I have written a lot about achieving Financial Freedom. I am often asked questions about my ability to hold my life at the other side of Financial Freedom. These questions are asked in different ways, sometimes directly, sometimes indirectly. This article is not about achieving Financial Freedom; this article is about sustaining it. I will try to answer questions related to those questions in this post. Broadly speaking, the all such questions can be summarised as:
How Do You Survive Financial Freedom?
This question, as I think of it, has two aspects to it – financial & non-financial. In this article, I’ll try to address both the aspects of a Free Life. So, let’s split the question.
How Do I Survive financially? And How do I survive non-financially?
Genesis of these questions
Imagine achieving Financial Freedom as climbing a mountain. You stand on this side, wondering how the other side will look like.
At this side of the mountain of Financial Freedom, you are anchored to frames of references – financial (regular salary) & non-financial (a ‘busy’ but unproductive routine). While tethered to such anchors, it is difficult for you to see the other side of the mountain of Financial Freedom. These questions arise in the mind because of a frame of reference problem. The thoughts of people pre-Financial Freedom, are anchored in a life which is
- Financially dependent on and accustomed to a regular salary. No matter what is happening to the outside world, the salaried person gets the regular dose of income. Salaries rarely vary in sync with economic conditions (unlike business incomes). The Lifestyle & mindset gets evolved accordingly.
- Engaged in a ‘pillar to post’ schedule which blinkers the vision and zombifies a person to mistaking being busy with being productive.
People are anchored in a reference frame of a stultifying life & regular income. This anchoring is strong to the extent that even if people don’t enjoy it, it is very difficult for them to imagine a life in another frame of reference – a life full of freedom.
Before I start addressing those two questions, let’s quickly look at what the end goal is! The end goal is…
A Free Life
A free life is one, which you’re able to live on your own terms. No outside circumstances or people are able to direct your life or schedule against your free will. The metric is not hard work, but freedom – freedom to work as hard as you want on the domain you want, with or without the people you want. A free life does not guarantee you freedom from suffering, failure and hard work. It only gives you freedom of choice – to live life on your own terms, a life devoid of any bonded labour or slavery. Having said that, a free life does improve your chances of success as you think & act without any pressure; plus the fact that pursuing your passion also makes the journey pleasurable.
Having understood what the goal is – free life – and what is the genesis of the question – the frame of reference…let me try and dwell on the two questions.
How do I survive Financial Freedom, financially?
In some ways, What Got you here will get you there (WGYHWGYT).
WGYH
It was a correlated progression of a two step process WGYH
- Living within means – You never overstretched yourself in ‘improving’ your lifestyle by taking consumer loans. You rather, lived within means, consistently saving and setting aside surplus funds.
- Allocating these surplus funds in growing assets, like shares of good companies, or Equity Mutual Funds, or other assets.
The consistent iterations of these two steps lead to the cumulation and growth of wealth, that enabled you to achieve Financial Freedom – a stage where your money makes enough money for you to take care of your lifestyle.
(Cost of Living) = Living expenses+Protection+contingency+Taxes
(Savings)=(Income from Job & assets)-(Cost of Living)-(Inflation)
(Wealth)=(Savings)x(1+r)t
WGYT
You continue to retain and grow these assets with the objective of long term appreciation. Nothing really changes, but one thing…salary!
In the old realm, you need not worry about the cost of living. It was taken care of by salary. In the new realm, the primary source of income is missing.
This has both real and psychological effects. You need to find a real source of inflow to take care of your cost of living. Psychologically, earlier you just took care of spending. All you needed to do was to keep it below the income. You never really have to bother about providing for the expenses; salary got credited automatically. Now, you need to watch out for both sides of your cash flow system – watch out for spending and before that, watch out for providing cash.
Cash Flow Problem
Mind you this is only a cash flow problem, not a balance sheet problem. The fact that you have achieved Financial Freedom means that (income from your assets) can take care of your (cost of living). You could take this momentous decision on Financial Freedom only because you were sure that in the long run, on average, the return on your investments will outgrow your cost of living. However, that happens on average. It does not happen linearly every year. Hence, what you have to do now, is to take care of the Asset Liability Mismatch (ALM). The maturity profile of your assets have to be in line with the maturity profile of your liabilities. While, the chunk of your assets remain focused on generating long term wealth at a CAGR greater than your annual cost of living, you need to make some allocation into short term assets, like Liquid Funds, or bank account to take care of your cost of living and short term contingencies. The short term bucket needs to be consistently refilled.
In the quest of providing for the short term asset bucket, it is better to err on the side of redundancy & robustness rather than productivity. In the absence of regular salary, any inability to liquidate assets quickly enough can get you in a spot of bother. Hence, always prefer to keep more than you can calculate, in the “Liquid Funds + Bank Accounts” bucket.
So, in a nutshell, the financial aspect of “How do I survive Financial Freedom” is not really a financial question. WHYH was a process of financial prudence and it is the same process of Financial prudence that will provide you with WGYT. Hence, I say WGYHWGYT!
Onto the 2nd aspect of the question..
How do I survive non-financially?
As I said earlier, this is an anchoring problem. People get so bogged down with drudgery that they almost forget or fail to imagine what life can be without it. There is also a pluralistic ignorance that emerges from the fact that everyone around seems to be involved in the same drudgery…
”..since everyone’s doing it, my boss, my boss’s boss, my boss’s boss’s boss is doing it, it must be the right thing to do.”
Years of such drudgery and the pluralistic ignorance leaves layers of patina on your thinking brain. You zombify..and then you typically respond like this:
“If I don’t waste 2 hours a day in traffic, 5 hours a day in useless meetings, 2 hours a day on the coffee machine conversation, 1 hour a day on sending/receiving/forwarding emails…then what will I do sitting at home the whole day…watch TV?”
In my article, “You Only Live Once”, I have given two thought experiments to shake up this thinking and help you scrape the layers of patina. I reproduce them here. Don’t just read these thought experiments; try and feel the situations.
Stay here for some time..feel the situations..let them sink in. If you do this well, you will realise that being busy and being productive & creative & free are two different things….a bit like existing & living. You realise that life is too short to waste on mindless, stultifying drudgery. I don’t know what is the purpose of life, but it’s certainly not this. The most fundamental purpose of life is to live!
We’re not done with the thought experiments yet. If you have successfully managed to scrape some of the layers of patina from your psyche, then you need to ask the pertinent question – If this is not how I want to live the rest of my life, then how? Take a white board and start making a mind map of what all you want to do with your life. Go wild…don’t worry about the how aspects at this stage. Don’t just make the mind map, make vivid pictures of yourself actually doing or being what you just wrote or drew on the white board. Make these vivid images as your goal. The how aspects will emerge on their own.
For, if you can see Rome vividly, you’ll start seeing the roads that will lead to Rome!
So far, I have helped you answer this question yourself. How do I survive the Free Life non-financially is not so important for you. Your mind map on the white board is unique to you and different from mine. Still, since I get asked this question, here’s how I survive…this is most of the content of my mindmap on the white board..
I wanted to spend the rest of my life doing the top 10 things that I want, along with the top 10 people I want. I don’t want to be answerable to anyone beyond the people I love & care. I wanted to earn money without renting my time. My calendar is always full for junk people and junk activities..and it is always vacant for fulfilling activities with the people I like. Health is my numero-uno priority. So, I wanted to sleep 8 hours daily…stay physically active, engage in regular exercise or sports and eat wholesome food. I wanted to be a voracious reader. I wanted to have a spatiotemporally free life – no geographical or time boundations.
So, what is my typical day filled with? It’s filled with joy (kids, family, friends), curiosity (books), application of learning (investing & writing), health (exercise, sleep). I have squeezed out mindless rat race, competition, traffic, meetings, concalls, clients/distributors/colleagues/bosses, emails and deadline pressures.
Confluence of Financial & Non-Financial Quest
I went for a pure form of Financial Freedom. I wanted a life, where I carry no liability or answerability to anyone, except the near & dear ones I love to answer and be responsible for. Hence, I worked for a reality, where my financial investments take care of my expenses & needs, as I focus on simply doing what I want, along with people I want. However, you can Imagine and plan for a reality different from mine. You may have a passion – painting, sculpture, teaching, mathematics, sports, music etc, or some skill sets like coding, selling, financial advisory, health & nutrition advisory, fitness etc. Such passions or skill sets can be nurtured and become your full time endeavours. Passion+Skill+Work is a powerful combination. Your Financial Freedom can provide you an opportunity to make this work out. This is where work life balance lose its meaning, because work & life become one!
About that proverbial mountain….once you climb it, you realise two things:
- The freshness of the air. The freedom & view at the top of the mountain is worth every arduous step you took. It opens up a new horizon. In the free air, you can wander around with freedom, explore new avenues and live a fulfilling life.
- WGYH will WGYT. You continue to deploy the same process and climb further mountains.
