Financial Security: Necessary Today More Than Ever

I believe you will be equally stunned as I was to read the article in link below.

http://money.cnn.com/2009/03/16/pf/Financial_security_rules.moneymag/index.htm

The very thought of retirement and the challenge to accumulate that huge retirement sum gives me shivers, given the ever escalating expenses.
Accept it or not, your boss, the government, the economy and everybody else decides your retirement amount.I discovered early on in my career that no matter how much efforts I put at my job, my rewards are going to be decided by someone else.I need to have the power to decide what my rewards should be for my efforts.
While I was in Japan 5 years ago, a friend introduced to me Robert Kiyosaki's book Rich Dad Poor Dad and my world changed after that.I had bought an apartment in an upcoming Mumbai suburb sometime ago and was proud of having my own apartment.
After reading RDPD, I realised that my house was not my asset but a liability. An asset is something which puts money into your pocket while a liability takes money out of your pocket. According to Kiyosaki, if your house is your biggest investment you are in for real trouble. But that is what the working class does.As their incomes rise, they go for bigger cars, bigger homes to be more comfortable.I learnt that the lack of financial education and the way they think is the reason why the poor and middle class are where they are.
As you look back, probably the subprime crisis could have been minimised,if not avoided, if people who bought homes beyond their repayment capacities had been financially literate.
To become rich,you need to learn to make money work for you.Of course, being an investor like Warren Buffett helps you do that.But how many retail investors actually understand the investments that they are putting their money into.So they put all their money into Mutual funds or Stocks on other people's recommendations.A little effort on self learning and understanding your investments can go a long way in protecting your hard-earned money.
The fastest way to become rich is to move from being an employee (E) or self employed (S) to being a business owner (B). While I was thinking on this and exploring entrepreneurial books, I met a senior management professional through a common friend who introduced me to the direct selling business.
Before I read RDPD, I was really against direct selling and looked down on this business as below my calibre.But after listening to CDs of the likes of Hal Neuball, a Harvard medical graduate, Professor at John Hopkins and a Nobel prize nominee,I realised that I have to raise my calibre to do this business.In this business, I have to raise myself to achieve not only my personal goals but help other people to achieve theirs.In today's challenging times, when people are losing jobs, families and lives, this business is a godsend lifeguard. The essense is to build the business when you are not in dire need. There are innumerable stories of professionals like us who have retired Rich and Young, something which most people only dream of.Anyone building this business seriously can retire in 5 years and build a financially secure income for generations to come.
Before I end let me give you a few points to ponder on:
1. We have backup for everything at our jobs, what is the backup we have for our job income?
2. If we lose our jobs or are not able to work for the next 6 months or 1 year, will we able to support our families or have the same lifestyle ?
3. Even if I am the CEO of my company, I cannot give my job to my children.So what are we putting them into, an endless rat race ? We cannot leave our jobs for our children.
4. A recent economic data says 95% of the world population doing jobs shares 20% of the world's wealth while the remaining 80% is controlled by the wealthy 5%. Imagine all the office stress, politics and race to finish first is for just 20%?
Friends, Lets get a bit wiser and start our journey to the 80% wealth today.

Road to Financial Freedom

Happy New Year and a warm welcome to all you voyagers reading this blog. Its been quite some time since I posted updates on my voyage ahead.I have been contemplating various options to the path I want for financial freedom.Well what is financial freedom? the freedom to choose to spend your time the way you want to. On our honeymoon last month, I was wondering what it would be like to have every day of my life like this.Is that possible?

There are some key questions you should ask yourself if you are into a job,just like me.

Does my job allow me to spend my time the way I want? No matter how terrible I may feel,I have to take still make my way to my job.Is my job that bad? Honestly no, the work I do involves a good mix of techno functional and management skills, a coveted job that many may want to have, and it is my job that gives me money to pay all my expenses.
Do I want to do the same job all my life or maybe get promoted and do what my boss does today? No, however lucrative I wouldn't want to. Moreover, when I stop working the income will stop too.
Does my job make me enough money to save for my retirement? Well thats very hard to tell.No matter how much I save inflation takes it away making all the savings and investments look so meagre.
The above reasons make it all the more important to have a plan, the financial freedom plan, a plan that will lead to the kind of life I want to live without having to work for money.That is possible if the passive income(to the unitiated, passive income is money which works for you e.g. rental income,income from stocks, bonds, royalty,real estate etc.) from other streams is enough to take care of mine and my family's expenses. To actually record your income and expenses into an excel format, you can do a google search to find a lot of sample expense organisers on the internet.
Then you can put the income and expenses columns on a separate excel sheet along with two more columns for assets and liabilities below them as shown.

Income

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Expense

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_______________________________________________________
Assets
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Liabilities
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Those who have read Robert Kiyosaki's Rich Dad Poor Dad would know how important this is.This simple step is your first step to financial freedom, i.e taking stock of your personal situation.By doing the above you are building your personal financial statement or balance sheet.
A brief overview on the items in the balance sheet:Assets by definition are those items that generate income, while liabilities create expense.Our homes, cars, etc. which we term as assets are not actually assets but liabilities since we need to pay for the maintenance of these items, which is an expense. In Kiyosaki's words, liabilities take money out of your pocket every month while assets put money into your pocket.
A house would be an asset only when it generates income for us i.e only when you let it on lease or rent, not when you are staying in it.
There are a wide variety of assets to invest in e.g real estate, stocks, bonds, derivatives,gold,commodities etc.
The simple trick to achieving financial freedom is simply to reduce your liabilities and create more and more assets that generate passive income.You may ask if this is so simple then why there aren't many people doing it.The reason is ever since we have been in school we have all been taught to get good grades and get a job.I was a high ranking student at school and college and have been doing well in my profession.But over the years I have been exposed to the teachings of Kiyosaki and have broadened my vision for my future. After having created the financial statement, the next question is how do I write such a plan.
(To be continued...)