Find out how financially independent you are with this 10 question checklist

This Independence Day instead of reiterating the importance of independence 71 years ago, let us introspect and contemplate if we are really independent today?

Have we become independent from our superstitions and beliefs, from societal mind blocks, independent from discriminating on the basis of their caste, gender or social standing?

Independence is a state of mind. It can have a different meaning for everyone and cannot be readily quantified.

Financial independence is one of the essential components of being independent - be it a country or an individual.

If you plan your finances properly, you can help your family gain the much-needed financial security and independence.

Here are ten things that will help you ensure your family’s financial freedom.

Are you 10 on 10 yet? Find out now.

1. Do you have any bad loans?

Credit cards loans and personal loans are considered as bad loans. The reason is that these loans don’t give you any tax benefit, hamper your credit score if you delay paying them and have very high interest rates.

So, try and get rid of bad loans as soon as possible. Don’t default on them and incur high interest charges. Pay them off! As early as possible!

Do you carry the baggage of a bad loan?

If the answer is no, you score 1 point.

2. Do you maximise your Income Tax savings?

Do you invest INR 1.5 lacs in tax saving investments like PF, Tax Saver Mutual Funds etc under section 80C every year?

Do you claim deduction on your (or your dependent parents’) health plan premium?

If the answer is yes for both, then you get 1 point. If it is yes only for one then you get 0.5 points otherwise 0.

Though your income is taxable, there are various avenues using which you can save tax. Using the tax-saving deductions prescribed by the Income Tax Act, 1938, you can considerably lower your tax liability. Read more about saving on your income tax bill here.

3. Have you automated your bills (and investments)?

All utility bills can be automatically paid, i.e. telephone bills for the entire family DTH bill, WIFI bill, Gas connection payment, electricity payment, water bill payment, etc all can be linked directly to your bank account or debit card and be paid automatically.

This is one the best recommendations which is often ignored by many. You should automate your bills as much as possible so that they get paid directly from your bank account before the due date.

This would reduce the hassle of remembering to pay the bills on time and then paying a late fine. It will also prevent the situation where you have spent the money and need to borrow in order to cover your bills.

Similarly you should also automate your monthly investments via an auto-debit mandate (NACH) so that you don’t skip it in favour of other random expenses.

Have you automated all your monthly utility bills and investments?

If the answer is yes, you score 1 point.


4. Do you have an emergency fund?

Having an emergency fund for a rainy day is of extreme importance. It will help you tide over any financial emergency without having to borrow money or having to disrupt your long term goals.

It can also help you give the necessary buffer when you plan to switch jobs.

Generally you should have about 4-6 times your average monthly expenses in an Emergency fund that can be easily liquidated.

Do you have 4-6 months of your average monthly expense in an Emergency Fund?

If the answer is yes, you score 1 point.

5. Do you have adequate term insurance?

Life insurance is meant to provide financial security for your family in case you die. The cover should be enough to meet your family’s lifestyle expenses for their entire life and major expenses like children’s education without having to compromise their current lifestyle.

For this, a term insurance plan is a must with a sum assured of about 10-12 times your annual income or your family’s annual expense.

Do you have an adequate Term Insurance Plan for your family?

If the answer is yes, you score 1 point.

6. How retirement ready are you?

Retirement is one thing which is always given the least priority when you are fit and in the prime of your career. Who thinks about retirement when you have so many other things to plan for?

As per AEGON’s Retirement Readiness Survey for India, which measures how retirement ready Indians are, only 42% are confident of achieving their target retirement income.

Are you among the other 60% individuals who are not ready for meeting their expenses post retirement?

Keep in mind that your expenses post retirement will be much higher than what they are today because of inflation (roughly 3x in 20 years). You may think 1 Cr is enough to retire today, but the purchasing power of 1 Cr after 20 years will be equivalent to today's 33 lakhs only.

Hence, experts say that retirement planning should begin from your early 30s so that by the time you retire, you have sufficient corpus at your disposal to take care of your retirement expenses.

Have you planned for your retirement fund according to when you want to retire and how much money would you need then?

If the answer is yes, you score 1 point.

7. Are you investing according to your goals

Most people take a very myopic view of their investments. Investments are done on an ad-hoc basis without a goal in mind with a “let’s see how it goes” attitude.

If they get returns in a year or so they continue investing otherwise they discontinue only to be drawn in during the next market boom. Rinse and repeat.

One should just accept that markets will go up and down and returns will only be secured in the long run.

Plan your investments according to your financial goals - short term goals need to be planned differently than long term goals.

Mixing them all up results in riskier, un-coordinated investments which leads to constant worry and knee-jerk market based decisions.

Investing according to your goals according to your risk profile with an annual review is the best approach.

So, are your investments linked to your financial goals or are they ad-hoc market driven?

Yes/No/Not Fully

If the answer is Yes, you score 1 point. If it is Not Fully then you get half a point otherwise 0.


8. Are your investments tax-efficient?

Tax-efficient investments are those which not only give you good returns pre-tax but also have lower taxability.

If you invest in a product where you need to pay a lot of tax at the time of redeeming the amount, then the entire return on investment can be lowered. So, you need to calculate your post-tax yield and then choose the investment products accordingly.

For example, investments in debt mutual funds are more tax efficient than bank fixed deposits because in debt mutual funds indexation benefit can be availed after a holding period of 3 years and there is no TDS. Read more about the advantages of debt mutual funds over FDs here.

So, are most of your investments tax efficient?
Yes/No/Only Some

If the answer is yes, you score 1 point. If only some of them are then you get half a point otherwise 0.

9. Educate and share information with your family

Are your investments spread across several different accounts that it is difficult to keep track of them?

Can all of them be accessed online or by your family members in time of need?

If not then you need to consolidate your investments and make them accessible online. Then sit with your family and share information with them regarding your investments and how to access them in case you are not around.

Your family should be aware of your investments so that they can use it when you are unwell or not around to use it yourself.

Do you have an easy way to access all your investments and have shared the relevant information with your family?

Yes/No/Not Fully

If the answer is yes, you score 1 point. If Not Fully then you get half a point.

10. Have you made a will?

Last but not the least, a will is really helpful in sorting your assets when you are not around.

This might sound a little far-fetched to you especially if you are middle-class individual not owning huge chunks of assets and property in your name but it is really really important.

It prevents misunderstandings between family members and so is highly advised.

Have you made your will?

If the answer is yes, you score 1 point.


Red Zone (total score 0-5): You need to give a serious thought to your financial planning before it is too late.

Yellow Zone (total score 6-8): Not bad. You have started the journey towards Financial Freedom for your family. A little more planning can put you in the green zone.

Green Zone (total score 9-10): Kudos! You are doing a great job! Keep it up!

Here is a cheat sheet for you to keep for yourself or share with your friends and family:


So, how well did you score on the Financial Independence checklist?

I am a 9. 😎
Haven’t made a will yet. Must get to it soon enough!

Let me know your score in the comments below and what you are going to do to improve it.

Also, if you need any help improving your score, feel free to ping us on chat or schedule a call with one of our advisors (for free). :)