As a middle-class Indian, navigating your financial journey can often feel overwhelming. However, understanding where you currently stand and taking intentional steps towards financial freedom can bring you closer to your goals. Below, we break down the 8 steps you can follow, based on Sampann’s financial planning framework. These steps will help you identify your position and guide you on actions to move forward with the Sampann app’s expert planning.
Step 1: Know Your Financial Condition and Life Goals
Before you can begin improving your financial health, it’s essential to understand where you are. This includes having clarity on your income, expenses, debt, and assets, as well as setting clear financial goals.
What You Can Do:
List all your sources of income, fixed expenses, and outstanding debts.
Create a simple budget using tools like Google Sheets or a financial planning app like Sampann.
Identify your financial goals, such as buying a home, saving for your child’s education, or retirement.
Why It’s Important:
A study revealed that 80% of middle-class Indians don’t have clear financial goals, which hinders long-term planning. By using Sampann, you can take charge of your numbers, making it the first step toward financial empowerment.
Step 2: Your Salary Covers Monthly Expenses Without Outside Help
Many families often rely on loans or family members for financial support during difficult months. To be financially secure, your salary should be enough to cover all your monthly expenses.
What You Can Do:
Track your spending for at least one month to see where your money goes.
Cut non-essential expenses like dining out, subscriptions, or impulsive shopping.
Set aside money for essentials like rent, groceries, and utilities at the start of every month.
Why It’s Important:
As per a survey by Economic Times, over 50% of Indian households live paycheck to paycheck, with little to no savings. Using Sampann, you can better manage your salary to ensure your monthly expenses are covered without falling into debt traps.
Step 3: You Have an Emergency Fund Worth 6 Months of Expenses
An emergency fund is essential to cushion unforeseen circumstances like medical emergencies, sudden home repairs, or job loss.
What You Can Do:
Calculate your average monthly expenses and multiply by six to determine your emergency fund target.
Open a Recurring deposit or a Liquid Mutual Fund for emergencies and start contributing monthly, even if it’s a small amount.
Avoid touching this fund unless it’s a true emergency. Sampann’s financial planning experts recommend automating your emergency savings to stay disciplined.
Why It’s Important:
According to a 2022 report by SBI, over 40% of Indian households don’t have sufficient savings to deal with emergencies. Having this fund will give you peace of mind and prevent you from taking on debt when life throws a curveball. And India's medical costs have been rising at the rate of 10% per annum, it is becoming costlier to deal with medical emergencies.
Step 4: You Have No Debt or Zero-Cost EMIs
Debt can weigh you down, especially if it’s high-interest debt from credit cards or personal loans. While certain debt like home loans may be necessary, clearing high-interest debt should be a priority.
What You Can Do:
Pay off high-interest debt first, such as credit card dues or personal loans. Sampann’s financial planning services can help you structure a debt repayment strategy.
If possible, avoid zero-cost EMIs for larger purchases and pay with cash wherever possible.
Avoid taking on new debt until you’ve cleared the old ones.
Why It’s Important: India’s household debt as a percentage of GDP rose to 37.9% in 2023, according to a report by RBI.
Step 5: You Invest 20% of Your Monthly Salary Towards Your Goals
Investing a portion of your salary is a key step to growing wealth over time. Rather than letting money sit in a savings account with low returns, investing in the right avenues can help you achieve your goals faster.
What You Can Do:
Allocate at least 20% of your monthly income towards investments like mutual funds, equities, or real estate. Sampann’s financial planning app offers easy access to mutual fund investments tailored to your goals.
Start with low-risk investments like debt mutual funds, and as you grow confident, explore higher-risk options like stocks.
Diversify your investments to minimize risk, and let Sampann guide your choices for optimal growth.
Why It’s Important: Only 3% of India’s population actively invests in the stock market, according to AMFI. By using Sampann and investing consistently, you can take advantage of compounding returns and achieve financial growth over time.
Step 6: You Can Quit Your Job and Live Off Your Assets
This step signifies financial independence. When your investments and assets generate enough income to cover your expenses, you have the option to live without working full-time.
What You Can Do:
Increase your investments in high-return instruments like equities, rental real estate, or a business.
Focus on building a passive income stream through dividends, interest, or rental income.
Keep your living expenses in check to make sure your assets can comfortably cover them.
Why It’s Important: Achieving financial independence doesn’t happen overnight. With Sampann’s financial planning tools, you can get closer to this goal, which allows you to focus on what you truly love—whether it’s travel, hobbies, or philanthropy.
Step 7: You Have More Money Than You Need
At this stage, you not only have enough to live off your assets, but you have more than you need. You can start focusing on wealth creation for future generations or giving back to society.
What You Can Do:
Consider estate planning to ensure your wealth is passed on to future generations efficiently.
Support causes you care about by donating or setting up charitable trusts.
Continue investing in growth areas like startups, tech, or sustainable businesses.
Why It’s Important: Many of India’s wealthiest individuals, like Ratan Tata and Azim Premji, have turned to philanthropy in the later stages of their careers. With Sampann’s planning services, you can achieve similar success and make a meaningful impact on society.
Step 8: Sampann – The Ultimate Financial Freedom
Reaching this step means you have achieved total financial security and independence. You’ve mastered saving, investing, and wealth-building, and can live a life free from financial concerns.
What You Can Do:
Work with Sampann’s financial planners to continue growing and protecting your wealth.
Use your position to mentor others in financial literacy and planning.
Enjoy your financial freedom by pursuing your passions and living life on your own terms.
Why It’s Important: Reaching this level is the ultimate goal of financial planning. Sampann helps you live a life of abundance, and more importantly, to help others on their own journey to financial freedom.
Conclusion
Share in the comments and take the next step towards your financial freedom today!
Sources:
Economic Times: "50% of Indian households live paycheck to paycheck."
SBI Research: "Household Emergency Fund Study 2022."
AMFI: "Investment Statistics 2023."
RBI: "India’s Household Debt Trends."
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