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Hey sweetie, how are you? I'm very good Minaj. How are you doing today? Friday evening. Absolutely. And for all our listeners who are tuning in or who will listen to this conversation later Manoj as we know is a is a best-selling author and he's super and he's somebody who's super passionate about managing the finances better and he is he's given multiple talks around. This topic is done multiple open talks. If you have not listened to the ones we've discussed before please do please click on his profile go to go and listen to some of the open dogs. We've Just about wealth management principles will discuss about the importance of being financially free. So please do check it out and manage. I think one of the things which makes me personally envious is like you said, you know, every day is a every day is is a holiday for you or every day is stress free for you because you are somebody who's achieved that Financial Freedom there. Are you don't you are doing something now what you're doing is doing. For pleasure and not for just building or managing your finances. So I think that's something which I am. I'm really envious and I would want to learn from you through through these open talks that we are having and absolutely fantastic and happy to have you here today. Yes, sir, Sunni same here. I think it's a mutual pleasure. Always thank you. So so for all the listeners today, we are going to talk about today. So we've already covered few things around Financial Freedom. We've covered about the principles but something important is when you start making those plans or when you start preparing for your Financial Freedom. There are certain mistakes, which anybody who's starting anybody who's not had a mentor. Now we'll make those mistakes. And today Manoj wants to shed light on some of these mistakes which can be very easily avoided if you are aware if you if you have a mentor if you have understood these principles. Well, there could be these very simple mistakes that we should be avoiding. So Manoj over to you. Okay. Thank you guys for knee. So I think before we go on to the mistakes typical mistakes people do and how we can avoid them. Just a quick Glimpse on what we're talking about. When we say Financial Freedom though. We discussed it in the earlier talks, but I think it's important to understand why at all we need to create a Financial Freedom plan know why can I just, you know keep earning in accumulating money and probably reach somewhere a stage where I can quit my job business or whatever. So, you know, I always related to the Lathe common scenarios and it's like I start from my home in my car. It's like, you know, you start a job or a business. Then you start earning money and you drive it a certain speed, you know drive your car at a certain speed. So you're earning money at a certain rate and what happens if you do not know where you are headed, you know, you're driving your car at a certain speed. You don't know where you want to go. So it's a very futile exercise if you do that and similarly, you know. Earning money and running at a certain speed. You do not know how much you need to earn. Where do you need to go? You know, finally we do need to reach. Okay. So is this lack of goal which you know can really frustrate you in life. So it's very important for us to understand while I'm running it how much money is enough for me for this life to be, you know to go through this life and take care of my responsibilities and take care of everything else. Bleep how much money do I need one crow two crows 10 crores. It's different for everyone. But then how much is it for me? So that's very important to know and for that, you know, this Financial Freedom plan is very important. Otherwise, you know, you are just, you know, you're moving without a goal. So absolutely. Yeah, so that's the first thing so we go to make a plan first now when it when we save him go to make a plan there, of course various Financial parameters that come into play and total when we create plan for our readers total. There are 7 steps involved in creating a wholesome Financial Freedom plan for your entire life. And while the steps in the process is common the plan. Obviously the numbers are different for every person and the Investments required a different for every person for every family because everyone has their own lifestyle their own future needs for money their own way of living life. So so everything is going to be different on the numbers, but the process is same so I'm going to explain the process in various steps. And while I'm explaining those steps, I will try and point out certain mistakes. Most commonly people do in each of those. Those steps while planning for the freedom and this is based on whatever interactions I have with all my readers and I tracked at least through three readers 101 every day. So so you can imagine over the last five years thousands and thousands of them have interacted truth. Whatever common mistakes did it. So we're going to start with step number one of Financial Freedom planning, which is understanding our cash flow. So cash flow, you know, it's sounds very simple and it's like whatever you're earning is your income and whatever spending is your expense. Right? And the difference of the two is basically what you say. And the difference of the two is basically what you say. Okay, and then that's potentially what you can invest it's very simple. Okay, but now the challenge comes as we dig deeper, you know when we say expense So what are the expenses we are talking about? So by definition, you know expense is something which you burn or spend in lieu of a service or product. Okay, so we have to be very careful and that we don't count certain things which usually people count as expenses. For example, there are so many people who may interact with who say okay. Am I I am giving an Emi of my home loan. And so that gets deducted from whatever money I earn. So ultimately that's an expense. What is your viewers when you do think the Emi is going to be an expense. That's a tricky one. So Emi in my opinion if the Emi is going probably going towards building an asset. Like maybe you've bought some jewelry, or maybe were you bought a house? Maybe then it may not be calculated the expense rather if the m is going into a phone that you bought or a car that you want, which is a depreciating asset in itself. Maybe then it's an expense. I'm not sure if I answered it for free. Basically, we're interacting as I would usually interact with any reader. So now remember that expenses are something which are going to be the money which you burn and which is which are going to do year after year or month after month or at a regular frequency at some regular frequency. Throw almost throughout your life. Okay. So as you said Emma is for your home loan, that's not going to run throughout your life. That's Point number one, okay. Second expenses are usually inflated by because of inflation, you know, there are adjusted in terms of every year you're going to have a six percent and sunrise in your expenses, but Emi stay the same. So usually we do not count em eyes as expenses. We take them as liabilities when we go to the next step So currently in step one where we are looking at our income and expenses e mais are usually not counted as an expense. So that's the us mistake people do so one of the things one of the things one of the confusions which which which I had was that if Emi is not part of cash flows, are there other things which we should not make out of our expenses or maybe income also for that matter, you know, let's say if I if I get a bonus or if I get a gift from somebody cash gift from a relative not these should be part cash flows are not so so are there these the basic list of exclusions which I should keep in mind. Whenever I am the back cash flows. Yeah, so good point. So I think in expenses when we were talking emails as as we just talked about similarly lot of people get confused between an expense and an investment. So people come and say okay if I'm investing five thousand rupees a month in a particular mutual fund. So is that not an expense for me? Because that get gets deducted from my whatever savings right? But again we missed him. Remember the text whatever you is investing in a mutual fund or any other investment. That is the money which is going to grow which is likely to grow at least and it's not burnt out to you know, in exchange of any service or an exchange of any product. So it's not an expense so we caught ogdoad Emi we talking about Investments which are not your expenses another mistake, which commonly people do is they consider income tax. Because some of the tax gets deducted since then only during the end of the year or they have to file an idea or and in that they have to pay some some tax on that so they consider that income tax as an expense. Remember income tax is not an expense. It's just a reduction of your income. It is very basic difference. We must understand so important while you may feel that if 20,000 rupees tax has been deducted. How does it matter if I counted as an experiment so ready? Reducing come because ultimately the savings remain the same but in matters when you plan for Financial Freedom because expenses is something which your nancial freedom has to take care of for the rest of your life. Okay, and it would be very very careful about you're putting in expenses. right So if you are on the lakh of rupees and if you're paying thousand rupees income tax in a certain month this 20,000 and an expense, so we don't have to take it to last day of your life, you know do that. Okay. So these are expense related issues and you talked about income many salary in people. You only consider whatever net income is coming to you know to the bank account as the Income they have there is an element of retirees deduction that happens which is either Provident fund or superannuation, whatever, you know, which we usually kind of ignore when counting our income. Now remember that that is also your income. It's just that it's getting deducted and put in a separate separate account, which is the Provident fund account. Okay, but you're running it. You don't need it every month. And not only you are earning extra month apart of it also contributed by your employer. So even that is your income and it's just killing put in a separate account just like a bank found you it's getting put in a Provident fund account. Okay. So these are certain mistakes, which usually we do when counting our cash flow. All right and manager what frequency would you say? We should do this exercise, you know, should we do it monthly as soon as the expenses for the Month or over or the beginning of the month or you would say let's plan it in advance for the year or a do it at the end of the year, you know, what should be the frequency of doing this cash flow analysis. So, you know as far as your income expense tracking is concerned you if I if you ask me it's a very important question when the basic problem that is there is not all expenses happen in one month or two months true. Absolute are many Expenses whose frequency could be quarterly could be semi-annual annuals months into years sometimes like for example, if somebody go for travel and vacations once in two years, so you're going to miss out on certain expenses. If you are going to you know, wait for a year to do this analysis. If somebody who is focused on Financial Freedom has to go and track the expenses at least once a week. Otherwise you want to miss. In fact, I do it every day, but it takes just two minutes. It takes two minutes, you know, these are very basic things. I am earning money and I am you know, I don't I'm done. I'm lose control if I'm not doing it every week at least but every day I do it I will not recommend it for everyone to do it every day because of your in jobs and businesses and all but you know, the more DP go in terms of your are tracking the more you reduce your expenses and it's been scientifically proven that somebody who track expenses every week as a potential to reduce princes by as much as 15% just because you're tracking it and you know, it starts to burn your mind when you start tracking it. It's all it's all a mind game ultimately. So so I think it's very very important that you Ticket every week. It doesn't take more than five six minutes to do that. If you're doing it every day takes two minutes before I go to bed. I just put on okay tuck tuck tuck. These are the three things. I did spend the money on today finished. Wow, but it gives you such an immense control and you remember what five percent or two percent reduction in your expense can be massive in terms of when you when you talk about Financial Freedom and And you know extrapolating that money over the rest of your life with inflation adjustment with compounding and everything because inflation plays like compounding so it can be massive amount. So I think these are the small things the discipline that's needed to really push for your Financial Freedom. Absolutely. No, I think one of the one of the key men key points that you mentioned here is the discipline, you know, these things don't take a lot of your time doing it like they just Before you go to sleep two minutes five minutes just to jot down your major expenses. The day does not take much. That's absolutely true. So, in fact, they assure you the entire Financial Freedom journey is not a doll complex. Let me tell you it's one of the simplest things you would do in your life compared to what you do in your jobs and businesses, but the challenge, you know, it demands certain level of discipline and commitment and patience now, these are The things which we unfortunately lack in today's generation probably and these are going to take you to Freedom not how much you earn because whatever you want. You can just throw it away the same month. It's the discipline. It's the commitment. It's your patience is going to take you through this journey true true true. Absolutely true. And and you're absolutely right near there are so many things. We just we just a little discipline beat your health Pete. Our finances, you know beat your bead you building right building a habit writing doesn't really take so much time. It's just about consistency of doing these things. Absolutely. Yeah true. So when I was right other Quentin, sorry, sorry, no, no good good a very small question this time. So so now a person and this is specific to you. So, where do you do this? You know, what? Is it a notepad? Is it a book? Is it a Table, is it a is it a calendar? Is it an Excel sheet? What do you say would be a good good reckoner for just doing this a journal? Well different people have you know get motivated by different tools. It's all about keeping yourself motivated in this because this is this does become boring for people who are not driven by a strong reason, so I would not recommend any particular thing I can share with you what I will but I will not say get this is the recommended approach for everyone. Absolutely. So we say I do it because we have a website. Site where we do all these steps, whatever I am talking about and whatever I'm going to talk about so very people come and do I mean there are around 300 or people. So very people come and do I mean there are around 300 or people. I'm you know coaching 101 today were on the journey towards Financial Freedom every one of them almost every one of them they come and do their entire daily expense tracking on the website. Okay, and some do it daily some do it beakley some even do it monthly but whatever. I have seen people who are doing it daily and doing it at a level of five rupees 10 Rupees, you know, they are the people who are you striving in this journey really moving their very first us so but you can use Excel you can use notepad. You can use anything that you know, you there's so many apps nowadays. You can use anything that you know, you there's so many apps nowadays. You can use any of the apps, but why I recommend the website is because you know, ultimately it's not a isolated thing to just track your income and expenses in a Financial Freedom plan, everything gets integrated and analyzed later on. So this whatever money you save ultimately will Define your speed towards An angel Freedom. Angel Freedom. Okay. It's like I gave you an example of moving in a car from my house to a particular destination. So at what speed I'm going to go is going to decide how quickly I reach the destination. So the more I save the more I mean the chances are that I reach Freedom quite early and that's why this this entire thing defines my speed in my in my Financial Freedom plan. This this entire first step of your cash flow is an element which finds the speed at which we are moving towards the journey. And so it's an integral part of your entire plan. Right? Right. Absolutely. So I will manage the website that you mention is the one which is there in your profile. Yeah, same website and anybody can register anybody can login. It's all free anybody can start using all the tools available there free. Of course, there is absolutely no charges only people who want to get enrolled in a specific. Program called as an elite program which I run where I personally Mentor people towards Financial Freedom only there there is a separate application in separate process. But otherwise anybody is free to use any tool on the website. Perfect. Perfect. Thank you so much for for this for sharing this information, please let's go ahead. Let's move to the second Point. Okay. So I think that is the first step towards planning for your Financial Freedom, which was understanding your cash flow the second important. Oughtn't step is understanding your net worth today. So, where are you today? So it's like, you know again the same example of driving in a car so cash flow Define it what speed you're driving it. Okay, so that influences your time in which you finish off your journey, but the second step is understanding your net worth your network current net worth defines. Where are you today? Okay, so if I have to go from Delhi to Mumbai via car. Where am I today? Am I today somewhere near Mumbai? Am I just outside Delhi Mi somewhere in between let's in vertebra. Where am I? So my current net worth will tell me where am I standing today? Okay, and how do you find out your network just like in a cash flow you have income and expenses to sections in net worth. You have two sections assets and liabilities. So there are certain assets that you own. There are certain liabilities that you owe. Okay, and by definition assets, you know, the definitions are very important because you know that helps you classify what is an asset and what is not, you know, that's another area where a lot of people get confused so s it you know by definition is something which is expected to increase in value and come back to you. So if I put the money in my fixed deposits mutual funds EPF PF bonds shares whether it increases or not the different thing but it is at least expect it to in weeks. Right. Okay and liability is something which I mean something that you or which is not your money with you or to someone which you have to pay and the difference of these two assets minus liabilities is basically your net worth today. So again, then lot of mistakes people do when I when I say, you know, in terms of identifying assets first thing people get confused whether the house where the stage that an asset or not. So, what's your absolutely? The house that I'm staying in although a property would be an asset but I'm staying in it. It should still be an asset when whatever would say? Okay, so, you know by definition assets something which in are expected to increase in value and the money comes back to you now, unfortunately in the case of your house where you're staying you cannot, you know liquidate that to, you know, get that money back and use that money for Are you defending your expenses or something else? Okay. So since I cannot liquidate it it's not possible to liquidate in your lifetime. We do not usually count it as an asset. Although again, there are various strategies which with which we can counter it, but that's a like reverse mortgage and all but that's a different story but a house where you staying is not your asset because you cannot get the money back. You can only create it and use that. that money Go to truth but the house with you have for let's say in the second house or something with your billed as an investment, which is giving you some rent or whatever. That's definitely an asset because you're running out of it either as a rent or it is just appreciating in value and you can probably create after whatever time whenever you need it. So that's definitely an asset. So someone is that that come that leads me to a question. So would would something. Which is an asset or with something like where there's a lock-in. So for example, let's say I have been vested in in tax saving fixed deposit which has a 5-year lock-in period mutual fund where there's a lock in those four five years since that acid is not is not accessible to me would have not count that as an asset during that during those four five years, or I can see it's still your asset because even after five years it's going to come back. To you with increased value the the question which are asking typically is not about whether it's an asset or liability. The question should be whether it should it's a liquid asset or not or what's the liquidity of an acid? Okay, so currently it has a lock in so you liquidity becomes low for your overall portfolio. Let's say you have a 10 lakhs of your overall portfolio and out of which let's say 1 lakh is in such kind of fixed deposit which is let's say five you're looking so your entire. Our portfolio is not liquid right now. So liquidity is one parameter which we measure which is not a part of step two will come come to it in Step number five. Okay. Okay. Yes. Your portfolio liquid is very important. And if you have as I said as an example one lack of fds in a 10 lack of portfolio, so your portfolio is currently 90% liquid assuming everything is liquid or yeah this becomes Um's a very very important parameter. If you have to take care of, you know future expenses. So if I have expenses coming up, let's say my child's College admission is coming up in two years. And if I lock in my amount in a fixed deposit for five years, then it's a foolish thing to do, right? So while fixed deposit with the lock-in will save me taxes, but I'm landing in a situation which is not not a very favorable situation as far as Thing is concerned. So so that's when not all Investments are good for everyone. So a fixed deposit to the lock-in maybe good form for you. If you don't have any major expense coming up in next five years, but it may not be good for me because I have some major expense coming up in two years and I need to use it. So that's why you know, all these things get integrated into one plan. And that's why you know, all these inputs are very very important to be integrated together, too. True, in fact environment of violence. In fact, in fact manage while they were explaining this whole concept. They were explaining this whole concept. It just took me back to my MBA days where you know, we poured over so many books. We spent so many hours understanding this for a company understanding this for a business and where there is think about it, but more than that your personal finances and rather than that understanding your personal finances is so much more important because and they are there is absolutely no formal education, you know. Being do these cool BB scores beat separate courses, there be no no formal education at that age. If people were taught something about that. You know, how do you manage your own personal finances liabilities understanding that your property is not this and then these are Concepts which we should learn very early on and so that's why I'm just I'm just comparing that this exactly applies to businesses, but it was never neither of us thought neither. We had the intelligence to put it back to our personal finances and your is different between a business and a personal finance. Its most of the concepts are very similar. It's just that we have never applied it to over personal finance as you said and once you start applying it, you know, it's so interesting and when you don't really need to teach a lot to anyone, you know, once you applied a new personal finance, it's very easy to understand businesses also, Absolutely. Absolutely. Okay, and I think one of the other common mistakes people do in identifying assets other than the house part is the assets which are in typically in India. This happens with assets which we want to leave for the Next Generation. What do we do with them do we count them as I said so not for example lot of families. I see they want to you know, keep some gold for their children's. Marriage, or they want to leave a house for their children after they are not there or leave some other, you know cash amount or some Bank FBI or something for the Next Generation. So what do you think looking at? I mean with whatever you have understood till now do you think that would be counted as your asset if let's say I have a I have a gold deposit of four lakh rupees what I want to leave it for my children. So what I counted as an asset Suman LG V again going by something that you mentioned earlier. If I don't personally have access to this Foreigner. I cannot liquidate it. Oh, I don't plan to liquidate it from my financial requirements at least in my lifetime and probably should not consider it in my ass. Absolutely. You're right. So it's that simple, you know, once you've understood what acid is for you then any example you should be able to clearly classify whether it's Finesse it or not. So if if there is a goal or a fixed deposit or a real estate you want to leave for your next Generation then that's not your asset. That's the set of your next generation. Right, right, right. That's simple. I think the other mistakes people do is in terms of typically in terms of life insurance is they have so many people consider life insurance as an asset. Some people do not consider it an air. Of course if it's a term insurance, it has no value in terms of asset in terms of being liquefied. So anyway term insurance is get ruled out in any case but even the other insurance is that you have where you have some maturity value they can be considered as Your asset but with corresponding liabilities, whatever premiums are pending. So you do, you know correspondingly consider the liability part also. Okay, right, right. So this is for assets some of the examples the common mistakes people. Do I mentioned then terms of liability that you need to be very careful that we talked about am eyes when we talking Step 1. So e mais definitely are you liabilities liabilities are typically those money which you have to pay to someone it's not your money just like Bank am ice and you're paying it slowly. And they are therefore a fixed duration. They are not there for your entire life. They could be there for 5 years 10 years 20 years maybe 30 years, but they definitely not there for your entire life and they're typically not inflation-adjusted. They fixed amounts. Okay, so it so a mile is one life insurance premiums. This is another because again, that's for a fixed duration no inflation adjustment. So you counted as a liability so typically lot of People do that mistake of counting and insurance premium as an expense, but that's not an expense. That's liability. Okay. So this is what usually people do. So if you have anything you think you're not sure about you can ask question even I mean at any stage. Yeah. Yeah. So managed on the expensive side does the same method of understanding expenses or liabilities apply that if so, for example if there is a liability I'm supposed to pay order which I'm supposed to end. You know, I'm not able to collect for a think of an example but is this general rule that if it is not going to be a liability in my life span or or I am not obligated to pay it by might come to Future Generations then should I not include I know I know this is sort of this is reality as well. But is this general rule that if it is not going to be a liability in my life span or or I am not obligated to pay it by might come to Future Generations then should I not include I know I know this is sort of this is reality as well. But do you do we consider it would not consider? No, it's a very practical. Typical situation. So what happens in an education loan typically is you take a loan for your child who wants to go for higher studies and the processes that you would save taxes on your whatever income you running because you've taken an education loan, but the education loan is supposed to be paid back by your child whenever he or she starts earning money. So whatever the agreement says in terms of whatever the banks is, but you're not Post pay back that money, right? So so whatever Emi is going to be there is not going to be your emis unless of course your child defaults and is unable to pay and then of course, I mean that's a different story but in a normal Circumstance the entire e mais become your child's liability so he or she is going to start his or her life, you know with the lab big liability, but for you not a liability unless you decide to pay, okay. I will pay 50 percent. So then we represent of it becomes your liability. Right? Right, right and and manage we have a question from the audience of cement is asking if you can again just maybe quickly elaborate on the differences between which ones to identifier or a similar rule of thumb to identify expenses versus liabilities. So first rule is never count any particular item in both the places. Many people do it. So they will County EMA in their monthly expenses also and they will also County Mi the liability. So don't do that. That's one big blunder people do they will count at both places. So either an item can be an expense or it can be liability. And what should it be and it's very simple expense is something which you're going to you know, execute for the most part of your life and it will be inflation adjusted. The money will be burnt out in exchange. Of certain goods or services? Okay definition. You have to remember this definition will help you classify things. Okay liability is not lifetime. It is not inflation-adjusted and it is for a fixed span of time. Understood. Okay. That's a that's a very good rule of thumb my thing which we can all simple rules of thumb that we can apply and be able to do. So before we end. I want to just highlight a few points. So this was step two and I think subsequent steps will be talking in other talks in future. But before we end I think very very important to understand three points first in Step number two when we Troubled assets liabilities essentially what we're trying to get is our net worth. SS its liabilities essentially what we're trying to get is our net worth. Okay. So what is my financial networks today? Which is my assets - my liabilities. Okay. So this net worth is very critical lot of people do this mistake of going by assets, you know? A lot of people do this mistake of going by assets, you know? Okay, how much assets do I have I have one crude of assets, but that's meaningless. If you have to pay one crude of liabilities, you know your one true. Love you my so ultimately you have nothing with you. Okay, so and you know even incorporate as you talked about when we study companies for buying stocks or whatever for otherwise also, it's very easy to elevate the amount or the number of assets, you know easily taken set on low on you. No, but unless you study the net worth or the equity as we call it their of a company you do not come to know the true worth of the company. Okay, so same way for assessing our own personal true word Financial work we go to understand net worth. Okay, not talking only in terms of assets. So in our Financial Freedom planning that we do we only track net worth we do not I mean we of course that would will be calculated based on tracking of assets and liabilities. But in terms of our goals, where do we need to reach I need to reach. Let's say 2 crores on net worth. I'm not going to say aye. Going to reach three crude of assets I go to reach 2 crore of network or three Crow whatever amount. Okay, so net worth is important and to track for Financial Freedom. Not only assets second important point is net worth is always as on a particular time stamp or a particular date. Okay. Second important point is net worth is always as on a particular time stamp or a particular date. So today my net worth is this tomorrow? It may change depending on let's say I have made some more savings. I've invested so it's on a particular date. While the to the first-ever dog board is for a particular period okay, so cash flow will be for a month or a year or whatever you want to talk about. Okay, and third and the last point is again relating it back to the example of moving in a car net worth defines where you are standing today. So higher your net worth today the closer you are to your our goal and you can reach Financial Freedom while your cash flow. Will Define your speed. So the higher the cash flow the higher the speed first. So I think that's these are some basic things which we should keep in mind. So we talked about two steps and of course will be continuing this talk when you talk about further steps. All right, there is this is this is fantastic and even you know, even after being the majors in finance, there were so many things that will new to me so many your rules of thumb which Which everybody can learn from and easily apply in managing their finances better. So thanks again so much for sharing these very simple very quick to use very easy to understand just needs to have this needs to build just need to build the discipline to use use these rules use these thumb rules and I'm sure that you know as we go along this journey together, it's it you're making you're making managing finances much. Each easier subject for for all of us. We'd actually is very easy. You know, I mean, we've just made it complex it. So I'm again telling you this Financial Freedom is very simple to achieve. But as I said, it needs discipline commitment patients, if you have these three things, nobody can stop you anyone any person. Nobody can stop them from reaching Financial Freedom. Perfect. Perfect. Perfect. So thank you so much for nodes gradually move. Sure, please. Okay, then. Take care. Take care. Thank you. Bye.