Transcribe
So whenever you ready let's get going. Yeah. Hello, welcome to open Talk. Hi Ashley. So, how are you doing - today, I'm doing good. How are you? Oh, I'm good as hell wonderful. So yeah, so for all the listeners who will be listening to this conversation Manoj is a best-selling author and he loves to write and talk about Financial Freedom. And this is a series of open dog that we are doing with Manoj to understand more and prepare ourselves for being financially independent. This is today's conversation is second in part in common mistakes with Made while planning for Financial Freedom. So my knowledge, would you love to just recap on what we discussed last time? Sure. So thanks that you need so I think last time when we talked about the common mistakes while planning for Freedom with the stone two steps. The first one was cash flow. We we talked about our income and expenses and how you know, the cash flow determines the speed at which you move. Towards your freedom goal and the second step we talked about was that in defying our Network Financial Network where we talked about assets and liabilities and what common mistakes people do while identifying assets and liabilities and how our Network determines the starting point of our journey towards Freedom. So now we know the starting point having calculated the network. We know the speed at which we are moving. Having known our cash flow now. It's a question of finding out. Where do we need to reach? What's the endpoint and how how much time it's going to take to reach there? So that's what we're going to discuss today, right? Perfect Manoj. In fact for all the listeners. There are some very simple rule of thumbs which Manoj shared last time to be able to identify what is an expense and what is not an expense and what is alive D what is not a liability so would request all of all of the listeners to do check out that episode as well and let's dive into this one when it's so we've covered two steps. Let's talk about the third one great. So see until now we talked about our past financials or our current financials. Okay. So what's our current cash flow how much we're earning how much you're spending today? What server Network so what have you already are? And wherever you missed it, we all talked about either the past or the present. So today in step 3. We will talk about little bit about our future. Okay. So how does how does the Freedom will gets impacted by certain future happenings that are likely to happen in our life. So we call them as future events or special events in our life. So there's a lot of events which we foresee in our life. So as an example, I'll tell you. So if I have a family that I have two kids, so I have a certain set of expenses that I do today. But I also for see that as they move along they going to get educated in some good college. So I'm going to spend a little bit more money on that which is over and above my regular expenses. They going to get married someday, so probably I need to keep a budget for that which is again over and above the general expenses I do today. So not only that, you know, a lot of people also want to plan for things like once they financially free they would like to travel bit more than what they do today. They would like to do more charity or they would some of them, you know, really want to start up their own venture or something. I know people who want to start a cafe who want to start their own small business. So so there's a lot of things which we plan to do in life and this One life. So you want to plan for it in your Financial Freedom has to be planned in a way that can budget for all these kind of future events. So that's that's one mistake which people usually do is they forget to you know, think too much Beyond certain set of years. So I would always encourage people to think through their life how they want to craft their life and if they can visualize a little bit of it they should try to budget certain certain. Fences which they think is likely to happen in future. So that's one of the steps we talked about usually after this which is future event, you know planning for future events. Right, right, right. But in this when we are saying we're planning for future events. How do we how do we plan those expenses? You know, so for example, do we set a number to it? And so for example, of course certain events, like education you mentioned kids education or you know weddings. So some of these are still which can be there can be expenses which can be factored in but let's say for leaving the for Or leading a good life. Once you retire once you're financially independent expenses and and not to miss out on expenses which could be medical cost. For example, which might just come we have not really planned for them or even if you have to how do we what is again? You know what I would ask for a simple the simple rule of thumb or our how do you still think about it so that we can manage that numbers better? Yeah, so I think things like medical expenses or unexpected events like these usually we go for insurance. So we will have enough insurance cover health insurance cover over and above the life insurance cover that we have. So typically you want to handle these unexpected unwanted events like health related issues and life related issues through insurance policies. So we usually budget for them as a health insurance policy law. People, you know do this mistake also that they do not buy any Private health insurance till you know, they get financially free because they're usually covered by their employers or whatever businesses they are in but you know, that's a very big mistake which I also did and I realized it later that a lot of you know health related issues need a minimum minimum period for which you need to be insured. So for example, if you quit your job and then take a private health insurance because till you were working you were covered by your company, then you know, you need to have at least two to three year period for certain ailments and if some suppose unexpectedly something happens to you during that two to three-year period you're not covered in that period for those elements. So I think this is one big mistake people do so. I always advise people. It by the time you're reaching your Financial Freedom. Let's say it's in 2025. Then you start taking your health insurance covers from 2022. It is two to three years before your Financial Freedom year so that you're covered seamlessly and there's no gap between while you leave your job that's on the insurance side in general. As you said, you know, it's very difficult to put in a mound, but how we do it is very simple. Let's suppose it's talking about let's talk about let's opening a opening a small Venture, you know, so what I would do is I would really go out and ask people if I was to open this venture today how much I would spend okay if it's a small Cafe for example, so probably some 10 lakhs 20 lakhs. So, you know, you go to venture out ask your friends move around because they ultimately if you want to do that, it's your passion. You know, it's something that really interests you. You'll be moving around and asking and I just need to know what is the cost today and then put an inflation figure and then, you know come out with okay. I want to do it in 2025. So obviously the system the tools that we have we would calculate. Okay, how much would you really need to spend in 2025 and they will accordingly, you know budget it from your financial. Understood one more question the same subject knowledge may be getting slightly more technical. Yeah, but how and how do we think about you know inflation or or the the decreasing value of money as time goes along, you know, so for example today, I may think that okay, maybe fifty thousand or 1 lakh is enough for my monthly leads and for me to live whatever life given factoring all my expenses now hot now is that this amount will Remain the same however fact the you know, the decreasing value of money over time very true. That's very valid question. And after we have taken care of, you know, these future events where each event can be, you know adjusted with its own inflation figure for example kids education, you know is rising at an inflation which is probably higher than probably travel. Okay. So each event, you know, you have an option to adjust the amount with a specific figure of inflation. Now after we have talked about events, then there are four other inputs that we take in Step number three. One of the first one in fact is inflation as you talked about so and it's a very very very important point in most often missed the of times. We see people buying insurance policies, which say, okay the you will get 1 crore plus in here, too. D 50 well, actually that 1/4 Plus in 2050 has no more value than probably five to ten lakhs today. So, you know inflation is a killer if you don't care for it. And so so while we're planning for step three the four other inputs that we take other than future events. The first one is inflation. So we go to factor in currently running inflation in India could be around six percent or so. So we have you know On our website, we have Global figures available. So people from different geographies, you know have can take care of inflation running in their geographies. So that's how they can select it. So other than inflation just to continue on your point. There are other factors that need to be considered. For example, how much money I need which is Financial Freedom would also depend on how long I'm going to live, you know, so after I become financially free How much how many years the money has to serve me? So we go to even ask teammate how long I'm going to live and while that can be very, you know, crude judgment, but then usually from a financial perspective. We estimated 90 years is what you should be taking as in general. A lot of people take even 60 70 years, but I always encourage them to go higher try to live more. In don't see Mystic about your life and unless you know, you're really suffering from some serious ailments or anything. You should always strive to you know plan for at least 90 years of age if go even higher up for myself. I planned 400 and why not, you know, if I'm imagining something I would really want to do it more and more and if it helps people around me, why not? I mean so so go and plan at least 90 years. Age so that you have enough funds and you don't want you know, you don't know about leave your money at any cause so so even if you have some spare left at the end of your life, it's okay, but you don't want a situation where you have no money and you still living on so that's that will be pathetic. So that's another and other than that, you know, there's a couple of other factors which need to be taken care of. We talked about Savings in our step one, but your savings don't remain the same as as we move along your increments will happen inflation will get factored in so we usually talk about a factor called as a savings increment. So what is the increment in savings you foresee, you know, it could be because you have become more clever on your expenses. It could be because you started earning more and you want to really save more savings increment becomes another Factor. It could be 5% 10% per year or whatever and last but not the least. We talked about net worth and we talked about what returns our current assets are giving to probably today Northeast people, you know come in initially. They have a very low Roi on their portfolio. So the returns are on average like five to six percent over the entire portfolio, sweetie, but you know while on the journey they going to learn a lot about finances about just investing more wisely. So we also factor in something called as a post Freedom are Why so today they may be at five to six percent but let's say five years down the line when they are closer to Freedom. We project that they percentage returns from your portfolio would go up by at least two to three percent. You know, they would somewhere come in the range of eight to nine percent. So that becomes a very important factor because that's what will Define your returns after freedom and that's a very long period of life so that becomes a very important factor to so Just to summarize in step 3. So we're going to talk about future events we go to foresee our life we go to, you know, craft it in our mind first budget for it. And then you know, it's going to happen that way and other than any future events, we talked about inflation calculating the last year of life savings increment and the post Freedom Roi. Wonderful, wonderful Manoj so one of my major learning from from point number three, was that even if you factor in future in future expenses future events, each of them have to be factored in with their individual inflation rates as well. Because I either this is a completely fantastic point because usually, you know, we just we just take the inflation number whatever we get from internet or from news and just apply it Point Blank, but you're absolutely right. Education International Education if you want or even even in India education has become many folds expenses in last last 5-10 minutes. All right. Okay. So so now having you know, given all these inputs from step one, two, three. What are we going to get? We what we were targeting was trying to find out where do you want to reach our end point? You know, so we had the start point we had this Speed but we didn't know where do you want to reach so after, you know feeding in all this data, there are certain tools in the website, which will try to calculate how much money is enough for you based on all these inputs given which can sustain you for the rest of your life and we call it as a freedom Corpus. That's a very very important figure. So today you will net worth maybe a 50 lakhs a one grow, whatever but You tell you in? Okay, you need to point 6 7 crores by the year 2030 to be financially free for the rest of life because that's the best possible the least possible amount in the least possible year which can sustain all your expenses with inflation. Take care of all your special events. They kill of take care of all the inputs have given and you'll still have some money left by the time you end your life. Okay. So this is one figure which I would say 99 to sin of people on this planet do not know that how much they need to earn which is enough for them. Okay, people are always under the confusion that they may have less. Okay, and that's where they keep earning the keep on they don't know what's enough and again I say that you know these assumptions may not all hold true. So you go to obviously keep certain certain buffers. Between which we do but still you go to have some idea. Where do you want to reach, you know, you started from Delhi you started with a certain speed but you got to know where you're going right? Where do you want to end and that's so important in life. So Freedom Corpus is what this going to tell you and it's also going to tell you Freedom here that is today is 20/20. So to reach this Corpus based on all the inputs. I've given it's going to take me another seven years to reach there. So these two critical parameters come out after step number three, which is where do I need to reach and how much time it's going to get there? Well, and one of the interesting thing to note in this in this exercise, it looks like is that you know while you're also controlling that while you're also realizing that maybe you don't need so much in life. You know while you you there are some numbers at you whine fond of you have here people come to a random conclusion that okay, maybe with 10 crore is what I want to live a happy life 50 crores, but if This analysis very methodically. He will arrive at a very reasonable irrational number. Maybe they're not correct, correct. But and that point you there's a satisfaction intimate in your heart to get this is the number which lead to a life which I have planned for me and the second and sometimes it's the other way around. You know. Wow. It's such a big number two point seven Scrolls looking at it right now looks so big but with right with just working making progress every day, it's me. Achieving but maybe it's at evil within 10 years within 20 years of July of working in your current in our current trajectory. So yeah, I mean I just said it's not only about variable to reach how long it's going to get there, you know. So as you said lot of people feel old reaching 3 crores is too much for me. I can't do it in lifetime. But you know this calculator or this entire system would also tell you it seems so but you know, the compounding effect has to come in place. Somewhere we talked about compounding in a one-hour sessions and this compounding effect is going to make it much easier for you than what you feel. So the system calculates based on compounding based on all inflation adjustment everything and tells you okay is only going to take seven years if you stay disciplined and be persistent these seven years you can get it done. Well, absolutely and and and to all the listeners I again would highly recommend checking out my ogis website. We've the link is there in manage profile as well. So do check it out. Okay manage on to the next point then yeah. So the once you know your goal, I mean, where do you need to reach in how long it's going to get there? Your targets are set what next? So let's say it's a seven year long journey. And you would reach from one crow two three crore. So the obvious next next step would be let's start going on to the journey and let's start tracking it. Okay, because you know setting a goal is normal to get you there you go to make sure that month-on-month week on week you are ensuring that you are on track. Okay, so that's what step 4 is about which is about creating smart monthly goals and you know get going with okay, so you will have I'm going to be from one chord to 3 crore. Okay. So what am I going to reach after one month? Okay. Is it going to be one cro 23 lakhs 350 whatever that much net worth I go to reach that much. Roi would ensure its being achieved and so that's the target. Month, I have a Target and I'm going to track my actuals against those targets and see if I am deviating from my goal. And that is one of the most neglected parts of any journey. I would not only say Financial Freedom. We set up a good goal. We have a very realistic goal. We have wonderful, you know, we are passionate about achieving it. Everything is fine. What is we, you know, we we feel that it's going to happen of its own. It's not going to happen you. You to borrow track it against certain smart Milestones month on month. And if there is a deviation able to fix it the same month then only you want to get there. Okay. So step four is all about Lee tracker which tells you where you should be at the end of each month and track your actuals against it if there is a deviation discuss it out with me or who so is your advisor and then take corrective actions and keep moving. So that's all set. What is about right? Right, right, right. And and how would we would we go into details in talking about the right tool or or the right method of tracking it? Well, mostly it's on our website. It's automatically generation. As I said earlier in is free to go and start using the website from step one right away from there. And there is no restriction. It's all free to use their lot of help send tips available on the website itself on how to start or use those tools and smart ways to use those tools, you know, so I think I would encourage people to just go on and you know start using them perfect. Okay, so I'm just thinking I have three more steps. So should we break it up for today or how should we proceed with and take another 10 15 minutes at least? Right, I think when you let's let's break it up. In fact, in fact, it's a it's a great segue that we've already built. So, you know, we know what is our starting point. We know we have to reach we know how much length we have to run for and how fast we have to run or how slow we are running or how fast we are running it now and then the last point was just setting up ways and places to measure as ourselves or track we are doing and also we have a stopwatch or we Yeah students to take an analogy from Athletics. So so yes, so we are now all set to run and we have the right ammunition right methodology right mentors with us. And that's when I think now the next topic our next discussion. We actually talked about how to run our other mistakes probably that people make while running probably right true true. Perfect route. Okay. He alright Manoj I think this was fantastic and thank you so much again for being here and sharing with all of us how to become financially free and beep and plan for it. I think that's most important. So yeah, I wanted would love to host our next conversation fat. I'm looking forward to it now and given the way you explain I myself felt during the I think again one of the biggest takeaways. Is for me was you know that number that number while it does, you know, everybody should know the number, you know, where do I reach in life So eventually, right right and and and and I think the second part also that, you know have a have like you said on your website have a have a great plan to reach that number so that so that does not look number one intimidating and it does not look that okay. It is achievable but with proper planning true super thank you, so So much Manoj. Yeah, so we'll catch up soon on the last three steps in our next talk. Absolutely minutes. Okay. All right. Take care. You too. Bye.