142. (3. Building Finance Intuition) Establishing My Credibility

#MakingBetterDecisions, #Goals,?#focusonwhatmatters , #Wealth, #Careers

"The key to financial freedom and great wealth is a person's ability to convert earned income into passive and/or portfolio income." — Robert Kiyosaki

When I started the series on “Building Finance Intuition”, my idea was to share what I have learnt and am continuing to learn in the area of personal finance. In my last article in this series (here ), I touched upon the very basics required to be on the path to financial independence. There were comments on that blog to elaborate on the mindset required for achieving financial independence.

In the past, I wrote a number of articles on nurturing careers (wrote a specific series called “Building Great Careers”). Given that my career path is outlined in my Linkedin profile, I did not feel a need to further establish my credibility to write on careers. But on the topic of financial intuition, somehow, I felt the need to establish some level of credibility before I wrote further. With this in mind, in this blog, I glossed over the story of my financial progress. My aim in writing this is to give some hope and inspiration to you and also that it will lend some credibility to me in writing on financial topics.

“A formal education will make you a living; self-education will make you a fortune.” ― Jim Rohn

As of this writing, I am on my way to financial independence. By some aggressive benchmarks, one could say I’m probably nearly there. But personally, I think I am about five years or so away before I feel confident with my financial condition.

I have earned reasonably well throughout my corporate career. My compensation definitely never fell in the top decile - it was probably in the 50th to 75th percentile in my professional grade. But earning well does not necessarily translate into wealth. I know this from firsthand experience. I moved to the US in my early twenties and earned in dollars in the initial five to six years of my career. Given the difference in purchasing power parity between India and the US around the turn of this Millennium, earning dollars and then moving back to India was generally a good situation to be in. But when I moved back to India, barring a couple of small plots of land in the outskirts of my hometown, I had very little to show for it. I spent most of what I earned on frivolous things. At the end, I had almost nothing to show for my earnings – not even precious experiences. Then after moving back to India, professionally I moved onto management level and was earning reasonably (and perhaps arguably) well. Under heavy societal pressure, I did buy a house – barring mortgage payments on this purchase, I had no idea how I ended up spending most of the money that I earned. Then in 2007, I moved to Mumbai to join Lehman Brothers to run fixed income interest rate derivatives technology teams in India. I was blissfully unaware that the financial world was, by then, leaning over a precipice of ridiculous height.

“You must gain control over your money or the lack of it will forever control you.” - Dave Ramsey

In about a year of my joining it, Lehman Brothers went bankrupt. With a young family (my wife quit working to take care of our one-year-old daughter), expensive house rental in Mumbai and high mortgage payment on the house that we bought in my hometown, for the first time in my life, I got seriously concerned about my ability to sustain myself financially. When my wife and I sat together to get a handle on our situation, we realized that we had just enough cash to get through two months. Facing severe job insecurity at the time, I felt very nervous and clueless. Thankfully, our India business was taken over by a Japanese Brokerage firm and my job continued. In fact, the takeover provided me with good, challenging growth opportunities at work. In a positively ironic twist of fate, my salary actually increased. This bit of positive development aside, my wife and I were clear that we needed to do something drastic on the financial front. Clueless of what really to do though, we started tracking all our expenses in a notebook. We did this onerous tracking for several months. I was lucky on another front. A colleague of mine at Lehman became an excellent mentor and lifelong friend. Upon his counsel and my own research, I realized that participating in stock markets via mutual funds was probably a good way to invest.

“Patience and diligence, like faith, remove mountains.” ― William Penn

Once I made up my mind on this matter, I steadfastly invested in equity mutual funds via monthly investment plans for about ten years. Evey time I received bonus or a salary raise, I invested that amount immediately. Through rain and shine, through market crashes and euphoria, for ten years, I invested aggressively and consistently in markets. And this made all the difference. This allowed me to seriously consider taking a break in my career in 2021. Now, at the end of 2023, I am at a point of recategorizing this experiment from “break” to “quasi-retirement”. There are a number of learnings in the last few years that I will capture in blogs later on.

During this ten-year mutual fund journey, I dug in and learnt a lot about investing, building conviction, courting volatility and managing risk. I also did a number of sessions for interested folks on how to pick good mutual funds, invest in them, review their performance and also how to determine insurance needs. I also encouraged a few colleagues (who became lifelong friends) to embark on the path of financial independence. Not all did but the ones who did do, are well on their way.

“Be patient, it takes 10 years to build a career in anything.” – Naval Ravikant

There is something special about the length of a ten-year period. For someone on a progressive career path, a very reasonable savings rate, a good handle on lifestyle creep and a broadly diversified (like an index fund) investment portfolio, a ten-year period can make a world of a difference. This is not incidental in my case. I ran numbers in excel and this holds up rather well.

Last year, I went through the certification process of SEBI (India’s primary Capital Markets regulator) to become a Registered Investment Advisor. This rounded off a good theoretical foundation to my personal finance experience.

Bottomline

“We all have dreams. But in order to make dreams come into reality, it takes an awful lot of determination, dedication, self-discipline, and effort.” ― Jesse Owens

Financial growth need not be anybody’s monopoly. With determined efforts, structured approach, personal conviction, right mentor(s), supportive family and earnest willingness, anyone can achieve financial growth and even independence, in matter of time. The only other ingredient required is luck but this is a default ingredient for any worthwhile effort. In any case, by doing the rest, one positions themselves for being lucky also.

***************************

Thanks for taking time to read this. In this newsletter, I share my learnings that could help you improve your decisions and make meaningful progress on your goals. I try to share stuff that I have personally experienced or experimented with. If you find this newsletter worthwhile and if you do not mind it, please do consider sharing it with others.

A bit on my background

I help people make better decisions.

I coach people on “Making Better Decisions”, “Financial Intuition” and “Building Great Careers”. I’m open to run sessions on these topics in institutions – this will help me create larger impact.

I’m also an Investment Advisor (RIA) registered with the Securities and the Exchange Board of India (SEBI). As an RIA, I analyze and prepare financial plans to help people achieve their financial goals.

Follow me on LinkedIn by clicking here

Making Better Decisions Newsletter on LinkedIn

Making Better Decisions Course