Planning your Financial & Lifestyle Freedom

Investment Options for your FIRE up plans

In my last article “I want to Retire at 40!” I talked about a growing trend where people would like to take steps that will help them achieve their “Financial and Life Style Freedom” - where they can wriggle free of the money reasons for staying in jobs and live a life of their passion rather than working to meet bills. If you missed that article, take a quick look at it here. In response to the article, many of you wrote to me online and offline asking for possible options which would ensure a passive income in future. In this article I shall briefly touch upon the most common ones and then elaborate on the one that I find the safest and most optimum.

To address this question, lets first demystify some myths about what constitutes "Financial & Life Style Freedom."

Myth 1 : "Financial Freedom means accumulating a lot of money and setting it aside for future when I can live off the same and do nothing."

This is a myth. Financial Freedom is neither about hoarding a lot of money nor about aspiring for a situation where you don’t work at all.

It’s about two things.

• Making investments in instruments, equity or assets which will generate a passive income on a perpetual basis without depleting the principal.
• The other important, but often neglected, is calculating, with a reasonable amount of accuracy, your future financial needs and desires.

Mark your “needs” as different from “desires”. To be realistic, add both and remember that while needs won’t change significantly, desires could multiply based on your lifestyle – today and tomorrow.

This number is important awhile choosing your investment option for a passive potential income, as it will help you decide the asking number of your passive income. ??

Myth 2 : Life Style Freedom means having enough savings to be able to party every night without a care!

Wrong again!

Life Style Freedom is not partying everyday!

It is being able to live your passion, your purpose, your non money ambitions, your inner calling.

For some it may well be partying, but for others it may, for example, be social service, nature travel, mountaineering - anything. Now you can’t be doing any of these if your primary money needs are not provided for.

Once again, it is important to know the life style of your passion, because it could help you choose an investment option, that blends with the same.

Myth 3: I am already over 60 and don’t see any chance for investing in my Financial & Life Style Freedom.

This is perhaps the weakest argument I have heard.

There is no upper age limit or a minimum entry age, for planning one's financial and life style freedom. It is all a matter of priories and determination. I won’t elaborate here but will be happy to discuss on a case to case bases.

Available Options

The next obvious question is the available investment options for Financial & Life Style Freedom that would help you FIRE up - their relative advantages and shortcomings. Important factors to consider in deciding the right investment option, are:

1. It must give an ROI which is adequate to take care of your needs. While the magnitude of income will depend on the amount you invest, the ROI as a percentage must be higher than competing options. FDs, for example, are not a smart investment for FIRE up.?
2. If you invest in fixed assets, make sure these should not be sitting unproductive just banking on appreciation. Take Gold, for example. It may give a good appreciation, but it generates no periodic income nor has any personal use beyond jewellery.
3. The income should be really “Passive” not demanding full time attention. It should not be like going from one job to two jobs simultaneously. Moon walking is good for supporting current needs but doesn’t make an option for Fire. Similarly running a side business while in a job is not the exact idea of FIRE.
4. Long-Term Growth is important but make sure you understand the statutory and tax implications of the option you choose.
5. Lastly, any investment should, ideally, suit your desired life style. Remember the purpose of financial freedom is to get life style freedom. Buying a property with merely rentals and appreciation may tick some boxes but you may never live in those. Property which you are able to personally use occasionally could meet that lifestyle need.

In a nut shell, if you are already successful in your job or businesses, investing in FIRE should not be just another game to play but a well thought over decision.

Life Style Asset : A Way Forward

This brings us to a rather unconventional investment opportunity, that is now gaining a lot of ground.

Imagine if you were able to create a Life Style Asset that would pave way for financial freedom and yet enable you to live a lifestyle you like.

An example of a Life Style Asset is what’s often called a “Staycation” or “Vacation Rental Home”

Connected benefits of Investing in a “Staycation”:

1. Creates a passive income from day 1 - at an ROI that is way higher than competing options. In the next article, we will understand the exact maths – based on market research and information as well as some of my first-hand experiences.
2. As we move up in the ladder of financial security, everyone wants a second home, a place where one can escape, even for a short while, when fed up with city life. A Life Style Asset provides an ideal get away destination whenever you wish.
3. For your aging parents, it is an ideal “home away from home” when they no longer enjoy living in crowded cities. A home where all their needs including the food and house hold chores are taken care at relatively much lesser costs.
4. And finally, who knows, it might as well be your own retirement home in the long run. Though it would be too early to finger point the final desired destination, but you can always trade in the existing home for a home at the desired destination. It beats the inflation that could otherwise make your dream impossible.

If done with good planning, you can tweak the cost to align with your investment which can grow telescopically rather than linearly. Apart from keeping the initial outflow low, it provides an opportunity to creatively add and grow it at your own pace while you are working.

Investing in a Life Style Asset is one of the best wasy to plan your Financial and Life Style Freedom.

In the next article we will understand the numbers and analyse threadbare, the Vacation Rental / Staycation business from a Life Style Asset.

I look forward to your questions here or via DM - which I shall answer in the next article in this series of #FIREUP.

Stay tuned !