Celebrating Financial Independence
We have our experts this week showcasing importance of achieving Financial Freedom in this ongoing pandemic.
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Transcript
00:00 Hello and welcome back to our show. We are back with a brand new episode of this Investor
00:08 Education and Awareness Initiative of Aditya Birla Sunlight Mutual Fund in association
00:13 with your personal finance magazine, Outlook Money. This Sunday, we celebrate one of the
00:18 most important days of the year, a day that marks one of the most landmark events in our
00:22 country's history, the Independence Day. On this day that celebrates the idea of freedom
00:28 and being independent, we at Outlook Money and Aditya Birla Sunlight Mutual Fund choose
00:32 to take this opportunity to also celebrate the idea of financial independence and ask
00:37 some crucial questions as to how one can become financially independent in today's day and
00:42 age. And to answer these questions and share their knowledge and guidance with us, we have
00:46 some eminent guests, the veterans in the field of personal finance. In this episode, they
00:50 will tell us what financial independence means, how it is important, how one can achieve it
00:56 and what mistakes to avoid in your journey to become financially independent. Our first
01:01 guest today is Mr. K S Rao, Head Investor Education and Distribution Development, Aditya
01:06 Birla Sunlight Asset Management Company Limited. Mr. Rao, an alumnus of IIM Calcutta, has spent
01:11 over two decades in the mutual fund industry and in his current role, he leads his organization's
01:17 effort towards investor education and distribution development. We are also joined by Mr. Amit
01:22 Trivedi, author, speaker, trainer and blogger with over 26 years of professional experience
01:27 in capital markets. As a trainer, he has trained over 83,000 participants through almost 1300
01:33 workshops across 130 different locations in the country. And finally, we are also joined
01:39 by Miss Kiran Telang, a certified financial planner who is registered as an investment
01:43 advisor with SEBI. She is also a founder member of the Financial Planners Guild of India.
01:49 A subject expert on personal finance, Miss Telang has also authored a book on retirement
01:53 called Mindful Retirement. So all the insights would be great help to us to understand the
01:59 idea of financial independence. So let's get straight to it. My first question is for Mr.
02:03 K S Rao. Mr. Rao, we know that the last two years, 2020 and 2021 have been two difficult
02:08 years. Many people have faced financial hardships due to the unforeseen crisis that we have
02:12 been going through. However, this difficult period has also made people realize the importance
02:17 of financial planning. How do you see this period of the last 18 months in this context?
02:21 Thank you so much Vishal for having me here. I take this opportunity to wish all the audience
02:29 a happy Independence Day in advance. And as we are going to celebrate our 75th Independence
02:36 Day, it is a time today we thought when Outlook Money has helped us to reach out to each one,
02:43 how we can look at our financial independence. Probably, I mean, we don't need to wait for
02:48 75 years to come to us to get our financial independence, probably how we can plan. And
02:53 we are grateful to team Outlook Money for like month on month to getting us here and
02:59 talking to each one of you on various initiatives and the financial literacy per se. And Vishal,
03:06 I think you said rightly last 2020 and 2021. In fact, 2020 we were all looking at it is
03:13 going to be a wonderful year. And a lot of us had a vision 2020. But yeah, 18 months
03:20 of this pandemic, either we are in the lockdowns or preparing for the lockdowns and getting
03:24 out. And we may call it the new normal, but it has become very abnormal for many people.
03:30 We may call it the black swan event. But whichever the conversation we can say, it is a black
03:36 swan to the people, but it is impacted very much for them. And sometime back we had in
03:40 your forum, we said, I mean, no, we can't predict but we need to prepare. Some who prepared
03:45 over perfectly fine, but some got unpredicted and it has come all the way it has impacted
03:51 us. And it has taken us like on the personal finance. I mean, on the first on the physical
03:57 health, then on the personal finance. It has forced us to think and look at a fresh, wet
04:02 year finances and your healthy well-being, I mean, and financial well-being. And it has
04:08 brutally exposed the frugality of life. And many of them leave like, their assets and
04:15 everything without even a simple will. They have not left anything behind to the family
04:20 to claim it right. And that's a big challenge. And people would have been asset rich, but
04:26 they are, they've struggled for their liquidity. And it's like to arrange a hospital bills
04:31 for the top time. All that has forced people to think the financial planning very seriously.
04:37 And I had a privilege to have many sessions with Amitji and Kiranji. And, and we also
04:43 had an opportunity to talk to many people over a period of time. In fact, I mean, let
04:49 me tell you, I mean, at Aditya Birla, we just completed our 10,000 programs over the last
04:55 seven years, but during this pandemic, we did a little over 2000 programs, and 2000
05:00 webinars reached out. And I call this entire journey is a COVID to COVID. And it is a time
05:05 people to really waking up. And it is, it has given the people to understand why one
05:11 need to have a contingency fund, and what is the necessity of health insurance. However,
05:16 we can inform people in the normal course, we would have neglected, we would have postponed
05:20 on our insurance, urgency for the health insurance, and need for the life insurance. And I know
05:26 documenting all these things and keeping family aware of the finances has become again a necessity.
05:32 And last but not the least, and the mutual fund per se, it is asset allocation, SIPs.
05:38 And if you can see the number of SIPs have gone up in the last 18 months in the mutual
05:42 fund industry itself shows the people, they've woken up and it is good. And I'm sure this
05:49 topic of financial independence today, I mean, can make us all think not one goal, but can
05:54 we be independent? Can we be financially independent? Can we look for it? How we can manage I'm
05:59 sure you will be getting the best of the conversations from my both of my friends. And now it's how
06:06 this financial independence can look, it is it looks very difficult at this point of time
06:10 for many of us. But it is we can plan very step by step, it is possible, we all can become
06:16 financially independent. I mean, all that we can do is in this 15th of August, as we
06:20 celebrate financial independence, Independence Day, let us also celebrate some time with
06:25 our family, how we all together can become financially independent. And that financial
06:31 freedom can become a motto for all the family members.
06:35 Right. Like you said, you know, it might look difficult to be financially independent, but
06:41 you can plan for it. So financial planning, and financial independence are two words that
06:46 are closely linked, and we use them sometimes in the same sentences. So I want to ask Mr.
06:52 Mr. Alam, what exactly does financial independence mean? And how do you relate financial independence
06:59 with financial planning?
07:01 Yes, Vishav. So financial independence actually means different things to different people.
07:07 So if we take a generic definition of financial independence, it would actually mean that
07:12 you don't have to work to earn money, you have enough with you that will take care of
07:18 your requirements, both short term and long term. So your daily expenses, or you know,
07:22 things which you need for your goals for long term for your family. But the problem here
07:29 in financial independence definition for most people is how do they define enough? Because
07:34 for each person that enough factor will be very different. So somebody, you know, they
07:38 will be very comfortable if their basic needs are met. So if they have a, you know, amount
07:43 coming in every month, which takes care of their daily expenses, they'll be happy and
07:46 they'll be more, you know, free to pursue other things of interest. But for some other
07:50 people, there would be wants also, which they would like to fulfil. So aspirations like,
07:57 you know, holidays on a regular basis, or doing some charity work or other things which
08:02 each individual might have. So for each person, the definition would be something that they
08:08 need to come up with themselves. It would probably start from the, you know, clarification
08:13 of their own needs and wants. So like in last one and a half years in the COVID times, we
08:18 have basically been living with what are our essential needs, you know, so the expenses
08:22 have actually come down dramatically for most people. But that is not the way normal life
08:26 is. So once things come back to normal, we will start going out, we will start spending
08:31 on entertainment, on, you know, shopping of things beyond the essential needs, we'll
08:35 start taking vacations. So the expenses go up and that also forms a part of joy of life.
08:41 So how far do you want to go in, you know, accumulating the corpus when you feel that
08:45 you're financially independent. So each person will have to think for themselves, what is
08:50 the figure, so to say, that, you know, I am comfortable now, I have enough and I'm financially
08:57 independent. Right, right. So, you know, one common doubt that a lot of people have is
09:04 does financial independence only mean to have, you know, enough corpus so that your passive
09:09 income is enough to meet your expenses, right? So I want to ask Mr. Trivedi, does financial
09:14 independence have only to do with passive income? Or is it about earning enough, both
09:19 actively and passively so you don't depend on someone else for your financial needs?
09:22 So as long as we are defining financial independence, so let's go deeper into it. So what do you
09:27 think? You know, is it just about passive income or just earning enough so that you're
09:31 not dependent on someone?
09:34 So wonderful question Vishal. And a lot of times people think that financial independence
09:40 means you don't have to work. Entire expenses, financial goals and other needs are taken
09:47 care of through the passive income. It may not necessarily be that case. It actually,
09:53 you know, extends to what Kiran was just mentioning that passive income becomes quite important
10:00 in this case, but it also allows you the freedom to choose. What kind of work do you want to
10:05 do? What kind of work do you want to avoid? What kind of activities do you want to engage
10:09 in? What kind of activities give you joy or happiness? Now, if you make money in that
10:16 process, great, do that by all means. But it doesn't mean that you have to compromise
10:22 with your feelings, your liking, your values in order to make money. You're free to pick
10:29 up what you want to do. So financial independence allows you that freedom. It does not mean
10:37 that you completely stop working. Incidentally, there is a very popular concept known as FIRE,
10:43 financial independence and retire early. I was, one of the forums I was reading somebody's
10:48 experience and this person said that I became financially independent at 35 and then I decided
10:54 that I want to be asset light. So I don't want to own a home. I will travel across the
10:59 world. But in four years, I got fed up of this nomadic life. So it's important to be
11:08 very clear about what kind of life that you want to live and pursue bigger loftier goals
11:19 in life.
11:20 Right, right. So basically what you mean is that financially, being financially independent
11:25 is basically having the freedom to choose what you want to do and being able to do that
11:30 rather than being dependent on your job and just needing to do one particular kind of
11:36 work even if you don't want to just for your survival. So, but who has this luxury to become
11:41 financially independent? Can anyone aspire to become financially independent? Can a school
11:46 teacher become financially independent or does it have to be a person, a high income
11:52 earning professional who can aspire to be one? So who should aspire to become financially
11:55 independent? Can anyone do it? Mr. K S Rao, I ask you this question.
11:59 Thanks Vishal. I think it's everyone of us can aspire to become financially independent.
12:05 It is not that how much you have an income to, I mean, which part of, which stage of
12:10 life you are in, but all that, aspiration is one, everyone can have this. And it's like,
12:15 there was a study at Harvard school and it's one batch of the students, they did this study.
12:22 I mean, at the time, everyone in the Harvard business school, I think it's way back in
12:26 seventies and everyone said they want to become financially independent. They were talking
12:32 this much of it. And after 25 years, they went back and made this study and went back
12:36 with the questions to those people of the same batch. Then the facts, the statistics
12:42 which have come out is much more revealing. It's only 3% of the population they have interviewed
12:50 have accomplished their financial independence and rest of them, 40, 50% of them, they are
12:55 living paycheck to paycheck and majority of them have gone into the debts. Earlier Kiran
12:59 Amitji was telling, the moment we locked down is open. Now, most of us are going out. There
13:05 is a kind of like the shopping to the spending, it's the revenge spending they call. I mean,
13:12 now that the people are doing, that way aspiration you have, but aspiration should have a follow-up
13:16 plan. And me, Amitji, we were talking to a group of people, somebody who started at the
13:24 age of 25 and who started as little small savings and regularly without, you are stepping
13:29 up your savings, you accomplish your financial independence. Let me give my own story. When
13:35 I joined my first employment, it is like, I had a wonderful boss who had come back to
13:41 me and said, "Son, 12% of your money is deposited from us in the Provident Fund. All that you
13:49 need to do is, can you save another 12% from your side for your future?" And incidentally
13:56 at that point, we are not having this concept of SIP and step up SIP. Unfortunately, or
14:01 fortunately, we have to put the money only in the bank deposits. But still then, we got
14:06 that habit of disciplined savings. The moment mutual funds started SIPs and we started investing,
14:13 but life was very complicated, even in the beginning, we need to give 10 checks for 10
14:17 funds. Again, you have to give next 10 checks to the mutual funds and you have a lot of
14:22 hassles. Today, life is much easier. Mutual funds are fully digital and you can just swipe
14:27 the button, how much SIP you want to do, how much step up you want to do. For example,
14:31 if you are anticipating your increments are at 10% per year, you can opt for 10% step
14:37 up SIP. And this way you can accomplish financial independence. I mean, let me tell you, it
14:42 took a little longer time than what I needed, but that discipline has helped me to become
14:47 financially independent. Then here, one of the, like Amitji, I mean, Amitji is one of
14:53 those guys, like he was mentioning about FI, right? It is a financial independence and
14:58 retirement early. And a lot of youngsters, when I go to the colleges and speak to them,
15:04 they say that they want to accomplish something. They are 40 under 40. They want to become
15:09 40 proven entrepreneurs under the age of 40. And many of them also come back and say, we
15:13 want to retire at 40. And here is Amit who proved, the next question you can always put
15:18 to Amit is how he has accomplished his financial independence at the age of 40 and gave up
15:23 his profession, which I mean, his employment, and he has chosen the profile and profession
15:29 which he loves the most. And when your passion becomes your profession, your income becomes
15:34 a bonus and you enjoy what is coming here.
15:39 Right. Yeah, that's interesting. And when we talk about financial independence, the
15:44 idea of financial independence maybe has changed over the years also, what was enough for maybe
15:52 one generation back may not be enough for the newer generation. The idea of money for
15:56 millennials is also different than the earlier generation. So I asked Mr. Trivedi, why is
16:03 financial independence important in the 21st century? Has its significance increased? Or
16:10 is it still the same? Mr. Trivedi?
16:13 I think a few changes have happened at the society level between maybe a period 30 years
16:20 ago to now. And that means that we need to be on our own. That's where financial independence
16:28 comes in. Take for example, my parents' generation had guaranteed pension from the employers.
16:35 Today, hardly anybody has. Okay, I mean, apart from some defense services and etc. Hardly
16:44 anybody has that defined pension available. So that's one big change. Number two is longevity
16:51 has gone up. So people live longer. And that means even if I consider 60 as the retirement
17:01 age, between those times and now, the lifespan in retirement has gone up. But like Rao Saro
17:09 was mentioning, there are a lot of people who are aspiring to retire at 40. Now you
17:14 add the shrunk working period and expanded retirement time. So if you are not financially
17:24 independent, then those choices cannot be made. And because of that, you see, and Rao
17:31 Saro quoted that Harvard study, only 3% were financially independent and the others were
17:38 living from paycheck to paycheck. Basically, that's where all these stress and related
17:44 diseases creep in because you are not enjoying what you are doing. You always on a daily
17:52 basis you get up and say, Oh, no, again. So that's not the kind of life that one wants.
17:59 And that's where financial independence becomes important. The good news is we have moved
18:04 to what is popularly known as the gig economy. And though that gig economy word is associated
18:09 largely with the youngsters, people above 60 are also able to participate in the gig
18:14 economy. Eventually, it's about picking and choosing what kind of assignments you want
18:19 to take. And once the assignment is over, you move on to something else. There is youth
18:24 energy and certain exposure on one hand, there is experience, wisdom and certain other expertise
18:33 on the other hand. So both have the opportunity. And with that, financial independence becomes
18:40 important. And there are more tools available at our disposal today to achieve that.
18:47 Right. So we know what financial independence is and why is it important. So the next question,
18:53 logical question is how can one achieve financial independence? What are the steps that one needs
18:57 to take to achieve that goal? So I ask this question to Mr. Lang, can you tell our viewers,
19:03 how can they achieve financial independence?
19:04 Financial independence actually begins with a disciplined life. So it will start from,
19:13 you know, starting your budgeting where you actually know what is coming in, what is going
19:17 out. So what happens these days is that the source of income might be single or dual.
19:23 But there are so many ways to spend money. So right from, you know, cash to digital wallets,
19:28 to ATM, to credit cards, there are several ways in which money goes out. So actually,
19:33 it is becoming more difficult to track what you're spending and where you're spending it.
19:37 So unless you get a good grasp on that, it becomes very difficult to figure out whether
19:41 you're spending more than you should be. So once that is captured, you will be in a better frame
19:47 of mind to actually, you know, know how much you are able to save and invest. So once that is done,
19:53 that is the primary step and that will take some time, some discipline to achieve. Once that is
19:57 done, then the investment option should be chosen very wisely. So Rao sir was mentioning asset
20:03 allocation and other things. So basis your goal, how soon you want to achieve the goal of financial
20:09 independence on your life circumstances, you know, your other responsibilities that will require your
20:14 money resources and the risk that you are comfortable taking. So basis this, you can
20:19 decide your asset allocation and start investing in a very disciplined manner. Here again, I think
20:26 it is necessary to mention that it is always a better option to automate your investments,
20:31 because we always try to judge the markets, the external environment, and that makes our decision
20:38 making very slow in the sense we might not actually take the action when it is required.
20:44 Vis-a-vis something like a SIP, which is automated on a monthly basis, and you don't really have to
20:50 think or sign a check or, you know, take a decision whether I should invest or not,
20:54 helps you create that automation in investment and it will help you create a corpus over a long
21:00 period of time. So if you remove this decision making factor at every step where you actually
21:06 need to put in money, this will ease out a lot of things and you will automatically start, you know,
21:11 moving towards your goal of financial independence. So I think these are some critical factors which
21:16 need to be looked at. Apart from this, I think I would also mention that you need to take care of
21:21 your risk also in terms of, you know, health insurance and life insurance, because what
21:25 happens is if you are just focusing on creating wealth for your financial independence and if
21:30 there is any event which needs you to spend a lot amount of money, you might end up pulling
21:35 money from these long-term goals and that will compromise on your achievement of the target.
21:40 So have your risk measures in place, you know, have sufficient life insurance, health insurance,
21:45 so that you don't need to dip into your long-term reserves for these kinds of events if and when
21:51 they happen. Right, right. So protect yourself against risk, ensure yourself, save, invest,
21:58 have the right asset allocation and then you can achieve financial independence. But how can one
22:02 know that they have finally achieved it, right? So like you asked, you mentioned in the beginning
22:07 that how much is enough, right? So how can one judge that they have achieved financial
22:13 independence, they have been saving throughout their lives and now they have saved enough,
22:17 so they are financially independent. So is there a parameter to do that? I asked Mr. Rao.
22:21 Yeah, thanks Vishal. It's a very, very interesting question and it is from time to time we need to
22:26 look back and see where I am standing, you know, it's the assets you created and wealth you
22:32 accumulated and your passive income streams which are coming in, all that can meet your expenses
22:37 and you don't need to look at the content paycheck, that could be the first sign, it is the
22:42 litmus test, like you know, I am not depending on my salary, rest of the things are happening,
22:46 that could be a first signal indication that I am into my, if not I have accomplished my
22:52 financial independence, I am on my path to accomplish my financial independence. And
22:56 second way to look at is the, like you know, there is inflation today which we talk about,
23:02 but there is a lifestyle inflation which is going to come in, if I factored that lifestyle inflation,
23:07 I mean, I was talking to Amit yesterday, I was narrating about a friend who is the CEO of
23:13 one former company, I mean, who said I'll get in my financial independence, I thought I'll accumulate
23:19 five crores of my financial assets, I am done. But today with my lifestyle, five crores is not
23:26 at all sufficient, I need 25 crores, you know, that's where whether your lifestyle inflation,
23:30 you need to look where you are there. And the third one I can say is, am I debt free? I mean,
23:37 you know, earlier on this forum, we used to have Gaurav, by Gaurav Mishrawala, he said in one of
23:42 those messages, I mean, you know, take loans for two reasons, one is for building your asset, that
23:48 is a housing loan he spoke about, and second could be education loan, which is a must, I mean, you
23:53 know, where you need to, because that is creating a wealth for you over a period of time. And rest
23:57 of the loans, he said very nicely in Hindi, L-O-A-N-A, and reverse it, loan alone. And financial
24:04 independence, third signpost is, I do not have any loans, I repaid all my loans, I am a debt free.
24:11 And the fourth one I can see is apart from this, do I have healthy savings accounts, like, you know,
24:18 there is a huge money, there is a psychology, like, you know, if my savings account is flooded,
24:23 I mean, we talk about contingency fund, etc. If that is a kind of nine months to 12 months money
24:28 is visible to me, and which I can, I do not need to look at my assets to liquidate in the need of
24:32 that, then that could be another way to look at that. And there is a, the best way to look at is
24:38 your earnings outpace your withdrawal. I think, you know, choose your spending, and how much you
24:44 need it monthly, and you have enough money, and you have a safe withdrawal rate. For example,
24:49 you know, you have x money and you are taking, today, my liquid fund may give around three and
24:54 a half, four percent. I mean, if the safe withdrawal rate is a four percent, you can look
24:57 at that, and that is where. And have you got the passive income streams? And the last but not the
25:04 least, you know, today, I may look very rich if I put my entire money into the equity. I am not sure
25:09 I will be the same rich and tomorrow market corrects. And do you have the diversified assets
25:14 and investment portfolios? And combination of all these things put together, I mean, you know,
25:20 like, I have a lot, I have a positive net worth and earlier Amit Bhai was telling,
25:27 let us say, if somebody wants to retire at 40, then you have to budget for next 40 years.
25:32 Somebody is retiring at 60, maybe you have to budget for next 25 years, these income streams.
25:37 And these are the simple tests you can look at. Even one, two, three, you are getting there right,
25:41 you are in the direction and you can accomplish. That is where it is a financial limit.
25:46 Right, right. And, you know, when we talk about the current times, especially in the context of
25:52 COVID, a lot of things have changed, you know, in the last one and a half years, be it any sector,
25:57 right. So, I want to ask, you know, whether the rules of financial independence have also changed
26:02 because of COVID-19, because I see a lot of people, you know, when I talk to them, there are
26:07 different reactions that people have to this crisis. Some say that, you know, life can end
26:11 anytime. So live in the present and do not worry about the future. And there are others who think
26:15 that, you know, such a crisis, if you had planned for the future, you would have survived this
26:20 crisis better, right. So, when we talk about financial independence and personal finance
26:24 planning, so how has COVID changed the rules? I asked Mr. Jibedi. Vishal, this is a brilliant,
26:32 you know, example of how the thinking gets impacted because of certain external events.
26:39 And that's precisely what seems to be happening these days also. And it reminds me of a very
26:45 classic movie, wonderful movie Anand, which was a problem with an individual and he was
26:52 a cancer patient, Rajesh Khanna. And he says, Babu Moshe, zindagi badi honi chahiye, lambi nahi.
26:58 So, a lot of times that kind of thinking comes in, in pandemic times. The problem is,
27:02 whether zindagi badi hogi ya choti hogi uski guarantee nahi hai, lambi hogi ya choti hogi uski
27:08 guarantee nahi hai. So, while you want to live in the present moment, what if you don't die?
27:13 And there is no guarantee. So, let's accept that the date of death is never certain, though death
27:24 is certain. And we have to live the whole life happily. Today, I'm in a position to work hard and
27:33 earn, at 85 I may not be. So, I need to factor in that as well. I mean, my productivity is going to
27:40 reduce definitely over that period. So, if that's the case, simply assuming that
27:50 you don't worry about tomorrow is also not a wise thing to do. Having said that,
27:56 it is also not wise to only think about tomorrow and stop living life today.
28:02 You live life today and you live life tomorrow. You enjoy life today and enjoy life tomorrow. And
28:11 that's where you got to plan. Otherwise, life can throw many challenges. The Olympic Games had to
28:19 be rescheduled because of the pandemic. What is my financial independence in comparison to the
28:24 Olympic Games? So, a few things may need to be rescheduled. But that doesn't mean that we
28:31 completely change the thinking. Certain things might need to be tweaked. For example, you need a
28:39 higher health cover is a feeling, you need a higher contingency fund, that's a feeling. Now,
28:45 those are good things. But the process still remains the same, that you need to take care of
28:52 contingency, you need to take insurance, you need to take care of short term and medium term goals,
28:57 provide for loans, and set up your financial goals and build a portfolio to achieve those goals.
29:03 Those steps in the process do not change. Right, right. So, you have to live in the
29:07 present and the future. And we talk when we talk about future, we talk about retirement.
29:12 So, a closely related concept to financial independence is FIRE, which you had been
29:16 talking about all of you, financial independence and retire early. So, I asked Ms. Telang,
29:22 how do you look at the concept of FIRE? I mean, is it relevant in the Indian context for the
29:28 current generation? How do you see it? Yes, the FIRE concept is actually catching on,
29:34 we are seeing a lot of youngsters who are aiming for the FIRE target. Probably that comes from
29:44 being in a place where they are not happy doing what they're doing. So, what is retirement after
29:48 all? They are probably looking to do something else. But on the other side, I feel it is also
29:55 a very romanticized version of things being better on the other side. So, if you're feeling burnt out
30:00 in your current job, and you're not enjoying it, you feel that taking an entrepreneurial
30:05 jump will be much better. The grass always looks better on the other side.
30:08 But what you don't see is that you are jumping from a full setup of a professional career,
30:15 of a corporate career, where a lot of things are taken care of. There are other colleagues who are
30:19 doing things for you. Whereas in an entrepreneurial journey, you will be everything from the sweeper of
30:24 your office to the CEO. So, those are the hidden things which people don't realize. And it might
30:30 not be very palatable when you actually jump into it. So, when you aim for FIRE, it is possible for
30:36 everybody to do it. But there is a price to be paid and there are consequences to be faced.
30:41 So, looking at that, the price to be paid is probably being frugal. Because if you want to
30:46 achieve that independence early, you will have to live frugally. You will have to be disciplined
30:51 in terms of both your expenses and your investments. You will have to learn to shut
30:56 down the noise of the market and do what the principles say is correct and stay with it for
31:01 a very long time. The consequences could be failure. You know, out of 10 startups that are there,
31:10 probably 2 will succeed and that is what you will hear about. The rest 8, nobody knows what happened
31:16 and what the entrepreneurs went through. So, those stories are never told. So, are you willing to
31:21 face those consequences? How prepared are you? How is it going to impact your personal life,
31:25 your family? So, there are people who are financially dependent on you. So,
31:28 will everything be taken care of? And what if something like COVID happens again? Though this
31:35 was a once in a lifetime kind of experience, but what if something, even half of that kind happens?
31:42 So, how will that impact you? So, those are the consequences and you should understand that it
31:46 might happen. I mean, it's not that everything is going to be rosy or everything is going to be bad.
31:51 You should be prepared for it. So, if you are willing to look at both the sides of it,
31:54 I think fire is definitely possible. Right. And like Mr. Rao was earlier saying that Mr.
32:01 Trivedi has achieved this fire, he has retired early. So, maybe I should now ask Mr. Trivedi,
32:08 how you achieved it? Any lessons, any learnings for our viewers based on your experience?
32:13 When you are jumping in fire, you got to have your fire protection suit ready. And that's
32:20 precisely what I did. I was working in a large company, the job was at a senior position and
32:30 the company was well established, my job was reasonably stable. So, to that extent, my salary,
32:36 the risk on the salary was very, very low. I did not have to worry about that part.
32:43 From there, I was shifting to a kind of profession where everything was uncertain.
32:50 I had never done that work earlier. And the income from that profession was also going to
32:58 be uncertain. So, you're going from absolute certainty to a huge uncertainty, that's number
33:05 one. So, when you're doing that, the first thing that you need to take care of is,
33:10 take a stock of your expenses. How much money do you need on a monthly basis or an annual basis,
33:17 because certain expenses are also on annual basis, the fees of the kids in the school, etc.
33:23 You take a stock of that, so you prepare a budget for yourself, that's number one.
33:28 And then check your financial net worth. And I'm referring to financial net worth,
33:33 not the total net worth, because though in the accounting terms, the house that I own
33:39 is part of my net worth. But I can't sell part of my house to run my household expenses,
33:44 obviously. So that's your only financial net worth. Your financial net worth takes care of
33:50 how many months of your expenses was the second part. Insurance is essential. In my case, it was
33:57 not possible to get at that point in time. So I did not get health insurance. But otherwise,
34:02 I would very strongly recommend that everybody should get that. In my case, because there was
34:07 no insurance, I had to provide for it separately myself out of my own savings. So there was a
34:11 second part. Third, I paid off the loan, because loan is a huge drag on, I mean, it's actually a
34:19 huge expense. It was, my EMI was more than my monthly household expenses. So I paid off the
34:25 loan very aggressively by selling my equity investments. The reason why I sold equity
34:33 investments was EMI is a fixed expense, and equity is a volatile asset. Now, that is an okay
34:42 combination, if my salary was also fixed. But in the absence of that salary, I can't have a risky
34:49 asset and large fixed expense. So I paid off the loan by selling the equity. The mistake that I
34:58 made was, I did not factor liquidity, enough liquidity, let me put it this way. So there was a
35:06 very short period where I was liquidity poor. So you got to take care of that liquidity as well.
35:14 It could have been wiser to continue with a little bit of loan, rather than paying it entirely off.
35:20 So I could have had that buffer. But anyway, so that was a mistake which somebody needs to
35:25 correct. And of course, you also need to plan for the monthly expense to be funded out of your
35:35 financial network for a reasonably long period because this is a startup, your income would take
35:42 a while to come. And in my case, it was professional services. So my investment in my business was only
35:49 buying a laptop. And that was all nothing else. But if you are doing any other activity,
35:55 then how would you fund that business as well? Is also a question. So the network should be enough
36:01 to provide for that as well. So again, as I mentioned earlier, also the steps were exactly the same.
36:08 Do a budget, which would tell you how much emergency funds you should have or liquid
36:16 fund that you should have. Second was insurance. And third, whatever were the financial goals in
36:24 the next three, four years. In my case, there are no major financial goals in those many years,
36:29 because I bought a house, I was not going to upgrade my vehicle. And the annual fees of the
36:35 kids, the school fees was the only large expense for me for next few years. Provide for those,
36:41 pay off the loan. These were the steps that I took. Now, a couple of things Kiran, I think
36:49 did mention about those digressions and deviations. So what do you do when you are getting a monthly
36:55 paycheck, that's such a mental comfort. And when you don't get that, a lot of times people may
37:01 lose sleep over that anxiety. So what I did was I put some lump sum amount in a liquid fund.
37:08 And I set up systematic withdrawal plan, which was to the extent of my monthly expense.
37:15 So every month on the first, I would get an SMS from the bank that your account is credited to
37:21 the extent of this much amount. And immediately my mind told me, "Chalo yeh maina nikal gaya."
37:26 That was such a comfort. So I was actually playing a trick with myself. But that trick was required,
37:32 and I was knowingly doing it so that you maintain your sanity, and you can focus on your work.
37:37 Otherwise, you would worry about, "Acha yeh kahan se paisa leya hu?" That worry also should not be
37:44 there. So that's really what I did. Right. I'm sure our viewers will take a lot of lessons
37:50 from your experience. Now, when we are talking about financial independence, especially fire,
37:56 so a thought comes to mind that our retirement and financial independence are they mutually
38:03 so much related that they cannot be exclusively talked about. So I want to ask Mr. Rao, does
38:10 one need to become financially independent so they can retire? Or is it the other way around
38:15 and one retires when they become financially independent? Or is it neither of the two?
38:19 What do you think about that, Mr. Rao? Thanks Vishal. I mean, one need not retire to
38:24 become financially independent or once financially independent, you do not need to retire. Either way,
38:29 it can be independent. Of course, we relate. Normally, when I am financially independent,
38:33 I can retire peacefully and comfortably so that I can lead a life where I do not need to work for
38:38 money and money will take care of me and I can work for my passion or I can live of my life of
38:44 my own choices. That's where people can look at. But all that what we need to do is not exactly
38:49 the retiring. All that we need to look at is how I can be financially independent because most of us
38:54 would like to become financially independent and after that we continue to work because that's an
38:58 opportunity. Earlier, Amitbhai was mentioning a person who want to have retired after four years,
39:04 you got bored and you went around and you come back and choose a profession you love to do it.
39:08 And second, I think we also have a bonus of responsibility. Some of us having working in
39:13 some of these fields. I mean, you can go on, keep on serving the people. You don't need to retire.
39:17 I mean, with the knowledge, wisdom, wealth you got, you can do more. And incidentally, when you
39:22 are doing, I have seen on the spiritual angle, I mean, when you don't need more money and you are
39:28 not working for it and more keeps coming to you. That's a very interesting aspect of life, which
39:32 I have seen on some angles where I associated with some of the people, the kind of wealth they
39:37 created post retirement is much higher than the pre-retirement. That's where and I jokingly tell
39:45 couple of them when I'm doing some social work with them, we are all, I mean, good, you are
39:50 spiritual, but money you made it. Now we are a spiritual for us. That is a spiritual. We want
39:56 to come there where you are created a wealth. We are intending to create wealth. We don't need to
40:01 interrelate, but keep it down that you become financially independent and retirement is a
40:07 choice you can make at that point of time. And sometime back, I think we spoke on this forum,
40:12 like there is a hundred years work life book we were talking about, and we may take some
40:18 breaks, sabbatical, we may come back and do it. And, but if you are financially independent,
40:23 that kind of peace of mind you have is much, much bigger. Aim for your financial independence,
40:28 not for the retirement and don't upgrade your lifestyle to the lifestyle, but upgrade
40:35 your qualification, upgrade your way you do it. And I have met somebody, this is a week back,
40:41 this man is 68 years old and he is doing a startup. He's starting a FinTech. I mean, he
40:47 intend to have me there. I mean, he's asking me, I mean, certain things which is related to the
40:52 financial literacy and that's the kind of spirit, but he's fully financially independent guy.
40:57 And let us be financially independent and retirement can come, but it's on and off.
41:05 And we can come back to work. And all of us are in, most of us are in unorganized,
41:08 I mean, the private sector, I call it unorganized today because government sector, those who are,
41:14 they comfortably retire and there is a pension and my father-in-law retired from the government
41:18 service. And he says, today my salary is a triple of what I got, my pension is triple of what I got
41:25 my last day, last salary when I retired. I mean, that way they're very organized, right? The system
41:31 is organized and for us system is unorganized. We need to become organized. Right, right. Absolutely.
41:37 And before we conclude, I think, on the occasion of the Independence Day, I would like all of you
41:44 to give one message to our audience on financial independence. So we can start with Mr. Lung,
41:49 perhaps. Well, so independence is something that is a very worthy goal, financial independence,
41:58 and it is possible for everybody. Take action, don't just think about it and do it in a very
42:05 disciplined manner. So it's not a very far off day when you will actually be financially
42:09 independent and you will have that choice to work the way you want to work. Right. Mr. Trivedi,
42:18 independence, as I mentioned earlier, is a choice. It opens up too many choices for you and
42:24 it gives you the freedom to choose from those options. And to that extent, just adding to what
42:31 Mr. Rao was mentioning, whether to work or not is also a choice. So it's not that you're
42:38 financially independent means that you have to retire and you can't work. You can work. Today,
42:43 Amitabh Bachchan doesn't need to work, he works. Warren Buffet doesn't need to work, he works.
42:48 And look at the age, 80+ and 90+. I mean, my father till, we just lost him a couple of months
42:56 back, but till March and April, April he was hospitalized. Till then, he was working to finish
43:04 a book that he was writing. Now, engage into an occupation that first of all allows you to spend
43:13 your time and gives you happiness. And that's the truest definition of independence. Money can help
43:23 you reach there because we need money to spend on various essentials plus more. But the moment
43:32 you start chasing money for your independence, then you are not truly independent, you are
43:38 dependent on the money. So be careful about that, be free, be independent and live the life of your
43:46 choice. Right, right. Absolutely. Mr. Rao. Thanks Vishal. I'll put it in my, I come from a company
43:55 Aditya Virla Capital ABC. Probably I can say one word on with all the three put together, aspire,
44:02 aspire to be financially independent and believe that you will be independent and that belief is
44:07 the most important part of it. And the last is see the commitment to reach there. That is a
44:14 discipline to reach there, Rod Kiran said. Aspire, believe and commit, you big commitment to get there
44:20 and wishing everyone become financially independent and we will be too glad to support you in your way
44:28 and the financial literacy is the first step to get there and let the financial independence
44:32 happens to everyone and happy independence day. Thank you. Thank you so much all of you. It was
44:38 such an insightful and wonderful session. I'm sure our viewers got to know a lot about financial
44:44 independence, how to plan for it and what to do with it once you get the choice of you become
44:49 financially independent. So with that, we wish everyone a financially independent life and we
44:55 also wish them a happy independence day in advance. All of you, we'll see you next month
45:00 with another episode, till then see you. Bye. Thank you so much. Happy independence day.
45:08 Thank you.
45:09 [Music]
45:14 [Music]
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