ENJOY FINANCIAL FREEDOM WITHIN 10 YEARS

 

FINANCIALLY FREED

Dear Friends...

To Ourselves, we have to ask only 3 Questions ----------------------->

1. How much money do we need to be financially free

2. How we can gather money and  from where we can gather money

3. What is the Ultimate Strategy that can be implemented to achieve in Fastest and Simplest way.

So Friends, whenever we talk about Financial Freedom, we meet Four Types of People -------------

1. Who will say To SAVE MONEY, Invest it, It will compound and in Retirement after 60s you will be able to enjoy. But in 60s even if you become the richest person in the world, what's the use? You will not even have energy to enjoy it. 

2. Who DOES NOT think about FINANCIAL PLANNING and RETIREMENT PLANNING. Whole day they will remain in office and work unhappily, will get bore and after getting salary they just spend their money extravagantly. In fact, before the month-end nothing remains in their hands. Some people spend lavishly which they haven't earned in order to show others.

3. Who thinks MONEY CANNOT BUY HAPPINESS.

4. Who doesn't want  Retirement but want EARLY FINANCIAL FREEDOM.

So Friends, when we talk about Financial Freedom, the first and foremost, what question arises in your mind? - How much to create savings? And if we ask people How much money they want to be financially free? No one will answer the question in a straight manner. People themselves doesn't know how much they want. Some will say Rs. 5 Crore? Some will say Rs. 5 Crore will be lesser in value after 5 Years - So... Rs. 10 Crores. Some people will get confused and say if this will get emptied then ... No. No.... Rs. 20 Cores. So, when People don't know their goal amount, how will they achieve it? Because of this, People invest anywhere or People just spend their money.

 According to me, this is very sad thing. If we don't have any direction, there are chances of wandering. So Friends, HOW MUCH MONEY YOU NEED? My answer is very simple. You are Financially Free when you get enough money for your monthly expense and that too without any earnings.

 Let's take an example, THE STRATEGY OF 4% RULE said by WILLIAM BENGEN. Suppose your Monthly Expense is Rs. 25000, so Yearly Expense comes to Rs. 300000/-. If you can get this Rs. 300000/- form somewhere without earnings, you don't have to worry. This Rs. 300000/- will be 4% of our saved money. Which means, if this Rs. 300000/- is 4%, then how much is 100% . How much money you have to save? The answer is Rs. 7500000/-. So this Rs. 75 Lakhs will have to be saved for Early Financial Freedom. Now... you will be in shock... How to save such a huge amount. Friends, it's simple. But in reality, it isn't simple.

So Friends, if you will notice, that you don't want Rs. 1  Core or Rs. 10 Crore or Rs. 20 Crore. This amount Rs. 75 Lakhs is even smaller than Rs. 1 Crore. Basically, you have to save 25 times your monthly expense. Means at the END OF THE YEAR, you have to invest Rs. 75 Lakhs + Rs. 3 Lakhs = Rs. 78 Lakhs, from which you will withdraw Rs. 3 Lakhs from your account. You may think how to create Rs. 75 Lakhs, but by proper saving and financial planning you can get Rs. 75 Lakhs.  In the next year, again your amount will grow. Suppose you invest your money in Savings A/c which has 4% rate, the next year, again you will earn Rs. 3 Lakh interest and will go on.. 

But, according to me, this strategy doesn't suits India. This strategy has DISADVANTAGE. Because India's inflation rate is very high. This strategy doesn't go with high inflation rate countries. So, we Indians what can do?. We will convert this DISADVANTAGE into ADVANTAGE. 

                                        THE ULTIMATE STRATEGY

We will make this Strategy 4% AS 8%. Because, as per India, 8% is easy to earn. Fixed - Deposit gives you 8% return. Interesting point is that you have to save only 12.5 times your expense as compared to 25 times of the expense. And you can become Financially Free. Means it will be Rs. 37.5 Lakhs instead of Rs. 75 Lakhs. So, approx we will take Rs. 40 Lakhs. So, if we save  Rs. 40 Lakhs and get 8% return p.a., at the end of the year our INVESTMENT VALUE will be Rs. 43.2 Lakhs from which we will withdraw Rs. 3 Lakh and balance will be Rs. 40.2 Lakhs. According to this strategy if we save half of our salary and invest it, we will be financially free only in 10 years. I am talking about 10 years because of investments in REAL INVESTMENTS like STOCKS, INDEX FUNDS, MUTUAL FUNDS, etc and not FIXED DEPOSITS which offers 13-20%. Let's see how...

YEAR	DEPOSITS	GAINS	BALANCE
	25000X12	AT 13%	INDEX FUNDS
1	Rs. 3,00,000	Rs. 20,731	Rs. 3,20,731
2	Rs. 3,00,000	Rs. 83,156	Rs. 6,83,156
3	Rs. 3,00,000	Rs. 1,92,697	Rs. 10,92,697
4	Rs. 3,00,000	Rs. 3,55,479	Rs. 15,55,479
5	Rs. 3,00,000	Rs. 5,78,421	Rs. 20,78,421
6	Rs. 3,00,000	Rs. 8,69,347	Rs. 26,69,347
7	Rs. 3,00,000	Rs. 12,37,093	Rs. 33,37,093
8	Rs. 3,00,000	Rs. 16,91,645	Rs. 40,91,645
9	Rs. 3,00,000	Rs. 22,44,290	Rs. 49,44,290
10	Rs. 3,00,000	Rs. 29,07778	Rs. 59,07,778

If your current salary is Rs. 50000/- pm, it can be more or less, As  I am comparing with 50% salary, Even though your rate of savings is less, you can enjoy financial independence. But it will take more time. By reading the following example, you will be motivated to save more.

If you take 50% of your salary say Rs. 50,000/- x 50% = Rs. 25000/- and invest every month with average % return of 13. According to me, you can invest in any INDEX FUND in long-term. After 10 years, Your TOTAL AMOUNT will be Rs. 5907778/-. If you wish you can retire with this Rs. 59 Lakhs. You can save this extra Rs.19 Lakhs as a MARGIN OF SAFETY. But according to me, You can increase such amount by making investments and you should do. I am calculating this in a more serious matter. I am adding inflation in it. As India's Inflation rate is 6% -8% it's a huge percentage. Because of Compounding, it will get benefitted in the long - run. We will do adjustment in below manner - 

YEAR	DEPOSITS	GAINS	BALANCE
	7% Incremental	AT 13%
1	Rs. 3,00,000	Rs. 20,731	Rs. 3,20,731
2	Rs. 3,21,000	Rs. 84,607	Rs. 7,05,607
3	Rs. 3,43,470	Rs. 2,00,071	Rs. 11,64,541
4	Rs. 3,67,513	Rs. 3,76,857	Rs. 17,08,840
5	Rs. 3,93,239	Rs. 6,26,180	Rs. 23,51,402
6	Rs. 4,20,766	Rs. 9,60,938	Rs. 31,06,926
7	Rs. 4,50,219	Rs. 13,95,950	Rs. 39,92,156
8	Rs. 4,81,735	Rs. 19,48,219	Rs. 50,26,160
9	Rs. 5,15,456	Rs. 26,37,239	Rs. 62,30,636
10	Rs. 5,51,538	Rs. 34,85,334	Rs. 76,30,269

We will add 7% inflation rate at 13% rate of return into our Deposits, as the salary will increase due to inflation, you need not worry to live life as a spendthrift. Due to Inflation, your TOTAL PORTFOLIO VALUE will be Rs. 76 Lakhs. And remember  I have taken only 13% rate of return, and if you learn stock - market by investing in DIRECT STOCKS in this 10 years, returns of 15-20% are no where  gone. 

Suppose after 10 years, with discipline you have saved money and you became financially free and you choose only INDEX FUND, you haven't learned about stock - market, because you are happy with 13%, so see the below table. 

Before becoming financially free, you will withdraw Rs. 6 Lakhs. Your expense was Rs. 3 Lakhs. So why Rs. 6 Lakhs? Because, expense of Rs. 25000 at the rate of 7% inflation will get almost double at Rs. 49 Lakhs. We are taking Rs. 1000 in addition as a MARGIN OF SAFETY. We have to make ensure that we have to withdraw every month but not once a year. This has 2 important benefits.

MONTHLY WITHDRAWAL BENEFIT

Just like SIP helps to be safe from market fluctuations, in the same way this monthly withdrawal will help in spreading risk in these 12 months. So, if you withdrew at once this Rs. 6 Lakhs when the market goes down and then rises the next 11 months, see to it that you don't repent on your decision. So, we will withdraw on monthly basis. The second benefit is that the remaining amount will remain invested and due to compounding it will earn. Hope so, if your company pays dividends or bonus.

YEAR	GAINS	WITHDRAWAL	BALANCE
	AT 13%	Rs. 50,000X12	Rs. 76,30,269
1	Rs. 9,50,474	Rs. 6,00,000	Rs. 79,80,743
2	Rs. 9,93,133	Rs. 6,42,000	Rs. 83,31,876
3	Rs. 10,35,675	Rs. 6,86,940	Rs. 86,80,610
4	Rs. 10,77,687	Rs. 7,35,026	Rs. 90,23,272
5	Rs. 11,18,678	Rs. 7,86,478	Rs. 93,55,473
6	Rs. 11,58,060	Rs. 8,41,531	Rs. 96,72,001
7	Rs. 11,95,138	Rs. 9,00,438	Rs. 99,66,701
8	Rs. 12,29,093	Rs. 9,63,469	Rs. 1,02,32,325
9	Rs. 12,58,964	Rs. 10,30,912	Rs. 1,04,60,378
10	Rs. 12,83,624	Rs. 11,03,076	Rs. 1,06,40,926
11	Rs. 13,01,760	Rs. 11,80,291	Rs. 1,07,62,395
12	Rs. 13,11,841	Rs. 12,62,911	Rs. 1,08,11,325

As per the Strategy, Your invested amount which is Rs. 76 Lakh will give you Rs. 9.5 Lakhs at the rate of 13% in First - Year. If you withdraw Rs. 6 Lakhs , Rs. 3 Lakhs remains invested  - the Balance. In Second - Year, You will again withdraw Rs. 642000/- and balance will arise to Rs. 83 Lakhs and the Portfolio will again rise. 

So Friends, due to this method, due to safe withdrawal rate, there will be rise in wealth and your regular income will also rise. You will be fear-free from inflation. You will remain financially free. 

Dear Friends, this was to achieve Financial Freedom in only 10 Years, who according to me, anyone can follow.