Once you've understood the concepts from the Learn section, you can start using them here to plan your journey to financial freedom.

Let's plan your journey to financial freedom


Step 1 - Where have you come from?

It's worthwhile jogging your memory about your earliest thoughts about money. What values did you learn from your parents about money? Was it 'it's only money' or 'money doesn't go grow on trees'? These have probably shaped your sub-conscious thoughts about money.

Step 2 - What do you have to show for it?

Let's take stock of how much money you have earned so far. More importantly, what do you have to show for it? This is when we make a list of all your assets, and liabilities. And then figure out your 'net worth' which is basically assets minus liabilities.

Step 3 - Where do you want to go?

What are your goals? While some people plan for each goal individually, I think it's better if you make a simple 3x3 matrix. List goals by time horizon and importance. So goals like building an emergency fund are short-term and important, while goals like retirement are long-term and important. Goals like sending kids to a fancy college could be medium-term and nice-to-have. Goals like buying iPhones, or vacations may be 'fun'.

Step 4 - How much do you earn now...really?

While you think you know your monthly/annual earnings and hence, hourly rate, let's adjust this by hard and soft costs of earning that money. These could be commute, clothes, childcare etc. Then let's explore if you can earn more money with the same skill-set.

Step 5 - Where does the cash go?

Let's track all the cash that comes in and flows out of your life. Yes, it's called budgeting. We can make it easier by going completely digital.

Step 6 - How to protect and grow at the same time?

While people ask whether you're conservative, balanced or aggressive, I believe I am all three. So how do I plan my finances such that I protect one part and grow another? We will need to use some mental accounting and understand concepts like asset classes.

Step 7 - Whom to trust

Human beings work on incentives. Some people in financial services have been given some perverse incentives, hence may put their own interests ahead of yours. So you need an understanding of how the main financial intermediaries function - how to judge their competence, how to know their incentives and how to pay them fairly for their value-add.