Building The ‘Be Your Own Boss’ Fund
Updated: Jun 8, 2020
For 15 years of my working life, I was in the middle of a high-pressure 24-hour news cycle chasing headlines and deadlines. I loved every minute of it. In lighter moments, I would joke with my friends that I wanted to retire before turning 40. Though I would say it in jest, a part of me really yearned for the freedom to be able to live life on my terms without worrying about my daily bread, butter and jam.
How often have you wished the same? How often have you wondered what it would be like to work for yourself? I mean the kind of hours, the kind of effort and the kind of commitment most of us give to our jobs, if we put in any kind of personal venture won’t that lead to greater satisfaction and a higher sense of achievement? Don’t let the thought of losing a steady salary come in the way of your entrepreneurial dream.
Here is how a well-thought-out financial plan can help you fulfil your dreams. To be able to attain financial freedom to chuck that job and start your own enterprise – all within a very realistic 10 years.
Step 1 – Identify your goal
A friend of mine has been dreaming of quitting the city and moving to a village in the hills. She wants to set up a homestay and live in the middle of nature. She has set herself a 10-year target to achieve her dream. For now, she has identified a property that she can obtain on a long-term lease and is getting her finances in order to make the payment.
Step 2 – Self-funded or financed
The big question facing her today is whether she should put in all her savings into the venture or should she take a loan. Dipika Jaikishan, Chief Investment Officer at Basis, suggested that instead of putting all her savings into the payment for the property, my friend should invest her money and build a corpus to take care of the big-ticket expenses. Since the target date is 10 years down the line, Dipika suggested that she put her money in SIPs and let it grow. She also advised against a loan.
Let’s assume by 2029 my friend needs ₹ 1 Crore to set up the homestay and a certain amount to maintain her current expenses (which might be lesser since she will be living a simpler lifestyle there – the lifestyle that might cost her ₹ 30,000 per month now, will be ₹ 60,000 in 2029, for which she needs to get to a saving of ₹ 40L to draw a monthly income for 5 years till her home-stay settles and gives her profits. She needs to start saving at least ₹ 20,000 a month now to get to that ₹40L amount.
Similarly, she has a plot of land that she will need to build her business on, let’s assume building the homestay will cost her ₹ 1 Cr in today’s value, in 2029 this will be ₹ 1.8 Cr for which she needs to start saving ₹ 80k per month in a combination of mutual funds to get to that dream coming true for her.
Effectively, she needs to save ₹ 1 L a month for the next 10 years. This may sound daunting, but she is already in a salary bracket of ₹ 1 L per month and has been saving in a PPF account for the past four years, the total amount she needs to save per month reduces a little.
She lives with her parents so this means no expenses on rent or food. She believes in her dream and for her, making the sacrifice of impulsive shopping or bar-hopping is not too much for her. Whenever we discuss the issue, she gets a faraway look in her eyes and she smiles, saying, “Apna time aayega (my time will come).”
Step 3- Employee to employment generator
Going towards her goal in a step-by-step manner, my friend will be able to get to her target without having to take a loan. With smart investment planning, my friend will be able to move from being an employee to being an employer offering an opportunity for sustainable growth to the people of the village where she plans to open her homestay.
Want to start your own business? Plan a goal on the Basis app to fund your dream to be your own boss.