Introduction
As human beings have our financial requirements as per our aspirations. At the same time, one must understand entering the professional workforce for the first time, you will realise soon that a good pay package will not be sufficient enough to achieve financial freedom.
Sure, it’s easy to purchase a flashy car these days, but that decision may not put you on a solid path toward financial freedom. So what is financial freedom. I will discuss it later in the article but let’s have some clarity.
This article series is purely based on my experiences of 30 years of a working professional from a beginner to rendering services as a senior professional in large corporates and as well as unorganised sectors.
Key Happiness Index (KHI) – This is what is financial freedom. I define financial freedom but let’s understand the Key Happiness Index.
We, in recent times, have heard about the Happiness Index. Countries have accordingly been ranked. As per the United Nations, there are SIX factors in the Happiness Index. But to me, happiness is all about living a luxurious lifestyle. A common man will also have similar beliefs that I carry. And not what is evaluated by the United Nations. I hope I have been able to make you understand about Key Happiness Index.
I play the BAD BRUTE. I do follow regulations and understand what norms tell us all about but I have my versions and I follow them to the nail. That’s how I have been working unconventionally.
Let’s examine Maslow’s theory. People with MBA degree would know about it so I am not listing down the stages mentioned by Maslow. Being a BAD BRUTE, I do agree with him to a certain extent in the current human life cycle. We all define our financial freedom as per our knowledge which is nothing but one’s financial acumen. But for me, it boils down to only two factors
- Needs and
- Luxury
The need is to survive in this world, to live a life where you meet your basic requirements of daily life. But how many of you can do it? A very few. Why? Because many people are not able to meet their basic needs.
We will define Financial Freedom, but let’s understand what comprises of basic needs. This will help you understand about needs.
Today people are not able to meet their basic needs. Why because they are running after luxuries. For example, they require a car for the family. But they are not buying a Maruti or Kia or Tata or xyz brand because they are worried about not having to ride in a Mercedes Benz.
To me, my basic needs were having a house of my own, one car, one bike, money for a kid’s education, and reserves for medical treatment since education and medical treatment in India are not cheap. These were my basic needs during the early stages of my career when I got married and had Kids. When these needs are sorted out then your basic needs are sorted.
The majority of people like us, will have similar needs to what I just mentioned above. I hope you all agree with it. In case your version is different please write a comment as priorities may differ for different people.
Once your basic needs are met then you can start your next journey toward luxury without any ifs and buts. This is what people do not understand. You can always upgrade yourself once you have met your obligations of meeting your basic needs.
NOTE: You should always be debt-free. This is what I have learned from my father and mother. There should be ZERO loan on you. If you have, then ensure that you pay off your debts first, before upgrading yourself to have a luxurious lifestyle.
It’s easier said than done. My request to all of you is to follow this process. I have done this myself and it does require some discipline. Do it and you will see for yourself how relieved you feel once you are debt-free.
My Story: People who know me, also know that Our organisation closed its operations in 2017. I had debt though it was not much but a good amount. Once I was without a job I immediately paid off the debt, in this case, it was a housing loan. I had been paying off my principal amount at regular intervals with no reduction in the EMI amount. This led to a low principal amount at the end. I paid off my loan in 10 years instead of 20 years the loan period.
I do not say that taking a loan is not good. It is always good to pay off the loan at the earliest to become debt-free. It’s not that I have not taken a loan. I have taken and followed strict discipline to pay it off.
Another example of mine is I purchased a CAR (Luxury) on Loan. I paid it back just after a year. Why after a year you will ask? Because it had a clause of attracting a penalty if I paid the entire loan amount before one year.
NOTE: Emotional stability and clarity are very important to achieve Financial freedom.
You must be wondering why so far I have not defined financial freedom. I was supposed to do it at the beginning. It was important to explain the concept and logic with examples for clarity.
To me, financial freedom is all about having sufficient money where I do not have to think twice to spend on anything I want. People may differ from my concept of money. I hardly care about such people.
In other words, it’s different for everyone, i.e. different for you and different for others could be your sibling, your friends, and different for me too. To define in another way I would say that financial freedom is when your passive income (from your own business or assets) exceeds your expenses, allowing you the freedom to achieve your ideal life and no longer need to work as an employee!
If I want to explain it in value terms it would be like this:
Say if your:
Earnings = Rs.1000/-
Total Spends = Rs.600/-
NOTE: Here total spend includes all your investments apart from your expenses. Why I include investments as I calculate Financial Independence with the excess money I have to spend the way I like?
Then it’s said to be financially independent. i.e. you do not have to worry about anything as you have surplus money at hand.
But if your:
Earnings = Rs.1000/-
Total Spends = Rs.1600/- or even if it is Rs.1100/-
This means you are not financially independent. In fact you are in debt.
I hope I have been able to explain to you Financial Independence.
NOTE: Money is important as it helps solve many life problems.
Wait for PART 2 of this series. The same will be published next Sunday i.e. 2nd June’24, where I will detail the 5 Steps to Financial Freedom
Share your feedback and do let me know what else you would like me to write on. Will try to sahre my thoughts and experiences.