FI to me
There are a lot of articles floating around on the internet about financial Independence. The reason this topic is close to my heart is because of the experiences I got in life. You can read about them here.
The reason FI intrigues me is because it empowers the individual to live life on his/her own terms. I mean look at all the things that one can do if we can get rid of the 9-5 slog. It opens up so much free time, opportunities and experiences. The best being remaining in bed on a cold winter Monday morning when all the world around you is stuck in the daily commute.
I have not yet attained FI, but with my experiences on the path to FI, let me tell you that I am experiencing a calm feeling as the basics (emergency funds, insurance cover) of FI are covered. The epiphany while walking on the path to FI for me was loosing the fear for failure. I am now facing the issues with much more confidence than before.
I am not saying that financial independence is easy. It's easier for people with higher income. But even they will find it tough to resist lifestyle inflation.
I’m not saying you can get to financial independence on minimum wage. No, the way that people on low incomes can get to financial independence is by increasing their income (as well as holding down spending). Again, this is not easy but its possible. The paradox here is for the people who don't have high income, it's all the more important to be frugal and focus on financial independence. When you’re paid less, there is less safety margin. You can’t just burn cash safe in the knowledge that you’ll be bailed out by a high salary in a months time. For a software engineer with no responsibilities, paying high interest on a credit card is possible. For a low income worker in debt, its a financial disaster.
Also, some people on the path to financial independence, do tend to take it a bit too far. It does not mean having loads of money stuffed in banks and leaving life like miser. Most of the things that we need comes free. For example having a sound sleep at night, living a carefree life or spending quality time with family and friends. We think that we need a lot of money to live happily, and the more we associate money with most things in life, the more we are tightly coupled with the hedonic treadmill.
So, what is my definition of financial independence, then?
I look at financial Independence from a simple spectrum of needs and wants. When an individual has enough to satisfy his/her needs, according to me, the individual has achieved financial independence.
The most common basic needs are food, clothes, shelter for self and dependents, followed by education of children (if any) and medical expenses (parents, self, children).If you happen to be from the first world country, then, medical expenses can be taken care of social security after a certain age.That eases out things a bit.
Thus, if a person can take care of all the above needs, I consider that person as financially independent.
Assuming that, you, like me, have interest in becoming financially independent, following are the steps that I have been taking so far in my journey towards it.
1. Avoid procrastination. If you think that earnings are a problem, then, try and figure out ways to increase them. One way is to invest in self. Work on your skill sets, try and build multiple source of income.
2. Stop fretting about things that are not in your control. What Mr.Donald Trump or Mr Modi will do next is anyways not in your control.
3. Be humble. A lot of things have happened and will happen in our life by sheer chance. Thank the almighty be grateful for the good things and be compassionate towards the less fortunate.
4. Analyse the monthly cash flows and optimize it towards building assets.At the end of the day, you can only improve what you can measure.
5. Spend less than you earn. Try and live frugally.
6. Avoid credit card debts .
7. Do goal based investing.
8. Asset allocation.
In the end, I believe that, financial independence is a mindset and everybody is capable of achieving it sooner or later.
Next, I will do a detail post on the process that I am following to achieve financial independence.
What do you think about financial independence?
What are the steps you are taking to achieve it?
Do let me know in the comments section.
The reason FI intrigues me is because it empowers the individual to live life on his/her own terms. I mean look at all the things that one can do if we can get rid of the 9-5 slog. It opens up so much free time, opportunities and experiences. The best being remaining in bed on a cold winter Monday morning when all the world around you is stuck in the daily commute.
I have not yet attained FI, but with my experiences on the path to FI, let me tell you that I am experiencing a calm feeling as the basics (emergency funds, insurance cover) of FI are covered. The epiphany while walking on the path to FI for me was loosing the fear for failure. I am now facing the issues with much more confidence than before.
I am not saying that financial independence is easy. It's easier for people with higher income. But even they will find it tough to resist lifestyle inflation.
I’m not saying you can get to financial independence on minimum wage. No, the way that people on low incomes can get to financial independence is by increasing their income (as well as holding down spending). Again, this is not easy but its possible. The paradox here is for the people who don't have high income, it's all the more important to be frugal and focus on financial independence. When you’re paid less, there is less safety margin. You can’t just burn cash safe in the knowledge that you’ll be bailed out by a high salary in a months time. For a software engineer with no responsibilities, paying high interest on a credit card is possible. For a low income worker in debt, its a financial disaster.
Also, some people on the path to financial independence, do tend to take it a bit too far. It does not mean having loads of money stuffed in banks and leaving life like miser. Most of the things that we need comes free. For example having a sound sleep at night, living a carefree life or spending quality time with family and friends. We think that we need a lot of money to live happily, and the more we associate money with most things in life, the more we are tightly coupled with the hedonic treadmill.
So, what is my definition of financial independence, then?
I look at financial Independence from a simple spectrum of needs and wants. When an individual has enough to satisfy his/her needs, according to me, the individual has achieved financial independence.
The most common basic needs are food, clothes, shelter for self and dependents, followed by education of children (if any) and medical expenses (parents, self, children).If you happen to be from the first world country, then, medical expenses can be taken care of social security after a certain age.That eases out things a bit.
Thus, if a person can take care of all the above needs, I consider that person as financially independent.
Assuming that, you, like me, have interest in becoming financially independent, following are the steps that I have been taking so far in my journey towards it.
1. Avoid procrastination. If you think that earnings are a problem, then, try and figure out ways to increase them. One way is to invest in self. Work on your skill sets, try and build multiple source of income.
2. Stop fretting about things that are not in your control. What Mr.Donald Trump or Mr Modi will do next is anyways not in your control.
3. Be humble. A lot of things have happened and will happen in our life by sheer chance. Thank the almighty be grateful for the good things and be compassionate towards the less fortunate.
4. Analyse the monthly cash flows and optimize it towards building assets.At the end of the day, you can only improve what you can measure.
5. Spend less than you earn. Try and live frugally.
6. Avoid credit card debts .
7. Do goal based investing.
8. Asset allocation.
In the end, I believe that, financial independence is a mindset and everybody is capable of achieving it sooner or later.
Next, I will do a detail post on the process that I am following to achieve financial independence.
What do you think about financial independence?
What are the steps you are taking to achieve it?
Do let me know in the comments section.
Very nice, You are generating lot of curiosity when is next blog coming on how to invest?
ReplyDeleteThanks,
DeleteWill try and come up over the weekend