At its simplest, Financial Independence means “having enough money so as to never work again for the rest of your life”. But as you would agree, neither is life simple, nor is it as predictable and straight-forward as one would like it to be. This effectively means that as you go along your life journey, your definition of what Independence means keeps changing as your goal posts keep shifting.
That said, it is not rocket science, and it is something that everyone should aspire towards, not just for the financial security, but for the mental doors that it opens for you when you discover that you are no longer working for the money.
Based on our journey, I share with you below a few simple principles that you can follow to get onto, and stay on this path. But beware, what is simple to understand is rarely easy to do, and requires discipline, patience and the ability to say no to your ego.
In the past weeks, the 32nd Olympics, Tokyo2020, provided the world with sporting excellence and entertainment on display across a range of disciplines. For avid sports fans, these two weeks were exciting days, merrily switching live-streams across events as diverse as hockey, gymnastics, track & field, badminton and golf.
While there were winners, we discovered there were many more heroes, some whose names we heard for the first time, but will remember for long. The Olympics provided some memorable moments but also lots of food for thought. Here are a few observations, particularly pertinent in these raging bull markets.
In the last few years, we have experienced two changes that are here to stay – One, the average investor is getting younger. And two, the investing process has moved to being fully digital.
These two factors, combined with the new-age confidence that today’s younger generation possesses, has led to more and more investors seeking to invest on their own. Or as it is known popularly, DIY (Do-it-yourself).
That said, investing in markets is fraught with risks, and understanding those risks and preparing for them is a critical pre-requisite for both creating and protecting wealth. Hence having a laid-own process with key steps to follow will help DIY investors have a guide-map to reach their objectives as well as guard-rails to ensure that they don’t fall off in the interim.
In the last few weeks, sports fans have been treated to some exciting and memorable sports events – the French Open, the WTC final and now the Euro. These three sports are completely contrasting in the way they are played, in the intensity of the games, the importance of the team vs the individual as well as the interplay between the players and the coach.
Our latest article, published in Moneycontrol talks about what can we learn from these sports specifically on the last point above, that we can apply to how we manage our money.
My recent article was about how just like we frequently do a stress test as part of our regular health check-ups, we also need to periodically “stress-test: our personal financial health to check preparedness for financial calamities.
While many of us thankfully may be financially secure and prepared for calamities, we nevertheless can still do better when it comes to taking money decisions. And there are enough practical life situations around us that we face (or observe) that we can learn from on how we can take our money decisions better.
While we might feel that we are good at taking money decisions, how good are we really? The best way to learn is from our own experiences and the last 12 months will have given you plenty of them to learn from! So, give this “practical exam” to learn how good you are with your money decisions.
While we make extensive plans for most eventualities, something suddenly happens that takes us by surprise and throws all our plans haywire. Take the last 12 months itself as an example.
In a way, we live our lives largely assuming things are going to be peaceful and are usually well prepared for peace-time events. We do make our plans and are prepared for some surprises, but it is when “war-time” strikes our lives that we suddenly find ourselves head under water and gasping for breath.
Such times are also the best time for us to learn about our resilience, our capabilities, our strengths & weaknesses and give us the best clues about what to change about ourselves, hopefully before the next “war” hits.
So, what are some of the “war” situations that has struck your life and how prepared were you? And how can one be better financially prepared for when “wars” strike?
Read our latest article, published on Moneycontrol.
As we get into the second quarter of 2021, life seems to have come full circle, as they say, and we seem to be well into a 2.0 version of last year. But just a few weeks back, the memories of 2020 and the troubles wrought by the pandemic seemed distant and fading. Life had more or less returned to normalcy in most parts, and people seemed to be mingling as though social distancing was a bad dream.
While the memories of last year seem short-lived, I have a different view on this – keeping the experiences of the last 12 months alive in our memories and better still, taking actionable insights from it to prepare for the future, may be one way of being safer and more secure in a future increasingly turbulent and uncertain. So, as we go into a vicious relapse, it may be prudent to quickly assess how each one of us fared during those stressful times.
Most of you would have heard of a “Stress Test”. In personal health, a stress test assesses the state of your overall fitness and particularly your heart. Simply put, a stress test simulates the health and strength of any system that you wish to test, through appropriately designed procedures. Similarly, one can design a stress test to check how prepared one is financially to endure a financial crisis, like what happened in the last few quarters.
Answering this simple six question test below will be a rudimentary yet effective way to check how healthy your personal finances are. Our latest article, published on Money9.
Our behaviors towards money and the money decisions that we make at various junctures in our life are influenced by our experiences at a formative level, right from childhood.
Am sure that this comes as no surprise, after all, money experiences are also a part of the various influences that form us through our life. Where I see a bit of a twist is that while my family was a fairly orthodox one, the women in the family were curiously still quite involved, and to some extent, even dominant, in some of the money decisions that were taken.
A friend was talking to me recently about an interaction he was having with some others, where there was a furious debate on about where to invest, as well as which asset classes including geographies would deliver better returns going forward. As you would agree, this particular topic of debate is not uncommon at all and today’s information-empowered world has led to both more aware investors as well as more confused investors.
Investors usually seem overtly focused on “returns” and are always keen to know where to put their money next. This is especially so during a bull market, and when the recent past has given very good returns. But, excessive focus on returns is usually a function of “not enough focus” on a few other important yet ignored aspects. Focusing adequately on these other aspects leads to enough and more clarity on which asset class an investor should choose and what “returns” the investor should expect going forward.
Are real life situations and financial decisions assessed for risks in a very similar way by investors? There are parallels but they are not always handled similarly. Here are some anecdotes with some pertinent personal finance lessons, that helps us understand the differences in the choices people make in real-life situations, vs managing their money.
Read our latest article, published on Moneycontrol.