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Saturday, June 24, 2017

financial independence

Wake up early; hurried breakfast, commute to work; hit the machine; read, reply, write, junk emails; attend meetings; hurried bites; emails again; meetings again; take responsibility for someone else's faults; take bullshit from the boss; office politics; little fun, loads of shit and frustration; commute back; work calls while commuting; back home; disgruntled greeting to family; not-so-fun dinner; machine and work again; deadlines; shit; frustration; hit the bed; wake up early...Everyday, five days a week, year after year...Heck, what a pitiful, distressing life, even when you are earning millions.  

If you are like most, your routine is supposed to look like that; and chances are that you are not a happy person. Both male and female, it is similar stuff, just a little bit of shuffling, but the chore is same. I know that you don't like it. Nevertheless, you are doing it because you want to make money, earn respect, take care of family needs, and provide for your retirement. You are kind of forced into this routine. Given a choice you would rather not do this grind; would you? That's the question. And if you are like most, you would rather have that freedom to choose work; where to work; how to work; and of course, whether to work at all. By work, I mean in general terms. In fact, not doing any work is also some work; learning Spanish may not earn money, but it is also work and fun for some. 

I call this person a masochist. In a way, most working men and women are like that. This includes self-employed too. People have made a mess out of their life. And they don't seem to do something about it. 

A few have realized that life is too short to be bound by someone else's demands, and therefore chose to do things differently. Here's what they do: Wake up when want to unless they are in the mood to see sunrise or do the morning jog; have a leisurely breakfast, lunch and dinner; do things that help them learn and have fun; take no instructions from anyone; choose their work hours and workplace; spend enough time with family and friends; sleep when they want to. 

You must wonder how it is that they are able to do this. Inheritance, may be? Not necessarily. In fact, they are the ones who have taken control of their life. And good news is that it is not that difficult; anyone can achieve that. I call it the ultimate liberation. 

You have to start with the premise that your life is too short even if you allot a hundred. Therefore you need to figure out what you want from your life; and you need to do it yourself, not piggyback. Remember, you are the hero of your life. Like someone said, you need to be yourself, for everyone else is already taken. You come out of school by the time you are 20 or 25. After that, you have to lay the path such that your life becomes fun. Remember it is not about cash, but fun. To see why let's flip it. What do you want: more cash and less fun until your last hours, or more fun and less cash? If you are a normal person, you will choose fun in life. Now, you cannot define fun in general terms. For Elon Musk, it is different from that of Warren Buffett; for you it is different from that of your friend. Nothing I have said so far is philosophical; it is both practical and real. 

So go figure out your definition of fun. Technology, business, cycling, marathons, photography, wilderness, there are plenty of choices to make. And make that your idea of spending rest of your life. But wait, unless there is lottery or inheritance, you are likely not able to tread that path. For most of us that means work to earn a living. 

Now I come to the real point of this post. There is also another word for my ultimate liberation. It is called financial independence. It does not depend upon how much you earn, rather it depends upon how much you have compared to how much you spend. In order to lead a life of your choice, you need to first make some arrangements. My guess is that it should not take more than 15 years of labor for anyone. Whether you are earning thousands or making millions, 15 is the maximum number of years that you should be willing to sort of compromise. I have noted this for a layman both in the US and in India. After 15 years of work, you will be transported to the world of fun and games. 

Some have got it wrong. You cannot have rules such as you need to save 30% when in 30s, 40% when in 40s, and 80% when in 50s for retirement. Although the thought is well-meaning, it is flawed. The best way is to increase your earnings and reduce your expenses as much as possible in your work years; and then throw those growing savings into the investment pot. Because increasing earnings is not everybody's cup of tea, it is far easier to control expenses. Like I have mentioned earlier, your financial independence does not depend upon how much your earn. If you earn a million and spend more than that, you are on a wrong footing. If your annual costs are 100 and your financial assets are many times over, you are financially independent. How many times over is a matter of judgment. Some say 25 times is enough. That means you are done with 2500 when annual expenses are 100. I see it slightly differently. All depends upon what is important in your life. If you have a passion so deep, you may be happy to live a life of absolute frugality to pursue your passion. After all, like I said, it is your life. If I want to make it more general, 25 to 50 times annual expenses should be enough. Don't tell me that your annual expenses are 100 and you are earning just about that; you will never be able to liberate yourself. 

Financial independence is achievable for anyone; from college dropouts to qualified professionals. It is achieved primarily through deferred gratification. That urge to spend is a behavioral pattern. When everybody should pick 15 years of bonded labor to lead rest of life more meaningfully, most don't do that. Heck, that instant gratification, that behavioral disorder called envy, come in their way. What a pity that they are so ruthless to themselves.

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