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Now that you are aware of most of the investment strategies available, let’s get to know how to go about building a portfolio. 

Over the years ( 15+ to be precise), I have realized it’s not that hard to build your Freedom Fund in India. I should have started way earlier (probably when I was in school 😉 ) , but like we always say, better late than never.

I would love to share with the younger generation on how to get to your Freedom Fund. I am not stating the non-millennial’s have just lost the battle, it’s just that for non-millennial the 20K rule will have to be doubled.( probably a 20K x 2 rule?).

Freedom Fund : An ideal sum of money that will help you reach a state of Financial Freedom where you will never have to work for money. Money will work for you. Please be aware that the majority of Indians don’t have a  freedom fund. If your parents are dependent on you , learn what they did wrong. Did they have a habit of saving for retirement ?

Why should one think about retirement so early?

It’s very hard for someone in their 20’s to start thinking about retirement. Most of the older generation in India have deprived themselves of a solid retirement plan. They are so dependent on pensions and their children for all financial needs. Some even retired way early thinking they had their entire Freedom Fund ready !

This should not be the case going forward for us. Why depend on our kids when it’s our duty to build a retirement corpus that will help lead a life of dignity and freedom?

Inflation alone will eat up half of your savings if not invested wisely. Don’t you desire doing what makes you happy? Travel the world , spend quality time with your loved one’s , have a peaceful/healthy mind… All this can be achieved if you start planning early.

Imagine by age 45, having a Freedom Fund earning for you even when asleep. You will never have to do the boring 9-5 job and have all the free time to work on what you are passionate about !

Why on earth would I need a Freedom Fund(FF)  ?

Many feel FF is just another random investment gyan thrown around and have the following arguments deep engraved on their tombstones.  

Argument 1 : “I want to work till I die”

Some people argue “I am a busy bee and want to work till I die,I will get bored to death if I stop working”. I mostly agree with this thought process as I myself am kind of a busy bee. But the sad fact is that most of us don’t have a business of our own that we are passionate about. Most are working for someone else, there are those gloomy days when we feel “I can’t take this anymore” and want to just quit. But we can’t, can we ? Our commitments to life and the cost of living in a city will not allow us to do so. Being your own boss is way better than being scared of a layoff or working for a rude boss or a crappy project. 

“There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don’t like because you think it will look good on your resume. Isn’t that a little like saving up sex for your old age?”

Warren Buffett

Life is tough and having a sound financial plan will help us ease out the journey of life. As you grow older, the younger generation that comes in will be smarter than you and ready to work for a much lower remuneration. Just this fact that you can be easily replaced should give you shivers. 

Argument 2: “Money is not everything”

My school friend recently had this argument. It all started when I put a link to my blog on how to invest wisely. She saw the message and started to argue “why are people behind money these days , money is not everything , one should enjoy life! “. She had recently tagged along with her husband to the US and the only question I had was why did she move to the US leaving behind everything if money was not so important? To enjoy life one does need money. I agree that money is not the only criteria, but hey money can solve 80% of your problems in life. 

The argument went on and I had to finally quote Tony Robbins from his book “MONEY – Master the Game” which goes something like this, “If people argue about money is not everything , take a deep breath , look up as if asking for help from some supernatural force , look straight into their eyes and blurt out – You are broke, aren’t you,” Tony says that most people will have their expression change and immediately will change their stance on this matter. I could not add the look up and look into the eyes drama over whatsapp chat. I directly had to cough out “you are broke, aren’t you”. Guess what happened next ? I got blocked for life :). 

“Money is not everything , make sure you have enough before saying such nonsense” 

Warren Buffett

Argument 3: “I have a truck load coming in from ancestors”

I may sound a bit rude , but hear me out with an open mind. If you feel the  property in cash/gold/real estate that your loved one’s will leave behind will help get through your retirement , think again. With the improvement in medical science, the survival rate has drastically gone up. By the time all that worldly possessions is passed on to us , we would be ourselves well into our 60’s. Don’t you want to enjoy your savings when you have some energy in those legs.   Also to add, the will your parents write would have clearly stated after their demise, all their savings would go to their beloved grandchildren/s. 

Even if you somehow get all the treasure chest ,most of the assets that get passed along will not be easy to liquidate. More than 2 siblings , there is a fight for property. 

Dhirubhai Ambani created an empire of 90 thousand crores through Reliance. After his death the goodwill got passed on to his children Mukesh and Anil. What happened next everyone knows. Depending on ancestral property is a bad idea !  If Mukesh and Anil can fight for a bigger share of 90 thousand crores, I am assuming what will get passed on to us will be peanuts after the share. Anil Ambani is now bankrupt , no truck load will help you , if you are not wise with money!!

A self built freedom fund makes sure that none of the factors are limiting you from taking that dream vacation that you have been planning for decades. 

How much would one need in their Freedom Fund ( FF )?

The FF numbers are just a hypothesis from the books I have read and the general consensus is as follows:

1. Find your monthly Expense ( add up rent, food, clothing, entertainment , etc.. )
2. Multiply that by 12 ( to find the yearly expense )
3. Multiply it by 25-30 ( 1000/age , Let’s take 30, as inflation in India is at a higher side)

Freedom Fund(FF) to retire at age X = Yearly Expense * ( 1000 / X) If one plans to retire at 30 with yearly expense say 5 Lakhs , FF required would be 5,00,000 * ( 1000 / 30 ) = 1.67 Crores

The 1.67 Cr should be in investments that are generating a steady stream of returns for the remainder of your life!

As a newbie living on a monthly expense of 40K  is a borderline case of being spendthrift 😉 . I would suggest curb down on lavish spending. If you are in debt already, just start living like your kidneys are in a garage sale and you need to buy them back asap! Curd-rice and pickle party till the kidneys are back.

1.67 Crore looks a lot for most of us ( looking at our current investment portfolio, it does 😉 )… Now let us see how easy it is to achieve, see 20k Rule .

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