8 Jun 2022

Sam Dogen a financial advisor

they say that in the year 2018

he was going to watch Soft Ball game with his friend Bob on a weekend

there Bob had bought his new Tesla Model 3 car

which was selling a lot in the market

Bob was doing a lot of show off there

that how does this car run on autopilot

he was driving his car with his I phone and was saying many interesting things

like I heard this in news recently

on 9th September a lady gave birth to a baby in Philadelphia in the front seat of Tesla

and the delivery happened, when Tesla was running on auto pilot

because of which, that baby is also called as World's First Tesla Baby

so Bob was saying such interesting things to everyone

Sam was shocked by listening to all these things

he was shocked because

that how did Bob a 31 year old pre school teacher

had bought a $53,000 car

which is obviously a lot of money

according to Sam it was their biggest financial mistake

which he shouldn't have done

and at the same time, there was a hype about Tesla

after listening to all those things, Sam drove that car one day

he says that the experience of driving this was very different

even he liked the Tesla Model 3

and even he wanted to buy that car

but because this car was very costly to him

and as he was a financial advisor, he didn't want to do that mistake

so as a financial advisor what he did was

instead of buying this $53,000 car

he started calculating it's opportunity cost

where he saw, if he invest this much money of his savings

what can be better opportunity for him than this car

then he started doing research about Tesla Company or Elon Musk's company

he started to realize about this company potential

and finally after doing all these things he decided that

instead of buying a Tesla Model 3 of $53,000, will buy the Tesla Stocks worth $53,000

in October 2018 on the per share value of $298

bought the Tesla stocks

and guess what after some time, these Tesla stocks reached $367

by doing this he had got a profit of $11,500

and he didn't want to sell that

and after 6 months, when there were some problems in the company

because of a Tweet of Elon Musk, the stocks came down to $179

then their profit of $11,500 converted to a loss of $20,000

but still he didn't sell his stocks he was still

now fast forward after 2 years, where the entire world market crashed

there Tesla stocks were rising

then Sam thought, just like last time, these stock will fall one day

then what Sam did was, at $888 per share value

sold his 75% stock

because he didn't want to handle the volatility of this market

due to which he got a lot of profit

but ya the fact was, after some time Tesla stocks reached to $1,126

thinking of which Sam regretted

but as it is said that Hindsight is always 20/20

after doing things we feel that we shouldn't have done it, but anyways

Sam had booked a good profit

and then he was thinking how stupid Bob is

even he should have bought the stocks instead of the car

do you know the interesting part was

Bob whom he was thinking is stupid

he was investing a lot of his money in Tesla, from a long time

because of which he had generated a lot of profit

and with some part of the profit he bought Tesla Model 3

look friends the things we should learn from this story is

wealth is not like that as we think it is

many time when you think people are less capable than you

you think that they are financially behind you

well many time is is not necessary that they are behind you

many times many people do well financially

but since all their wealth is in their investment

which we can't see, so they won't look rich many times

and many times even if they look so, they look stupid

which is not always the case

ya being financially free doesn't mean

that you have a lot of wealth which is visible to people

by which you can live a luxurious life

no but the meaning of being financially free is

you live a comfortable life where you don't worry about money

where your money keeps you safe and work for you

now Author Jonathan Clements in their book From Here to Financial Happiness

in this book they share 77 short lessons

I will merge all those points and share with you 4 practical steps

which will help you to be financially free

as with that as I had gifted you shares of Google few weeks ago

let's come to lesson no. 1

which is No saving with debt

author says to start your financial freedom journey

first you have to do one thing

that is clear all your debts

clear the loan and this is the most basic rule of finance

that if you have any kind of debt

specially bad debt you cannot start your investing journey

author says, some people start long term investing with their debt

where they will be paying their debt and also doing some investment

by this their process of becoming financially free, slows down

so author says first clear all your small debts

like mobile phone, laptop emi, car loan

and such things which you can finish early

ya sometimes the big amounts like home loan

that can't be easy to clear, those are exceptions, keep them aside

but clear your small debts

plus the author also says, to use credit cards wisely

because US Department of Labor had did a research on 7,900 citizens of age 20 to 40

by that we know that, those who were at high credit card debt

their stress was affecting their physical health overtime

by which they faced many problems in daily life

pain in joints and stiffness

and were facing many problems

you should know how you are using your credit card for not only your mental peace but also physical health

many people don't know that by using credit cards the interest starts

and it's amount keeps increasing

and there is a solution related to it, which you will know in 4th point

but first remember that

that clear all your debts as much as possible

after that start your savings journey properly

Lesson no. 2 Financial safety net

this might have even happened with you

something needs repair in your home, like your phone is broken or your T.V is not turning on

on there is a problem in the engine of your car or bike

like I remember my friend was saying, that the graphic card of his computer was spoilt

the price was very high, at that time he didn't had money to buy it

so somehow he started working without graphic card

at that time he didn't had credit card and he didn't want to borrow money from someone

he he decided that next month when he gets income he will buy the graphic card with that income

now look, many people are just like this

if there is any problem, for it's solution they use their credit card or depend on next salary

if something happens they say, they will do it from next month

do the EMI many times

but author says, no one thinks what if their source of income stops

many people are salary based

and their job is their main source of income

there are only few people who have passive income

if their main source of income dies of any reason

job went or anything, even then, they will have a different source of income on which they can depend on

now as it was seen during Covid time

where many people lost their job and were destroyed completely

so well what is it's solution, the author says

If you want to feel better about your finances today then you should spend more time thinking about what you are gonna pay for tomorrow

which means basically author is saying us

here we have to create an emergency fund

you store your money, at a place where you can use it even after loosing your main source of income

you cannot spend this money on any random things

like for vacation, for buying a car or anything


here you have to create an emergency fund

which should be the backup of your main income source

because of which, in case something happens and you loose your job

you will not get a new job until you can survive and be safe

and how to do that, well to do that author says

that you have to calculate your monthly expenses

let's say your monthly expenses is 20,000 rupees

you should at least keep 1,20,000 rupees safe at side

which is your emergency fund

if there is any problem, like covid, lock-down

even then you will have a buffer time of 6 months

where you can do many things, can find a job or create a new source of revenue

which will be very helpful for your survival and your respect

Lesson no. 3 Invest conservatively and buy stocks with caution to increase your wealth

J Walk when they launched a website Priceline of discount offer in the early 2000's

by this their net worth reached $1.8 Billion in just one year

and at the other side the world's greatest investor Warren Buffet

they had to wait 55 years to earn their first Billion Dollars

look there is how much difference

but the thing is J Walk's income was not sustainable

everyone knew that this dotcom bubble will burst

and when that bubble burst, by end of October 2000

in just a few months, out of billions of dollars of J walk only 33 Million Dollars were left

and Warren Buffet were into the top 1% richest club of the world

and are still today

and for the coming many years, he will be in the top 1% list

the reason behind this is, Warren Buffet, is investing from past 7 decades

and he had rarely sold his shares

so even the author says, if someone wants to be financially free

so to invest your money stock market can be a very good place to you

where you get not only returns, but the company pay you dividends many times

which means they share some percent of their profit to their share holders

for example

you might know that Warren Buffet is a major share holder of Coca Cola

so the C.E.O of Coca Cola

he gets the highest 16 Million Dollar salary per year

on the other side, Warren Buffet by the dividends of Coca Cola

earn 547 Million Dollars

so you might have understood where to invest to become financially free

author says when you think long term to invest in stock market you don't need to understand any rocket science

but the companies which you know about properly or better

use their products daily

which you are using from many years, which you believe on

you like those products

it will be good for you to invest in such companies

and one of the most successful Mutual Fund manager

Peter Lynns, who had wrote many good books on investment

even he says the same thing

you should invest in such companies whose products you use or you know better about them

whose products you like and you believe on

as many people use I phone

eat Maggie, drink Coca Cola

use Tesla Cars

so it can be good for you to invest in such companies

as it was proven in the starting story

and here you don't need to see the daily fluctuations of the market

in the Intelligent Investor, the mentor of Warren Buffet, Benjamin Graham, even they say in their book

that we should not focus on the daily fluctuations of the market

but you should just pick the good companies

and invest in that for long term

this will give you very good returns in long run.

Point no 4 is Rugality leads to better finances

look our physical health, mental health and relationships

and overall in entire life, habits play the biggest role

and this is an universal fact

that good habits makes good life

financial success is nothing but the result of your good habits

if you think logically

if you want to be financially free

you have to save money, you have to invest it

but you have very less time

so it is very important for you to save and invest money

author says 90% people can't achieve financial freedom because of their bad habits

their bad habits impact savings a lot

because people don't think exponentially they always think linearly

example what we think is, I am just eating one pizza, what will happen by that

I am just eating one burger today, what will happen with that

with these small things, they make it a habit and start eating outside food

order everyday some thing or the other from Zomato

at least it happens every week and that becomes a habit

because of which a particular amount Zomato gets every time

goes to different junk food companies

money is also going

plus all these things impact your health

I saw a video, there were two people

both take different choice every day

one person gets up early then the other gets up late

one person eats junk food everyday the other person eats healthy

all these small choice which comes in front of us everyday

our habits

one person spends his money on useless things

buys and eats useless things

on the other hand the other person instead of eating unwanted things he saves it

or eats healthy food

and all these things of 1 day, 2 day, I month or 1 year compounds

it's effect becomes so high that the person who had bad habits his health gets worse

his money slowly decreases

and his relationship life, everything comes to an end

on the other side, who had made small habits

those small habits brings improvement in his life slowly

his savings and his investments start giving him money

his health helps him living a good life

and in long term one person's frugality changes his life completely

on the other hand, the ignorance, his smoking, eating unhealthy

will destroy his life

so even you have to understand this thing

that the small decisions which you are taking everyday

may be you won't see it's results today, tomorrow or even after a month

but you will definitely see some difference in some years

and that thing will hurt you in the long run

so start living your life frugally

instead of spending on unwanted things, start saving

start investing

ya it might not help you to get rich in some time

but definitely in long run, you can save money and make money

so don't keep linear thinking, keep exponential thinking

how can you do all these things

try not to spend more than 50% of your income

and you have to invest 12% for long term

for retirement and all

if you do like this, you will benefit from it in long run

I want to say you a bonus point, start working on different sources of income

start working on many different sources of income as much as possible

if you just have one job then obviously that's very risky thing

you have to create sources of income side by side

which can give you income at least a little

this thing will help you to earn money in long run and to be financially free

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Great post. My kids have started a simple first step in saving 70% of money from their part time jobs whilst not investing in shares just yet they are practicing financial literacy.
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