from Home Loan to Credit Cards to Personal Loans. Focus on creating assets through your borrowing by using Loans to own a home or a car. Minimise borrowing for expenditure through Personal Loans or Credit Cards. If you do, ensure that you do not miss any repayments. At all times, maintain a good credit score.
Conclusion
Achieving financial freedom by the age of 45 can be possible with discipline and patience. Stick to your plan, save aggressively, and invest smartly. Avoid debt, build an emergency fund, and protect yourself with Insurance. With a focus on your goal and consistent efforts, you can create a life where money is no longer a worry. So, start your journey towards financial freedom by taking the first step today!
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
Mutual Fund investments are subject to market risk. Please read all scheme-related documents carefully. Axis Bank Ltd. is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Any purchase of Mutual Funds by Axis Bank’s customer(s) is purely voluntary and not linked to availment of any other facility from the Bank. This content is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future returns. Readers are advised to consult a qualified financial advisor before making any investment decisions. Terms and Conditions apply.
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