(Perhaps) You Can Be Financially Free Right Now
For Real.
This is a short writeup about being financially free. Plenty of famous finance influencers define financial freedom as the ability to do whatever you wish because you have the financial means to support your lifestyle. Subsequently, they proceed by calculating the amount of money you will need to be financially free assuming:
Risk free rate
Your cost of living
Risk free rate refers to the amount of returns that you expect to get that is free of risk (almost zero risk). This typically ranges from 5 to 7% in Indonesia, for example if you buy a government bond or time deposit. This rate is mostly out of our control. If Sri Mulyani or any finance minister decides to change interest rates against our favour, we cannot really do much about it.
Onto the second point that, in our opinion, is much more interesting. You can control your cost of living. So in theory, if you decrease your cost of living down to zero or near zero, you automatically should be financially free.
So how do we reduce our living cost down to near zero?
Ask for Your Company to Provide you Lunch and Transport
It is possible for you to negotiate with your HR to let the company provide lunch and transport for you, while you taking less salary from them. We think that this should be the norm because lunch is usually had during work hours around the office area. Also, transport in and out from office to home is an expense that is made for the company, therefore it should not come from your personal expense. Otherwise, you could be happy to work from home.
A simple framework of thinking will be asking ourselves
Am I making this expense if I were not to be working for this company?
If the answer is no, then the company should pay for it 🙂
If you own a company, that’s even easier. Get your company to pay for your lunch and transport.
Be Debt Free
This is hard for plenty of people. But if you are debt free, you do not have a recurring cost. Now you are already in a nice position to lowering down your expense to zero.
Invest in Luxury Items, yes. Consume Luxury Items, no.
We are not going to be telling people to avoid branded goods at all cost. We in fact believe that if you can make a good investment on it, do it.
A lot of these luxury items, if taken care of properly, will actually appreciate in value overtime. Some people even have a knack at selecting luxury items that will most likely appreciate in value. If you have studied these items considerably and are confident that these items will be valued more in the future, go for it.
A big no no though is to be dependent on these items. People sometimes have the urge to get the latest and greatest brand at all cost and it is a never ending hamster wheel. If you are trapped, find a way to get out from this dependency. Such items are high margin items that do not have that big of an intrinsic value. They simply offer a brand equity for you to feel like you are of a certain social status that is high up there in society.
Berikut ini 8 barang luxury yang dapat dijadikan investasi!
Restaurants are Expensive
As a simple illustration, if you go to a restaurant, you are paying for:
The raw ingredients
The Chef who prepares your meal
The waitpeople who serve you
The rent
The utilities
The margin that the restaurant owners take
If you cook your own meal, you are paying for:
The raw ingredients
The utilities
Certainly not saying to avoid restaurants at all cost, but it is always wise to remember the cost of going to restaurants usually far outweighs the cost of cooking your own delicious meal.
Closing Remarks
While this article is seems like a pro tip to save money, but it is actually more of a way to be financially free.
To get a little bit philosophical, we know that science and technology have played a big role to reduce people’s cost of living (food, transport, utilities, etc). However, people’s cost of living is still skyrocketing. This, in our view, is more of because the increasing availability and hence desire of entertainment, food, novel products, etc. If we can free ourselves from those non-life essential desires, we are perhaps financially free right now.