What’s your Wealth Number for achieving financial independence?

-Nilesh D Naik, Head of Mutual Funds at PhonePe

A recently conducted Gen Z and millennial survey by Deloitte revealed that 71% of the Gen Zs and 78% of the millennials in India are confident that they will be able to retire with financial comfort. In contrast, only 41% of the Global Gen Zs and Millennials are confident of retiring with financial comfort.

So, are Indian Gen Zs and millennials better prepared for retirement than their global counterparts or is it just overconfidence? The fact that many Gen Zs and Millennials aspire to achieve financial independence in their 40s and 50s makes this question doubly relevant.

The reality is, in our country, while many people in their 20s and 30s aspire to achieve early financial independence, they hardly think of planning for it in a serious way. This is because it’s a goal that is at least 15–20 years away for them and most people don’t think beyond 3–5 years, when it comes to financial planning.

Getting started with your plan to achieve financial independence

If you belong to Gen Z or millennials and are serious about achieving financial independence, the best way to do so is to plan well in advance. And the first step in this planning is to know your Wealth Number, i.e. the amount that you would need when you attain an age at which you wish to achieve financial independence.

Here are three simple steps to help you estimate your Wealth Number

1. Decide the age at which you would like to achieve financial independence. Given a choice, everyone would wish to achieve this milestone in their 20s or 30s. But that’s not realistic unless you inherit huge family wealth. So, be realistic in your aspiration.
2. Imagine you were of that age today, and estimate what would be your approximate current annual expense. If you are currently not married or do not have children, but plan to get married and have kids in future, you need to estimate expenses after accounting for such lifestyle changes and related expenses. Also, your yearly expenses should factor-in your spend on holidays, insurance premiums, kids’ education expenses, medical expenses, gifting expenses and so on.
3. Finally, you can refer to the table below to find out your Wealth Number to achieve financial independence. You can simply refer to the cell that corresponds to the row with your current age and the column having the age at which you wish to achieve financial independence. That’s the amount in Lakhs that you will need for every ₹ 1 Lakh of annual expense.

Ready reckoner: Know your Wealth Number for achieving financial independence

For example, if your current age is 32 and you wish to achieve financial independence at the age of 50, you would need approximately ₹ 73 Lakhs for every 1 lakh of current yearly expense. So if your current yearly expense is ₹ 6 Lakhs, you would need approximately ₹ 4.36 crore (73 lakhs X 6) at the age of 50 to achieve financial independence.

Now that you have taken the first step of figuring out your Wealth Number, you can embark on your journey to achieve financial independence with greater confidence.

Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully.

PhonePe Wealth Broking Pvt Ltd (“PPWB”) is an AMFI-registered Mutual Fund Distributor having ARN — 187821

This communication is a part of the investor education and awareness initiative of PPWB.