Path To Financial Independence

by | Apr 14, 2019 | 0 comments

Mr.Wikipedia defines it as “A state in which an individual or household has sufficient wealth to live on without having to depend on income from some form of employment”. Everybody wants to be in this state, but most do not know what it takes.

Unfortunately, there are no shortcuts to financial independence. I can’t give you step by step notes on how to achieve it. But what I can do, is to give you clues from my reading, own experience and hearing it from the successful people. It’s difficult to put all that is in my head into a page or two but let me try to keep it concise.


A lot of household jump directly into investments without having a budget. A budget is simply being aware of your income and expenses. A budget tells you where you are. It is important to know where you are before you take the first step towards the destination.

Instead of, Savings = Income – Expenses, follow Expenses = Income – Investments.

A Plan

A close friend of mine wrote to me recently “Focus on Progress, not perfection”. It was a profound statement. A plan doesn’t have to be perfect. It can change along the way, according to your needs. You need a plan to budget your expenses. Expenses come in various forms. It could be a fixed expense (like an insurance premium), could be a variable expense (like a utility bill) or an adhoc expense (like your car breaking down). Not everything can be planned but most of it can be. A plan relieves you brain from worries and gives space to think about other important things. Everyone likes a good surprise but a bad one might drag you through the mud for months.


Stowing away all your savings in a savings bank account or in a treasury box is simply a financial suicide. Not that other investment like fixed deposits, real estate, gold, mutual funds, equities won’t kill you but there are chances of survival. So where to invest ? Before we get into investments, here are few things you must know and digest well.

Know yourself first: A person might be wired to be business oriented or can stomach extreme risks or could be completely loss averse. Know what pops up into your mind when you hear about an investment ? Does it scare you or does not flash dollar sign in your eyes ? Here are the two golden rules for losing money.

  • The fear of losing money
  • The greed of getting rich in a short time

A human brain often oscillates between these two rules. I have not only seen but known people who won’t invest in anything but national bank fixed deposits but also buy a lottery ticket every week. I recently read in an article published by Vishal Khandelwal from Safal Niveshak where he said, while teaching a room full of MBA students he asked “If you play a slot machine in a casino consistently for long enough time, eventually you will _____” and all of them screamed “WIN” !! The most probable answer to this question is “LOSE” or even better answer is “BE AN ADDICT and LOSE”.

Investment Rationale: Try having a rationale for every investment decision you make. That will help you keep your emotions in check. At the end of the day we are the biggest risk for our own investments.

Fixed Deposits: If you are stowing away your money for a year or two for an expense or something you have planned for where the corpus protection is important, then fixed deposits makes a great investment rationale. But if you do not have a time horizon but just want to protect your money from losses or the guarantee of maturity amount make you feel safer, then it is time to remember the golden rule #1. Most of the time, the only thing guaranteed about Fixed Deposits is that it’s guaranteed for us to lose money!

Gold, Silver, Diamond, what else, what not: If wearing gold jewelry makes you feel good and you often attend functions and parties where you want to look your best, buying gold is not a problem. Now that is not an investment. It is for your own personal use. If not, then you must have a talent to find a fool who would pay you more than your purchase price. There is no dearth of such fools, so if you know a pool of such people, gold makes it a great investment. I stay away because I just don’t have an easy access those fools. If I had, I would buy gold left and right.

Real Estate: Stories of your friends earning a lot of money selling a piece of land or a house must have given heart burns to many of you. It does not mean that investing in real estate is the thing, rather, it only means that your friend is a super smart guy and understands the market dynamics better than the most. Here are two silver rules of investment.

  • An Asset is something that puts money into your pocket.
  • A liability is something that takes money out of your pocket.

A real estate can be an asset if it earns you a rental that is more than your expenses.

Rental Yield = [(Total Rent received in a year)/(Value of the property) ] * 100

Or have a clear understanding of real estate market trends and know how to outsmart others. It is an art. If you buy a house for 50 lacs and sold it for Rs 1 Cr after 9 years, it is a return of ~8%. Sounds lucrative?

Stock market: Remember golden rule number #2? No, this won’t make you rich either which most expect when they invest in equity mutual funds or in stocks. They can make you wealthy but can also set your finances back by 10 years. Many have eaten the dust being greedy and trying to time the market. Remember, Only the god or a liar can time the market perfectly. However, by having a long-term vision, you can reduce the possibility of losses significantly. Through stocks, equity mutual funds, you own portions of businesses whose fundamental idea is to make profits. It can beat inflation hands down. This instrument can probably help you in sustaining your current lifestyle in your old age. It has a potential to make you financially independent in a decade or two. But the question is, “Are you ready to wait?”

Find your gig

This investing idea will certainly expedite your path to financial independence. Most of the parameters drive this investment is under your control. That’s your talent, your brain. Here I can give you clear steps to succeed. 🙂

  1. Find something that you are good at.
  2. Find a way to monetize your talent, your knowledge, your passion etc
  3. Start/keep earning. Value any number that is more than zero.
  4. Either invest the earnings through SIPs into equity or reinvest back into the business to grow
  5. Just keep repeating steps #3 and #4 while you enjoy the process
  6. Let compounding do its job.

Just find your own gig.



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