Empower Your Children to Achieve Financial Independence

The other day, four of us college friends met over dinner. We all are now in our early fifties. We were meeting after almost two decades and were reminiscing over old memories. By now, everybody is well settled in their respective jobs and also in life. Most of the family responsibilities are over, children have grown up and joined their professions. The discussion slowly drifted towards daily routine and revolved around the job profile. All of them had a similar routine. All were busy from Monday to Friday having the responsibility of completing assigned tasks. Though the work-from-home schedule has provided well-deserved relaxation, the job still demanded due seriousness and time. They all were busy throughout the day while attending client meetings, resolving various issues, and trying to adhere to the project deadlines. I could sense that they are exhausted and bored with the daily routine.

Seeing me silently listening to their story, Manish asked me about my daily routine. They were aware that I had quit my job too early and now I am pursuing my passion. I said I do not have any fixed schedule. I do not plan any of my days. Most of my daily time is spent with my wife and the rest of the time I enjoy reading a lot of books, writing, and investing in the stock market. Very early in my life, I realized that I had a desperate desire for complete independence. So I deliberately chose to retire early as I wanted the freedom to live my life on my own terms. And I knew that if I have to achieve this lifestyle I must become financially independent. Hence, in this quest for freedom, I became financially independent at the age of forty-five. Since then I need not work for money. Financial independence gives me the ultimate freedom to choose how I want to live my life. I desperately wanted independence so that I can do what I love to do. And, here I am, sitting timeless, without worrying about tomorrow. I have planned my life in such a way that at this juncture I am completely free to explore all the possibilities life may throw at me. I am ready to receive the blessings with folded hands.

After listening to my story, I was surprised to see that all three of them were seriously deliberating on quitting their job. Everyone has a strong point of view about this. Prashant said, “I am going to surely quit in the next year.” Sumit said, “I am also thinking the same but unable to take a call.” Manish said, “I too desperate, but may be in two to three years.” They have their own reasons for quitting. Prashant was bored with his job and wanted to live a peaceful life without doing anything. Sumit thought he had worked for thirty years now and hence wanted to stop at some point but was not sure where. Manish wanted to follow his passion. The reasons may be different but the bottom line is that all three looked quite serious about it.

I immediately interrupted them. I emphasized that quitting a job at this age to follow your passion is not as easy as it looks to be. It is the most difficult decision of life and hence they must not hurry. It has many inherent challenges. It is easier said than done. It has many long-lasting repercussions on the entire family. Quitting a job now may be easy but sustaining a present lifestyle without a job is extremely difficult. I suggested that they must consider the following issues before taking a call:-

Want to quit a job to follow passion? Answer these questions first:-

1. What are your plans after quitting a job? What are you planning to do next?

Manish said, “I will follow my passion.” I asked him, “Do you know your passion? Have you ever discovered it? If yes, how passionate are you about that thing? Will you love to do it throughout your life? What if you do not like it after a few months?” He had no answer. So, even if you think you have found your passion and are prepared to follow it for the rest of your life, it is not so easy. Passion is one thing which you must enjoy and love to do it repeatedly, day after day, throughout your life without getting bored of it. If you think you can do this, you may consider this option. However, there will definitely be times when this so-called passion will wane out with a due course of time, and at that moment you will be left with neither your job nor your passion. So, think hundred times before taking this decision. The most profound question you need to answer is,” What are you going to do with your life, post-retirement?” If you do not have an objective answer to this question, you are still not ready to explore the freedom of life.

2. Have you saved enough to live a comfortable life without doing any job?

Prashant said, “I am not going to do anything. Just chill, relax and enjoy the rest of my life.” I was ready with my question, “Have you saved enough money to live a comfortable life without doing any job?” He said, “Yes.” I asked, “How much money do you think you need per month to live a comfortable life?” He replied, “Rs. 35 K.” I asked Manish and Sumit. Manish said, “Rs 75 K.” Sumit was of the view that Rs. 50 K is enough. I was expecting a figure of Rs. 1 L per month. And for the next fifteen minutes, having three drinks down, Prashant was screaming and shouting at me for arriving at this figure of Rs. 1 Lakh. It was fun seeing him in this avatar. He had based all his future calculations on this figure of Rs. 35 K and I was challenging his every plan, every calculation.

I completely agree that monthly expenditure is a personal subject and varies from family to family. However when you want to take the decision of quitting a job and wanting to enjoy life thoroughly, then all your calculations must cater to unforeseen risks. And hence, I suggested the higher figure to enable the family to prepare for the worst eventualities. At this moment, when you have a job in hand, your perspective is totally different. Your vision is blurred by the habit of receiving the regular pay cheque. Hence, you are unable to even imagine what will hit you once you quit a job. I have been in this situation for more than three years now and hence I am presumably in a better position to look at these things from the other side. However, as usual, Prashant was not ready to listen to my views at all. He was hellbent that even with any risk, any inflation, any challenge, he will able to manage with the figure of Rs. 35 K.

Once you have decided on your monthly expenditure, the next question that arises is how much savings one must have to quit the job. And believe me, this is not a very astronomical figure. I have arrived at this figure with the assumptions of a monthly withdrawal of Rs. 1 Lakh towards the household expenditure, a modest expected rate of returns of only 8%, and annual inflation of 6%. So, even with such constrained assumptions, if you use the Systematic Withdrawal Plan (SWP) judiciously, you will need only Rs. Three Crores to live a comfortable life. Hence the price tag to achieve ultimate freedom from the job is a small amount of only Rs 3 Crores. That’s all you need to enjoy your life on your own terms. With a working span of about twenty-five to thirty years, accumulating this amount is not a big deal.

However, as I said earlier, all this looks simple, exciting, and easy. But this is the half-truth. I have given you only the financial solution. However, the main challenge in quitting a high-paying job is more psychological than financial. One needs tremendous courage, conviction, and mental strength to take this decision and live a happy life. Let me help you understand this aspect in a bit more detail.

3. Do you have enough mental strength to quit your job?

Quitting a high paying job at this age to follow passion for the rest of life is not so easy. The biggest challenge here is psychological. At this juncture, you are used to receiving regular pay cheques month on month. Leaving this regular payment of Laks of rupees and sitting idle at home without doing anything is not a cup of tea for everyone. It needs real courage and conviction. There will be enough testing times when you will start questioning this decision. Do you have enough courage to let go of this comfort for the freedom of life? Can you choose freedom from your job over this regular pay cheque? Do you have enough mental strength to let go of this easy money and focus only on your life? Believe me, it is the most difficult thing to do. Also, as you start dipping into your savings, you will loose your peace of mind. These are all inner conflicts. You must be mentally tough to focus on your quality of life rather than worrying about regular pay cheques.

Additionally, once you quit, you will start comparing your life with others. Your friend, who is still working, will now buy a Mercedes, a farmhouse, and a villa. In such an enviable condition, you should be at peace with yourself. Do you have this spiritual awakening? Many don’t. And this is what is required to live a happy life. Ego, hatred, jealousy, and comparison are the most difficult vices to tame for the worldly human being. If you can do this, then only you should think of quitting. Else, stay on course, and be happy with your monthly pay cheques. Mind you, early retirement and the quest for freedom is not for you.

In the society in which we live today, quitting a job in between to enjoy life is considered the most foolish thing to do. No one will buy your decision. Everyone will criticize you for this. In conventional society, you will be looked upon as a big idiot. You need to garner enough wisdom to feel happy to be called an idiot. The path you intend to choose is laden with many unseen, unexpected hurdles. Be mindful that by taking this decision, you are movingout of your comfort zone and entering unchartered territory. It is not for the faint-hearted. To travel on this path of freedom, one has to be a bit crazy, restless, and unconventional.

4. Have you consulted your wife/husband about this decision?

At this age, many of us have Rs. 3.0 Cr in savings. It is not a big deal. Even if you have enough funds in your kitty, can you simply say goodbye to your job and sit at home from tomorrow? Have you spoken on this subject with your wife/husband? If you haven’t yet spoken with your spouse about quitting a job and contemplating doing so on your own, then please don’t do such a blunder. It is one of the most critical decisions of your life and hence it is your moral responsibility to take her opinion. If your spouse is not yet ready for this decision, do not fight with your wife/husband. Just forget about quitting your job and move on with your life. Believe me without the consent of your wife/husband, it is not even worth thinking about this issue. Don’t force your decision on your wife. She is right in her own way and she has all the right to say, “No”. Respect her views and stay on course.

Additionally, you must also discuss this aspect with your children. Make them understand your feelings, aspirations, expectations, and financial calculations. Few children may understand, and few may not. Irrespective of this, it is always good to involve them in the decision-making process. It will be a great learning curve for them. Allow them to express their views, listen to them aptly, and convey to them that their opinions do matter.

Checklist for seeking freedom from job:-

Even after all these warnings, if you are still desperate to quit your job and enjoy your life on your own terms, then let me help you with the checklist to arrive at this decision:-

• Try to find out your passion and decide on how are you planning to spend your life after retirement.

• Introspect whether you have enough psychological strength to quit the job and follow your passion.

• You must achieve financial independence before taking this decision. Before quitting a job you must build savings of at least Rs. 3.0 Crores.

• Consult your wife/husband and children about this decision. Go ahead only if they agree with you. Else, continue with what you are doing now.

• Do not take this decision looking at someone else’s life. His life and your life are two different worlds. This is your life and you must take this decision on your own.

• It is advisable to take a one-year sabbatical and check whether you are comfortable in this situation or not. If not, then join back your work and continue your routine life.

• Introspect, how desperate you are to seek this freedom from your job. If you are not desperately wanting this freedom at any cost then this is not the right choice for you. Better follow the conventional path and enjoy your present life.

• Most importantly, before quitting a job, it is essential to listen to your inner voice. If your inner voice is saying, “NO,” then don’t jump into the fire. It will be a complete disaster.

• If you or your wife are attached to materialistic life goals like a bigger car, a bigger house, and so on, then this path is not for you. Please make a U-turn and keep visiting your office every day.

• If you believe that you live only once, you are a bit crazy, restless, and desperately feel that you want to be different from the rest of the crowd, then only you should take this route.

If you cannot achieve financial independence and freedom from job, at least empower your children to do so

When we started earning thirty years ago, very few of us had this vision and awareness about investments and wealth creation. None of us have heard this word of financial independence. However, today, our children are fortunate to have a barrage of information, tools, and awareness about investing. They are at the right place at the right time. Next twenty-five years belong to India. You cannot imagine how much wealth will be created over this period. In the next twenty-five years, the Indian economy will grow at an unprecedented rate. Today, the Indian economy is about $3 Trillion. In the next twenty-five years, by the time our children attain the age of forty-five, I will not be surprised, if we achieve $30 trillion economy. Imagine a 10X growth in just twenty-five years. This is real and not just a dream.

If you cannot achieve financial independence, at least ensure that your children achieve this. If you cannot pursue your passion and live your life on your own terms, empower your children to dare to dream without worrying about money. It is up to you to show them the correct path. I have skin in this game. I am invested heavily, and both of my children have already started investing right from the age of eighteen. Armed with this knowledge, you can ensure that your children become financially independent by the time they reach the age of forty-five years. Even after reading this article, if you do not act now, you will be doing gross injustice towards your children.

As of date, when you need Rs. 1 L expenditure per month, then after twenty-five years, considering inflation, your children will need about Rs. 5 Lakh towards their household expenses. To achieve financial independence and freedom from job, they must build a wealth of Rs. 10 Crores. Building a wealth of Rs. 10 Crores over twenty-five years is a cakewalk. It is called the power of compounding. You don’t need rocket science to achieve this target. And believe me, it is absolutely achievable. What your children need to do is to just start a Systematic Investment Plan (SIP) of only Rs 30,500/- per month and annually increase this investment by 10%. To simplify further, if you can invest only Rs. 30,500/- per month in a SIP and increase annually by 10% then after twenty-five years, you will have created a wealth of Rs. 10 Crores.

The price tag of achieving financial independence for your children is only Rs. 30,500/- per month.

I know that this is achievable. I have seen this happening before. However, the biggest challenge in achieving this goal is not financial but psychological. It is all about behavioral investing. It is about how you think and act with your investments. If you want to achieve financial independence then the only aspect you need to build is your psychological behavior towards your investing decisions. For the past year, I have been repeatedly advocating the importance of behavioral finance in almost all my articles. At the cost of repetition, let me reiterate again that long term wealth creation is a complete mind game. You must play it that way.

Let me simplify all these aspects by giving a detailed checklist.

Checklist to achieve financial independence for your children:-

• You must start investing with your first pay cheque. Earlier the better. Do not delay.

• Start SIP of at least Rs. 30,500/- per month and increase annually. If your starting salary is less, then invest as much as possible and increase the SIP amount as your salary increases.

• Never ever stop this SIP, and do not withdraw from this kitty.

• Let this money compound over the next twenty-five years.

• While investing, focus on your ultimate goal of achieving financial independence.

Discipline is the key. Plan and execute meticulously.

• At times the market will be volatile, irrational and ruthless. In such situations, keep your cool, hold on to your nerves, do not panic. This is the best time to invest additional funds. Market will test your mental abilities, do not allow yourself to wander. Irrespective of the market behaviour, stay on course.

• Do not listen to cheap advise from friends and colleagues. It will destroy your wealth creation process.

• Achieving financial independence is a long term game. At every stage the market will test your patience. Inculcate the habit of building adequate patience and let your money compound.

• Stay away from distractions like trading, future & options and crypto. They are the sure shot recipe for disaster.

• Creating wealth is more of a mental game than financial. Play it that way, prudently, diligently, wisely.

If you follow all these suggestions, I assure you that on 15 Aug 2047, when we all will celebrate the 100 years of Independence of India, our children will have achieved true financial independence. And this would be the most precious gift of life for them.

Always remember the wisdom of Charlie Munger. He said:-

“Like Warren, I had a considerable passion to get rich, not because I wanted to buy Feraris … I wanted Independence, I desperately wanted it”