Financial Independence Day

If you are reading this, I am sure you wish to become financially independent some day. You might have been secretive about this dream of yours, but given a chance you would be the first one to get out of the rat race. 🙂

Now financial freedom means different things to different people.

Being independent mostly means not depending on another’s authority. Or you can say that when you’re financially independent, you work because you want to and not because you have to.

And that is what I like about this concept.

To bring in Charlie Munger’s words in the context:

Like Warren, I had a considerable passion to get rich, not because I wanted Ferraris – I wanted the independence. I desperately wanted it.

Personally speaking, I want to become financially independent much before 60. And if I get it right, it should be done by early 40s.

Am I close to it? Not yet.

But I am working towards it.

I know I need to be smart about handling money. But not too smart.

I need to think differently most people. But not everytime (and not just for the sake of being different).

I know that by simply avoiding making stupid mistakes and being lazy enough to stay on course, I can reach the goal.

But is there a guarantee?

No there is not. I cannot control everything.

But I am trying and I am optimistic about it.

Many people think that being financially independent and retiring are one and the same things.

But you can be financially independent and not retire from active work. And that is what I am aiming for. I don’t want to retire but I want to be financially independent.

Now there is a well-followed blog named ‘Early Retirement Extreme’. And if I remember correctly, the author has written that one can retire very early (even in 5 years) if you can save more than 75% of your take-home pay each month for about 5 years!

Now I can’t do that. Seriously. 🙂

Don’t wanna retire like that.

I would rather delay my retirement financial independence… 🙂

As I said, this is not what financial freedom means to me.

Being financially independent is not enough. There is more to life than just hoarding money for years, to spend it when I am old.

And life will not wait for me till I achieve my financial freedom.

So I am better off balancing my desire for financial freedom with that of living a decent and fulfilling life.

And to be very honest,

I don’t want to choose between Life and Money. I want both. 🙂

So how do you go about finding your own financial independence?

Will it work if you just read an article or two on say How to Become Financially Independent in 5 or 10 Years? Or if you used some checklist, early retirement planning calculator or financial independence calculator?

These steps will no doubt be a good start.

But that’s it. These are just….start(s).

And there is a lot more to be done.

The biggest challenge of adopting such an enormous goal (like achieving financial independence) is that the only way to actually achieve it is to change your mindset. And as this article puts it,

That can be a difficult transition. When you commit to saving a major portion of your household income each year, you’re choosing to live in a way that’s likely significantly different than how you were raised and also significantly different than how the vast majority of [people] live.

And the author goes on to put out 9 strategies to change your mindset:

1. Spend Time Thinking About What You Want Most from Your Life as a Whole
2. Spend Additional Time Thinking About How Your Daily Choices Work Toward That Life
3. Learn How to Separate Needs and Wants
4. Separate Your Desires from the Desires of Others
5. Research All of Your Purchases
6. Take Your Time and Be Patient (Financial independence is all about the long term. It’s about patience. It’s about taking your time. It’s about being willing to move slowly toward something big that really matters instead of moving quickly toward something small that doesn’t matter as much.)
7. Educate Yourself Daily
8. Maximize Appreciation of the Free Things in Life
9. Build Reinforcing Relationships

And these are not easy changes. Read them again and you will know why.

Now lets come back to the possibility of retiring early in India.

Can it be done?

Yes. Ofcourse.

Can I prove it?

I can’t.

But you can chose to believe me when I tell you that two of my friends have already done it. One is 33 and other is 38. Younger one got lucky and the older one was super smart with money (took risks that paid off).

Then there was this guy I wrote about few years back. He was unhappy, busy and never gave much thought to early retirement planning or thinking how much money was needed to retire at say 45. But one smart decision and he had enough money to retire. And that is what he did. He is doing well now.

Want another example?

I have it – a financially wise reader accumulated tons of money by following a simple, disciplined and powerful investment plan.

So there is absolutely no doubt that it can be done.

Just few days back, another friend of mine asked me a question.

How much do I need to retire early in India?

Now there is no one right answer to this. And I told him this and that his ‘how much’ would be very different from my ‘how much’. 😉

Every person will have his/her own number and it has be worked out mathematically and very very carefully.

As our discussion on the topic progressed, he confided about his poor state of finances. And this friend of mine is earning Rs 25 lac+ annual package. And without getting into the details, I will say that he has totally messed it up. (He now even wants me to now help him put his finances in order professionally….)

So I bluntly scolded him – that inspite of earning so well, he would be unable to retire even at 60 if he continues doing what he does with his money.

So ideally, he has no right to even think about retiring early for now.

Having not even created an investment plan to retire at 60, he was asking how to make the exit at 40. It was ridiculous.

I told him to become realistic and atleast put in place a simple investment plan and stick to it. Once that is achieved and his finances are under control, only then should he even think about early retirement (or financial freedom or financial independence)

Suggested Reading – Jonathan Clements’ decade old article (in Wall Street Journal) on how to know whether you are in control of your finances or not – Your Finances Are Under Control When …

I am not suggesting that everybody aim for financial independence. Some people are just better off and more comfortable working in a routine-heavy day job.

But there are a few who are quite capable of taking an aim at financial freedom. And even if they fail, it won’t hurt much. They will in any case be able retire at 60 (when generally everybody does).

So such people should think about it.

All they need is to take the first step. And rest everything will fall in its place with time…

Here’s a small suggestion to ponder over this Independence Day weekend.

Take some time to come up with a day (or year) you want to become financially independent.

Declare it as your…

Financial Independence Day.

Or call it whatever you like – use F words if you like 🙂 (for example – F***-the-day-job Day).

Just do this.

Once you have done that and if your desire for achieving financial freedom is really strong, you will take steps to understand how to achieve it.

You will start asking the right questions. More importantly, you will start looking for answers. And that is what will take you eventually to your financial independence day.