ATTAINING FINANCIAL NIRVANA

 ATTAINING FINANCIAL NIRVANA

I have been asked a very logical but an innocent question that when should the investor who has been investing with the goal of retirement planning, consider that he is on his way to financial freedom.
Should it be a landmark in the Corpus, should it be some percentage gain in,form of cagr or annual return or what.
Assuming that investor has constructed a proper portfolio with equity as the stronghold and fixed income schemes to support as a buoyant measure...
There will come critical level after a few years which can be approximately 5 to 7 years that one's portfolio will mostly remain in the green round the year despite the market taking a nosedive or  staying sideways which means neutral.
This stage will happen because in the previous span of 7 years one would have invested in a systematic manner and thereby gaining the advantage of rupee cost averaging and since normally it has been seen that in a 7 year period there is one cycle of bull and bear.
Beyond this as the investor will move on he or she will find that the return on his investments are becoming  more or less equal to a his monthly take home salary.
This fact he will judge for himself and if he does not touch his investments these gains will keep increasing.
Beyond this a stage would come when the annual rise in his portfolio would be much more then the annual take home salary.
This stage of course will definitely take more than a decade to come irrespective of the amount that one puts in.
 But it will definitely be a very satisfying and even an exhilarating stage a corresponding stage of what one may call a financial Nirvana.
When a person has reached the stage where the net corpus is beyond the above mentioned critical limit and  if he withdraws from it for his family needs the sum will never diminish.
If a person has been investing consistently along with his earning from profession then there will be lot of changes that will come into his nature.
First will be the change of equanimity: in so many years he would have seen the market rise up and come down almost everyday and every week so he becomes used to it. Even at 10 to 15% fall will not disturb him .
Second change that will come into his nature is of keeping on the fixed path and becoming lethargic to look into other popular avenues of investment. This should be taken as a good sign because historically the investments which are boring are the ones which give immense Returns.
Third change that comes into the person is a calmness settles into his nature. Since he is contented financially he starts pursuing his hobbies & looking after his family and also starts the exercise of discovering himself.
Somewhere along the stage he will find it necessary to give up his profession and concentrate more on himself and the people around him.
This is the stage where he can consider himself financially independent and having attained the stage of Financial Nirvana.

What is so DIFFERENT about Financial Planning for Mariners

 

 This article could be approached  in so many ways...
Why is the life planning of Mariners different?

Why should the life planning of Mariners be different?

Why should mariners plan differently for the future?  And so on...

The reasons why none of the plans that conventional financial advisors belt out with percentage and graphics would fit our conventional mariner is because...
1. The cash flow is very different from any organised sector.
2. The process of career promotion is quite different than conventional employment, all the same it is compensated by the top most rank being achieved at early age.
3. There is no pension system or social security.
4. There is no definite healthcare system.
5. There is no adequate provision for any compensation in case of disability or death.
6. The income from one year to another could differ by as much as 35% in case the resident status changes.
7. Status of employment is most uncertain at its best and is sometimes beyond the control of the employer himself.
8. The security of his employment is dependent upon so many external agencies and legislations.

9. The most important one that I find is that when one returns home after employment there is a complete break of from the place of employment. His source of earning stops abruptly. I can't think of another profession where this happens .

In this regard I would like to mention my personal experience of receiving salary all round the year. This happened when I was working with Maersk tankers and it was basically the monthly salary split into two and being distributed and given to us all round the year. Apparently It looked that we were getting only half salary and company was benefiting as it got to keep half of a salary for another 6 months. But the way it worked was that I got to invest all round the year without break thereby taking advantage of all the ups and downs of the market. It also enabled me to take advantage of the 2008 economic meltdown. Probably if I was paid the same amount in 6 months as usually it is done in shipping and certainly my investment would not have taken place all round the year.

This is one factor which keeps playing at the back of the mind of our typical sailor and affecting his chain of investment..

10. Detachment with reality: while growing in age and rank, our mariner becomes unconnected with the rise in the cost of living, realistic issues and challenges of shore life. He starts seeing things through the glasses of his colleagues on board who themselves may be or may have become quite uninformed.

Because of all the above reasons it is impossible to follow the typical formulas of equity allotment , asset allocation to debt or any fixed income scheme which gives sub-inflation returns.
One has to become aware and adopt Financial Literacy at a early stage and get on with it as soon as one starts getting a regular salary. In actual practice there is no limit how much one should save and invest.

The earlier one starts ...he lays the most important seed for the tree of his wealth or The Wealth Tree ( from today onwards I will use the acronym TWT instead of Portfolio or Corpus ...in my posts, articles and blogs). All the future contributions to his investment will go towards providing for the fertilizer, water, upkeep of this tree. 

Initial years will require extra care for this tree... later it will start looking after itself. Soon there will come a stage when fruits will start appearing on this tree .
Still later this tree will be robust and will not require any attention and will give such tasty fruits and in great quantities.
All you need to do is be Financially literate and then focused. In this journey you may not need any advisor except your own family.
Be determined...because nothing in life will work with the formulas...neither the inflation nor the returns, neither the expenses nor your living standard .
Your living standard will be more dependent on your family and also your peer group.
The most expensive events will occur at later stages of your life and most unexpectedly. e.g. children deciding to  study abroad, some serious illness in family members, marriage of children or siblings etc.
One needs to be prepared for as much as one can and take all steps to mitigate  such risks. But how can one do all this? Simple ! By being connected with oneself and ones family and discussing things with them at all stages.
Discussing finance and all other plans and challenges on the dining table threadbare so that all family members are aware of your plans and can also be encouraged to share theirs with you.
Your spouse and children will understand the importance of astute Financial planning and will try to co-operate as much as possible in the journey.
If you wish to add something, please send your comments, I will certainly edit this article to include your feedback.
©Rajeeve Kaushik
2Sep2022