The other day I was talking to a boy who has just landed his first job. He wanted to know some of the things, which he can do in his life to expedite his financial independence. In the short discussion that I had with him, I shared some of the learnings from my experience. I am presenting the gist of that conversation here for the benefit of the broader audience.
The first set of points below are focused on income generation. Higher income is a very important factor in deciding your wealth. Only when you earn a higher income, you have the potential to save more money which can then be deployed for further growth.
- Invest in building your skill and stay ahead in the learning curve. Education is a continuous journey. Investment in education and learning has a multiplier effect on your career and wealth accumulation. Make sure that once you have acquired these skills, you monetize them by finding the opportunities, where you can leverage these skills.
- Acquiring knowledge is important but the ability to articulate your knowledge and thought process in a way that is easy to understand for others is even more important. Do not let go of any opportunity to present to individuals, groups, clients and in various forums. A visible effort is proportionally more rewarded than an equal amount of invisible effort.
- Ask for opportunities that you will enjoy and which will help you grow. Once you get the opportunity of your liking, give your best. That will encourage your boss to reward you. While the boss will set the expectation for you, do not hesitate to set your expectation with your boss. That way you will set yourselves for higher performance and reward.
- Be a smart negotiator in your life. In any negotiation, be clear about what you must secure and what you can let go of. Negotiation is never an all-win situation. If you have negotiated your must-wins, you have done your job.
- Be a smart Risk-taker in your life. I was once offered a good amount of stock options in lieu of the reduced salary. Since the company was not that well known, I settled for a lesser number. In hindsight, that decision delayed my financial independence as I chose to play conservative.
Once you have surplus money from your income, you need to invest and grow that money so that the return can beat inflation otherwise the value of your money will erode over time.
- The first and most important thing is to educate yourselves about available investment options. While you can take the help of an Adviser to streamline your finances, you should understand and be in control of your finances at all times.
- Start early. If you start early, you can afford to take risks, make mistakes, learn from them and sharpen your decision making acumen. It provides you with a huge amount of flexibility and the potential for early financial independence. Remember, Time is of the essence.
- Use a structured approach (Financial Plan) to financial independence as that will keep you on course to meet all your financial goals.
- Calculated risk is important. For most of us, investment only in a conservative asset class such as fixed income will not be sufficient. Hence explore and invest in alternate asset classes including Equity with an inflation-beating return.
- Always invest according to your Asset allocation so that your investment is aligned to your risk profile and your ability to afford the risk.
- If you can do it on your own, go ahead and do it but if you do not get success, do not lose time by continuing to use the ad-hoc approach. Sometimes it is wise to take the help of a Financial Adviser to learn the industry best practices and get a head start. You can then manage on your own.
The writer is a SEBI Registered Investment Adviser and Founder of FinMyn (https://finmyn.com). He provides Fee-Only Financial Planning and Investment Advisory services. To know more about him, click on https://finmyn.com/about/.