My Aim Of Writing This Blog

The reason, i started to write this blog is to pen-down my thoughts..

My  clear aim is to become financially free as soon as possible so that i can enjoy life ( of course i will work then too) with peace and sense of accomplishment and also worry-free.

I think everybody wants to live like that..

What i have understood that there is two aspects of human life...first is social and second is self or spiritual.....becoming financially free will take care of your social aspects....and at the same time you should be properly spiritual to enjoy life fully..meditation, yoga along with moral values and developing a strong character will take care of that....believe  me, only lucky few have both of them. Highly rich people lacks moral values, that is why they remain unsatisfied...and on the other hand, morally good and character people lacks money, so they do not get the respect they deserve.

Human life is a balance between those two...only one can not give you full inner -peace.

So, in this blog, in the start, i will write only about social aspects, that also only about financial freedom, which is very essential.  I will try to understand the answer of this question both philosophically and practically..

1) How much wealth is required to give me financial freedom.

2) How i can accumulate the wealth through right path.

so, keep tuned and suggest me to improve myself...and i will touch other issues as we move on..

About Inflation

 Inflation is just a process where too much currency is chasing few goods. That is the growth of currency is higher than the growth of the production of goods.

Let’s suppose you are shipwrecked at an island with two friends. Now one friend has 50 breads, you have a million rupees and the third person has lighter. Who is the worst-off? You will be worst off since they can just start exchanging goods with each other. Why they need your money, they can light a fire out of wooden logs rather than from your paper currency. So what I am trying to say is never just go on the amount of money someone has. But how much goods that amount can buy. This is a simple concept but this concept lies at the heart of inflation, foreign exchanges, investments etc. Many people just don’t understand why some countries have 1, 00,000 unit currency notes and some have only 100. It is just because overtime higher unit currency went through the shipwreck type conditions more than the other currency. Thus value of currency dropped and they have to increase the denominations of currency as it is awkward to give 100 hundred unit notes to buy bread. This is called inflation in modern terms.  

  what happened at the island of course is an extreme condition and something which we call hyperinflation, where the faith over currency just vanishes. 

When there are limited goods and increasing money supply. What happens to the value of the money? It takes a dip. That is Inflation for you. 

How the recent inflation is affecting you ??

Why to Look For Financial Freedom

  Your financial choices do not stand in isolation. They have a cumulative effect. As you pay off debt, as you save for retirement, as you reduce your spending, you are creating a snowball of right action.
Or, to use a better metaphor, each smart choice you make creates ripples throughout your life. As you work toward financial freedom, you make it easier for yourself to accomplish other goals.
 I’ve drafted a list of several ways that financial freedom makes it easier to accomplish other goals. Financial freedom means:

• Freedom to choose your work. “Financial Freedom means choosing a job or career I want to work at,” “I don’t need money to be the sole deciding factor.” I think this is huge. For sixteen years, I worked at a job I hated: I sold boxes for the family business. I couldn’t leave because I felt trapped by debt. Once I repaid my debt, I could consider other opportunities — like becoming a professional blogger.
• Freedom to live where you want. Do you like where you live? Would you rather live elsewhere? Mumbai?  Delhi?  Venis ? There are other considerations than money, of course, but when you are financially secure, you’re better suited to practice “geographic arbitrage”, to explore location-independent living. In other words, if you have the money, you can live where you  please.
• Freedom to do what you want. Wealth doesn’t just open doors with work and housing. It also gives you freedom with your time.  “For me, financial freedom = The freedom to choose how I spend my time: wake when rested, play when playful, work when/if I want.” My friend Anurag had financial freedom, if only for a little while, and it let him travel the world.
• Freedom to seize opportunities.  people will know how being out of debt and financially secure allowed them to refinance their mortgage when the opportunity came along. they was financially prepared, so they could act. One of My friend  practices what she calls “predatory shopping”. She can afford to delay purchases until she finds what she wants at rock-bottom prices.  “Financial freedom means no worry about paying everyday bills. Means able to give back, able to invest when opportunities arise.”
• Freedom from worry. Most of all, financial freedom means freedom from worry. When you’ve eliminated debt, when you have money in the bank, you can sleep more soundly. “Financial freedom means freedom from worry to me. It means knowing I’ve done the best I can to spend and save wisely.”

I think  the best summary of financial freedom is : “For me, it means never having to work to further someone else’s goals instead of my own. It means options and more opportunities.” Financial freedom means options and opportunities. I like that. I believe it’s true. Debt is slavery because it limits your options and prevents you from seizing opportunities. But financial freedom allows you to pursue your own goals, to build the life you’ve dreamed of.
What does financial freedom mean to you? Have you reached it yet? Do you have a plan to do so? Or do you think the notion of “financial freedom” is just a marketing ploy?

How Money is Created

How money is created.? So we start with an example straight away. Lets take the example of Google and a writer. Lets take 2 universe. Universe 1- there is no Google. Universe – 2 there is Google.
Universe-1 – if there was no Google. How a writer can research his book? He will have to go to the library. Take a cab of 30 Rs each and lets assume he takes 50 trips. That’s 1500 Rs. He will then have to find out the books he need to research from and then search through the contents and indexes and then retrieve what all material he needs. A time consuming process.

Universe-2 – There is Google. Now a writer can research about his books on internet only. He doesn’t have to take a cab. And so he can cut short his number of trips by say 25. So he saves 750 Rs. He pays 500 for internet. And overall he saves 250 and of course ‘Time’ than the first case.

Now in both the Universe we get the book (Forget, the time saved for now, we will come back to it later). But in 2nd universe we have 250 Rs more. So in other words Google created 250 Rs. Now our intelligent readers will point out that hey 250 Rs is currency so currency was created not money. Okk now we convert it into money. We go and buy 25 breads for that. Google created the purchasing power (which is same as money) to buy 25 breads extra. Don’t go into trivialities that what happened to cab driver and all. Here we are focusing on the product called book alone. We get that in the second universe with 25 breads worth of purchasing power extra. So :

Extra purchasing power created while producing the same good = money created.

Money Saved while producing a good = money created.

So if on Monday you produced 10 breads at cost of 10 Rs and on Tuesday you produced the same quantity and quality at the cost of 9 Rs, then you created 1 Rs on Tuesday. And O fcourse if you produce it at 11 Rs you destroyed 1 Rs. Assuming you sold the bread at the same price on both day.

Now don’t think that money saved is money created. I never said that. In that case she could have saved whole 1500Rs by just not writing the book. But that is not money created because we never got the good called Book. It’s the amalgamation of production and saving at the same time is what is called creation of money. You must notice that I have taken only production side and I am assuming that you are able to sell a product at a constant price. There is money creation at the selling side also. Something we call a brand. Something called profit.


so, My conclusion is we have to use our brain to create money out of scratch...then only we will free from financial anxiety...as money can buy most of service.

Fiat Money

Fiat money is money that has value only because of government regulation or law. The term derives from the Latin  fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.

Fiat money originated in 11th century China, and its use became widespread during the Yuan and Ming dynasties. The Nixon Shock of 1971 ended the direct convertibility of the United States dollar to gold. Since then all reserve currencies have been fiat currencies, including the dollar and the euro.

Characteristics 

The term fiat money has been defined variously as:

• any money declared by a government to be legal tender.
• state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
• money without intrinsic value

While specie-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of specie, fiat money's value is unrelated to the value of any physical quantity. Even a coin containing valuable metal may be considered fiat currency if its face value is higher than its market value as metal.
A feature of all fiat money is its acceptability to the government for payment of taxes and charges.
Fiat money is not essential for large countries, nor is it always used. An economy may function on banknotes issued by commercial banks, which are not legal tender, and hence not fiat money. This was the situation in the United States during periods prior to 1862, before the first United States Notes were created and declared by the government to be legal tender. From 1944 to 1971, the Bretton Woods agreement fixed the value of 35 United States dollars to one troy ounce of gold. Other currencies were pegged to the U.S. dollar at fixed rates. The U.S. promised to redeem dollars in gold to other central banks. Trade imbalances were corrected by gold reserve exchanges or by loans from the International Monetary Fund. This system collapsed when the United States government ended the convertibility of the US dollar for gold in 1971, in what became known as the Nixon Shock.

A fiat-money currency generally loses value once the issuing government refuses to further guarantee its value through taxation, but this need not necessarily occur. For example, the so-called Swiss dinar continued to retain value in Kurdish Iraq even after its legal tender status was withdrawn by its issuer, Iraq's central government

Hence, My conclusion is Today's Money have no real value and backing except Government guarantee  and people's faith and of course monetary economy. This perception of value can change any time. That is the reason why sometimes GOLD becomes so Precious. 

About Money

In this post, i want to share some of my view about money...

1. Money is medium of exchange in its basic sense...but in broader sense, money represents value, potentiality, aspirations, time and labour....Money derives its value from its usefullness...from its users..
2. Today's money is called FIAT money...as there is no real asset ( GOLD) backing of money...any government can print as much money they want...
3. Inflation is the real enemy of money...It decreases the purchasing capacity of money.
4. Money changes hand very quickly.
5. It is more difficult to keep or protect money than making money.. Todays wealthy family becomes day to day earner within very short span of time (may be 100-200 years). 

So, My conclusion , it is more vital to protect the money from devaluatating than earning it..

Ways of Passive Income

      In this post, i will try to make a concise synopsis of ways to earn passive income...and the list will go on increasing as my knowledge increases and as per readers suggestions...

1) Interest income :----Bank Deposits..RBI Bonds...Company Deposits...Post-office Deposits etc...we will see  later that relying only these products, you will never achieve your target....as per my  obsevation, these interest rates are +- 1% inflation rate....and post--tax, you will loose  money,  inflation and govt will eat your money....but this is risk-free and smooth running.

2)  Dividend income: --- Dividend earned from Shares of company or Mutual-Funds....is carefully choosen, dividend income can give you enough passive money-flow.

3) Rental income :--- You can built houses, business premises in important, busy areas. and rent that for continuous flow of passive money.

4) Business :-- Profitable business ideas, either run by you or your representative...this is best source of passive money....i will open a new thread to discuss various business ideas which is  passive....will not demand lots of your time.

5) Royalty Income :--Royalty earned from writing a book or patents.

The only formula of financial independence

Having defining the meaning of financial independence and passive income, I am trying to state the basics to attain financial freedom....Financial freedom will be achieved when the passive income will be more than double of your monthly expenditures....I am also trying to get an idea....

Suppose, my total monthly expenditure is Rs.25,000 (INR)....So, if somehow, i can get assets such that they will generate Rs. 50,000 monthly passive cashflow, then i will become financially free...and my active income will be bonus...

Now question is why double or more than double of the monthly expenditure ?...because of the demon called inflation...the extra Rs 25,000 will be utilized to acquire more assets. so that your net value never decreases...

I will discuss these matters in depth later on..

Now quickly, suppose i acquire least productive asset..such as Bank FD to attain my freedom....

Suppose the interest rate is 9% per annum....and inflation is 5% per annum....then, i need only Rs. 75 lakhs  to attain financial freedom....( detail calculations later)...

I think lots of people are out there who are financially free ( they may not be aware of that also ) but they may not be free from greed and desire to expand and desire of more and more...

unfortunately, i have to travel a long distance before i reach there....i am enjoying the ride..

Hence, in conclusion, The formula of financial indepence is that...

ACQUIRE  ASSETS  SUCH  THAT  THEY  WILL  GENERATE  PASSIVE INCOME  OF 2 TIMES AND MORE  OF  YOUR  TOTAL MONTHLY  EXPENDITURES....

What is Passive Income

Passive income is income you donot actively work for after putting in some inital effort by creating an ever-lasting asset ( like golden goose who lays egg of money systemically and regularly ) sound interesting !!!...

To be financially free, all we have to do is to aquire assets which will give me passive income..

Think about writers like J.K.Rowling and Eric Segal..or scientist Mani Bhaumick...they put in huge amount of effort in writing a book or inventing something..and then earn royalty money for the rest of their life...

Thats the passive income..