Can I be Financially Independent?

I was born and raised in a small town in India. My family was essentially lower middle class. My father was in Government Service and my mother was a stay at home mom.

State of Personal Finance in India in the 80s and 90s:

When I grew up in the 80s and early 90s, the concept of Finance was non-existent in many parts of India. India was not the same. We didn't have the technology or Internet or mobile. A land line telephone required a wait of 2 years, and was considered a luxury. To call long distance, we had to book what is called "Trunk calls". It was expensive.

Mom and dad utilized Dad's pay, spent for essentials (and sometimes non-essentials). They were as frugal as possible in avoiding wasteful spending. Whatever was left was saved in a bank account by default. Fortunately We didn't have any debts.

Sometimes we bought jewels for sisters. We didn't buy any stocks or real estate, or invest in anything. We didn't worry as much about retirement planning or investments because most employed were in government service, which was pensionable anyway.

The primary financial goals of families (to my knowledge) were to get the daughters married, and sons decently educated. A luxurious addition was a roof over one's head. The Opportunities for an average salaried person in a town in India was low. The awareness was even lower.

People who were above average, had the courage to invest in UTI (Unit Trust of India) for their mutual funds. Those living in big cities had share brokers, who helped them buy shares. Real time stock quotes were not for everyone.

Personal Finance in India in the 21st Century:

Flash forward 20 years: India as a country has made giant strides despite all its challenges, thanks to globalization, Internet, Technological and Other Innovations. Foreign investment started pouring in to India thanks to the liberalization policies of the governments starting in 1991 . Proliferation of TV Channels, Internet Media, Foreign banks, Broadband and Even mobile Internet are available even in remote villages, at affordable prices. Valuations have skyrocketed to ridiculous levels (specially cities). Cell phones have made ubiquitous communication not only possible, but very cheap also. As an example, Our servant maid , auto driver and news paper boy can all be contacted easily only by mobile phone.

The magnitude of changes that India went through over the past 20 years is perhaps higher than any other country in the world in the corresponding period.

I find that a few enterprising people (especially in cities) have taken some commendable initiatives to grow their wealth.

A majority haven't even thought about it, although they have equal facilities and access to technologies and communication.

Most salaried people still seem to be busy fighting daily issues, oblivious to financial risks of poor or non-planning. Many are working hard yet not getting anywhere financially. Most of the jobs are non-pensionable, yet people don't seem to take notice or plan for their life after retirement. Credit card debts are climbing, yet people seem to use it more regularly than cooking oil.

Those that are only saving but not investing, are silently falling prey to Killer Inflation.

The basic financial objectives of many, have not kept pace with time. They seem to be the same as 20 years ago. Get my kids educated, and get my daughters married. Not that these objectives by themselves are bad, they are just plain inadequate to address the complexities posed by today's challenges (financial and societal).

Many other questions that beg an answer are still open. Will I be even able to pay for my kids' higher education? What about my post retirement life? What after my kids get educated? What if they turn too busy to care for us?

Are the gold ornaments possibly the best gift for my daughter? What if something catastrophic happens to me or anyone in family? Can the remaining lead a decent life ?

I don't mean to point fingers at anyone here. Just that this is a reality that I find. Personal Finance Education is not taken up in schools and colleges with a level of seriousness it deserves.

OK. Back to my personal story.

When I completed my education and got a job in IT , and my income was considered higher than average. However, years later in to my job, I realized that although I had some savings, I had not invested.

I was not even keeping up with inflation. This struck me quite hard when I searched and could not even afford to buy a decent apartment in Bangalore, despite foreign trips. I had made some poor decisions in the stock market. I lost a good chunk of money.

I realized that I had not been very different from my parents and ancestors when it came to Personal Finance, although my earnings and exposure to technology were significantly higher than them. As I thought deeply about this topic, it hit me hard, that I am not even eligible for a pension. I was not positioned well for the financial future.

I was foolish to not even give retirement a thought leave alone other difficult questions I posed earlier in the post.

My ancestors didn't have much opportunities to invest in those times, and hence they didn't invest. The general awareness was low. It was conceivable that they were that way.

In today's world, we have so many opportunities and access to technologies and information. Yet I didn't take advantage of them. I blew those opportunities with missteps, due to lack of fundamental Personal Finance Education. What I did, was worse than them.

I wanted to turn the situation around, and I knew I could. I took expert guidance and mentoring in Personal Finance from savvy friends and well-wishers. I got exposed to some excellent Personal Finance literature, Concepts and applied sound fundamental principles to reduce debts, save money and investing it meticulously. I developed good Financial Habits. I persevered and to this date I do.

Ever since this realization, I have come a long way in the past few years. I have learnt some hard financial lessons that I wanted to share with you and in the process learn from you.

I am not a millionaire or even anywhere in that league, but I am happy with my progress. I am in reasonable control of my Financial Destiny. I am closer to Financial Independence than I used to be years ago (when I didn't even have it as a goal).

I am sure some of my hard learnt lessons, must be very encouraging for you, and save you ample time, money and frustration. You shouldn't have to make the same mistakes that I made. That's my intent of starting this blog.

I learnt that Growing Financially Independent

• Is not necessarily linked to having a High Personal Income. While higher income helps, Personal Discipline is a more important Factor.
• Requires radical thought process AND behavioral changes. If you continue to do what you have always done, you will get what you have always got. You have to show willingness to make these changes, but you can do it.
  
• Requires deep passion, commitment, ability to set and realize goals and perseverance. You have to badly want to be Financially Independent. If not, your results could be mixed (at best) to dismal (at worst).
  
• Takes time in learning and applying sound principles consistently. Reading good literature consistently is a very important prerequisite, but it is fun.
• Requires action. You can't sit idle and hope to be wealthy by magic.
  
• Requires you to take calculated risks, and the realization that you can't be 100% right all the time. The best learning is when you mistakes. You can cut your losses in those situations by using time tested principles.
  
• Requires you to discover your own personal goals and chart your destiny. You can't adopt some one Else's path, and assume that you'll get similar results in similar time lines. Every one's situation is different. It's like a tooth brush. You can't borrow some one Else's.
  
• Requires flexibility on your part to make course corrections as required. You can't adopt a one size fits all approach, invest and forget.
• Doesn't mandate the use of high-technology. But you have a significant advantage if you are tech savvy in some basic technologies, and use of software. Prosperity can be more easily built with at PC and a broadband connection at home.
  

Although fundamental principles of investing are the same across the globe, implementation of principles in the Indian Market has some specific nuances that you need to be aware of.

You have to tailor the advice of Western Financial Experts, to suit the Indian needs.

I also learnt the following:

• If an investment scheme to make you rich sounds too good to be true, it perhaps is.
• It's impossible to get sustainably rich overnight unless you are a victim or perpetrator of a Ponzi Scheme.
• Credit cards require a certain Financial Maturity. If you are not sure you have it, you are better off without credit cards.
  
• Day Trading, and speculation are not for everyone. It won't make you rich specially if you have a job or business as a main stay.
• Shortcuts can make you temporarily rich but potentially and very likely broke.
• Not planning your Finance is a very bad idea. It could devastate you and/or your loved ones.
• Although saving is good and a lot better than spending, it is not good enough. You need to learn to invest in the right instruments. Inflation is the worst enemy of savings.

In summary, I think to answer the headline of this post, it IS VERY possible for you or anyone with even an average income to build wealth with time by learning, planning and applying sound Financial Principles. You can Be Financially Independent. In fact you can turn wealthy.

It can't happen overnight. You can have a good answer for some of my disturbing questions . Personal Finance is a discipline much like Engineering or Medicine that takes time. However it is not complex. If you can do basic math and show willingess and ability to apply the principles, you can master it.

Those are some of my lessons. That's what I plan to share with you, as my experiences through this blog. They may not be all 100% correct, but they will get your thought process started in the right direction.

What are Personal Finance Topics that are of interest to you? What would you like me to write about? Please let me know your comments.

Gigantic Disclaimer: I am NOT professional when it comes to Personal Finance. I am not a certified Financial Planner. I don't work for any financial institution or any brokerage. I don't have any vested interests in promoting a particular share or institution.

The intent behind this blog is to share what I personally learnt over the years, and continue to learn from myself and others. I think there is a good potential that others can benefit out of it.

I'll try and keep the focus more on the general concepts than on individual stocks or mutual funds or other investments. I want to demystify and make certain complex Personal Finance topics easier and actionable,so that you can get started on your own way to Financial Independence. My goal is to share some concepts that I have learnt and applied.

My goal is not to turn in to a Personal Financial Adviser to you, or to tip you off on that hot stock that's taking off today or a mutual fund that's going to go bust.

Take my advice, and experiences at your own personal risk if you like it ! If you apply these and you are not successful, just discard it. If you are successful, please come back and post your comments!!