Financial Independence – How much is ‘Enough’? #Finance

Hi everyone! Welcome to our channel. In the last many CashNews.cos we’ve talked about how do you calculate this big ‘number’ that will be determining your financial Independence using safe withdrawal rate, 4% rule, multiples of your expenses etc. But based on our own

personal journey to financial Independence we realize that this journey is not just about this number. There are lots of non-financial factors that play a big role towards this journey. Things like your satisfaction, your yearning, and drive, or hunger to earn, or spend more, your happiness, your

fulfillment in life. So, in this CashNews.co I will try and build a link between this financial number and those non-financial factors. The equation for that matter. How do you use that equation to determine your big enough point, based on our own personal journey. How do you use that enough point

and this equation to actually achieve not just Financial Independence but can get off this corporate rat race, or this corporate treadmill. Before I do that, a quick introduction as always. My name is Yogi and my wife Seema and I, we both were on this journey to financial Independence. We achieved

it and we decided to take this big bold step of retiring early. And now this is how we are spending our time during retirement – enjoying nice cups of coffee during a work day! Anyways back to the topic. So let’s first try and understand this relationship between money and satisfaction,

or fulfillment, or joy. To do that, let’s imagine an extreme example. Imagine that you are stuck in desert for days. You’ve run out of your last bottle of water two days ago. You are really thirsty and to the point now it’s life and death situation to get that water. Guess what

happens – you suddenly see a local tribesman or tradesman on his camel passing by. And he’s willing to give you water in return of something. I’m sure for that first bottle of water, you’ll be willing to give him even your expensive car. And this guy says – Hey,

I’ve got more bottles of water and he’s willing to give you two more. For the other two, probably you will be willing to trade your Apple Watch or Airpods. Because that first bottle was not enough to quench your thirst it was just really the necessity that you needed. So you take two

more and this guy says – Hey, I’ve got a whole crate of bottles that I can give you. Now, these extra bottles or this whole crate will not just be good for you for today, but for the coming days. And it’ll at least keeping you happy and you’ll know that you’ll not feel

thirsty. But for those extra crate bottles you’ll probably give a little bit higher than the retail price what you could buy it at a store. And then he goes on and offers you another crate! But this time probably you’ll think twice say ‘Hey, if I take another crate, I don’t

know if I’ll have enough space to keep all these bottles with me. I’ll have to carry these extra kilos of load while I’ll be crossing this desert. So this situation – if you compare it to the professional or business lingo, is what is called – The Law of Diminishing

Returns. That, no matter how much input you get give into something, the value at a certain point maximizes. After which the value starts – either you get marginal benefits from that – or actually even the value starts becoming negative. If you plot this in a graph of ‘law of

diminishing returns’ your bottles of water. The bottle that, the first bottle was the necessity. That was really needed. After that the two bottles added the comfort factor and really quenched your thirst. And this entire crate of bottles – that was enough for you. For not just today

but for coming days and that was a good luxury to have in this middle of desert. But after that crate, any other additional crate was just in excess and I don’t think it’ll give you that much of extra benefit. And actually, it could even be an extra load that you’ll have to carry

with you. If you translate this example on our daily lives, because we go through this during a daily lives. During a career, that we start with a fulfillment or satisfaction with first addressing our necessities and the basic needs. Then we start addressing the comforts and there is a point that

we really are aspiring towards luxuries and we start enjoying luxuries. Spend money on that, but there is a certain point after that the luxuries do not give that extra benefit. Or actually even starts taking away that fulfillment. This graph, you can put it against multiple things – your

lifestyle, the money, the house, the transport. So, if I have to plot my own transport on this, I started my life with first mode of transport – something called a Hero Majestic. I don’t know even if they are selling this moped still. So Hero Majestic Panther to be even more specific

and precise, because I still fondly remember that. So there is a necessity. It put me and made me mobile. After that I bought a Kinetic Honda. A little bit more addressing my necessities and little bit more comfort. Then when Seema and I got married, we bought a Maruti Zen, our first car. So you

know from that Hero Honda, it was a big comfort. It was a first four-wheel that we could drive around and then so on so forth. I would say, our luxury peaked when we bought a BMW 3-Series. After that, we did buy multiple different cars and the features were different but it didn’t really add

so much of extra joy. Actually, for some of the other cars, we were even more scared that any scratch or any used to get any scratch, it used to make us a lot more frustrated for a lot more expensive car. In the traffic jam, they were all the same. So, all this, we all know that we go through this

graph. But then why do we still keep falling for this? Why does this happen in life? It’s because of three reasons. Basically, the first reason is that the luxury point or that ‘Wealth’ for everybody is very relative. It’s very individual. For Seema and I the BMW 3-Series

was a luxury point and after that it was just marginal benefits. For someone else it could be a Mahindra Thar. For another person, it could be actually a Porsche. For maybe a billionaire, it could be a private jet or even a yacht. So that luxury point is different for each person and it’s

very individual. So it’s a very relative thing and it’s very difficult to pinpoint and it keeps sliding on a scale. The second reason is that our mind and body has over the evolution has evolved so much that we adapt very quickly to our changing conditions. Be it good conditions or bad

conditions. There was a study done. I think many years back where they looked at or they did a research on people who had won lotteries. So extremely fortunate lucky folks who became millionaires overnight. And then on the other side of the spectrum were people who had suffered horrific car

accidents and they unfortunately got paralyzed for life. And they looked at their fulfillment or the happiness level and they realized over time interestingly the people who won the lottery, within six months they were back to that same level of joy that they had before the lottery was won. And for

people who got this paralysis, they took a longer time from 6 months to one year. But they were also back to that same level of happiness or life fulfillment that they had before that accident happened. And here’s the interesting part – the people who won the lottery, over period of

time their happiness actually dropped while the people who had got paralyzed over a period of time their happiness rose a little bit before that accident happened. Because they felt more fortunate I guess. For the people who won the lottery, they started taking the luxuries and wealth for granted.

So this is how the mind very quickly plays tricks with us or adapts over a period of time with our luxuries. Here is an interesting thought-provoking exercise or fun exercise to do Think about yourself your old 18 year old self. And think that the luxuries that you have today your car your house

your lifestyle your your job corporate career whatever you have today did you imagine when you were 18y old most likely you’ve already surpassed your own dreams and imaginations that you had when you were in 18y Old at least for SAA and I we did we had never In Our Lifetime imagined that we

will do whatever we’ve achieved or we achieved in 10 15 years after um when we were 18 or when we were in college so this is what happens that you know we generally surpass our own expectations and Imagination but it becomes the reality and we take for granted the third reason is that we are

socially and culturally brought up in this very high compete mindset so even when we are at school our parents everybody is encouraging us and we very proudly say that beta first my child has come come first in the class so we we have this comparative culture from the day one in society and that

comparative culture continues to the point that that keeps us to make sure that we are better than the others around us so around that there’s another interesting exercise for you to do so imagine your boss has um some bonus that he’s willing to give because it’s been a phenomenal

year for the company and he decides to give you 2 lakhs or 200,000 while your colleague gets nothing imagine another scenario that he gives you 2 lakhs 25,000 225,000 while your colleague gets 5 lakhs or 500,000 the most likely the second situation if you’re honest with yourself will make you

a little bit bummed out and feel at least less fulfilled even though in the second example you’re getting more money you’re getting 25,000 more than in the first example but still the second example makes us feel bummed out why because we are in this High compete race that we’ve

been indoctrinated almost in now how does this manifest on a really on a daily basis now what happens is that you buy a plot of land you build your Dreamhouse and lo and behold in a few years time or a few months time someone else buys the plot of next land next to you and builds a mega mansion or

a much bigger house with a much better car Etc in their life and every day you have to cross that house and your dream house looks much smaller than that what will happen is that in the next few years you’re already planning that how do you make sure that you get into that same Mega Mansion

League because that’s how we are taught to compete so these three factors are the ones that continuously keep on this hamster wheel because we keep moving the Target in the because wealth is relative and we keep getting used to the wealth and the luxuries and the power changing conditions and

then even people around us are changing and that that gaps or that carrot keeps moving ahead and ahead now what can you do about it how do you make sure that you minimize that risk or you can even stay away from this Chase or this ratri and how do you use this to get off from this hamster wheel or

this corporate treadmill like we did so the first is a practical thing is Define your enough point so on the same graph that um you I drew on Basics and the Comforts and the luxuries Define your luxury points on the non-financial side so Define what’s your luxury point of a transport

what’s your luxury point of uh house the education for your children your lifestyle overall also Al honestly see or check that what was the luxury point that you would have your 18yearold self would have defined at that point write it somewhere and as I said this is all the non-financial part

the second is the financial part Define your Fu money that Fu money is based on your safe withdrawal rate your 4% rule or 3% rule or multiple of your expense so the real formulas and Define that this is your Fu money and what does FU money mean this money is that when you have this much money

you’re independent or confident enough that you can tell your boss to go f himself if things go wrong or you decide that look do hell with this corporate job I’m willing to you know call it quits now when you’ve done this defining that enough point on the non-financial sides and

defining your Fu money um start chasing both of them it could be that you achieve your Fu money faster than your non-financial aspects or it could be that you achieve your non-financial F aspects faster than your Fu money but in both cases be sincere to yourself don’t move those goal post

because that Fu money is very much linked to your non-financial um enough point because if you move that unfortunately your Fu money will also move the third is stop comparing or try to minimize comparison now how do you do that chart your own Journey that F you money and your enough point is what

your reference point has to be this is what you’re going after you’re not going after what the your colleague or your neighbor having that bigger better Mansion or a bigger better car is just your own reference points of that Fu money and enough point and to do that just focus on your

own Journey Don’t focus on how much what is the Corpus some other person on YouTube or Reddit or any other forum is putting it out it’s their Journey it’s based on their Fu money and it’s based on their own enough Point your journey is based on your own uh part and the last

part is even in that enough point when you define for your car house Etc ask yourself that is this going to build towards your own satisfaction and your own wealth or is it for the others that is on the path to riches I’ve done two CashNews.cos one CashNews.co focused on stealth wealth and

the other is about the path between wealthy and the path between being a rich person now if you keep changing that enough in your enough Point you’ll probably get onto this rat race of this riches and you’ll no longer be in that stealth wealth category so simply put in summary the four

actions which are worth doing putting it on paper and even you know locking it in maybe in your locker and make sure that you you’re sticking to that first is this enough point that I’ve been talking about the second is your Fu money the third is focusing just on those two as being the

references rather than other people’s corpuses or their other people’s lifestyle and the fourth one is that those enough point and that a few money should be gratifying to you and your immediate family rather than for the validation of the others now if you do these this can help you

bridge that gap between the financial and the non-financial and it can also um help you get off that uh corporate treadmill like you keep saying Financial Independence is a must retiring early is an option but once you achieve that Financial Independence then after that um you’ll be just work

working really for your pure passion and pleasure rather than being on the treadmill because you don’t feel independent even though you have the money to do so so I hope this CashNews.co gives you some new insight on this financial and the non-financial factors and the relationship and I hope

just by documenting it following it it helps you uh get off that corporate treadmill at some stage as always please do comment provide your thoughts um and as as always we’ll strive our best to reply to each one of them and also welcome your suggestions or ideas for any other things that you

would like to hear from us till the next location till the next uh CashNews.co until the next topic goodbye from me byebye