Skip to content

What Forrest Gump can teach you about investing ?

Sounds ridiculous? After all, Forrest Gump was an immensely successful movie and rightly so.  But what has it got to do with investing?

In the movie there is a scene where Gump says that his partner Lt. Dan has invested the money they got by selling their business in to “a fruit company” and that they don’t have to worry about money anymore.The fruit co is actually Apple !  When i saw the movie way back it was interesting to see how financial independence ( The stage where your investments return via dividends/interest is enough to cover all  your expenses +life goals)  was spoken about in a real practical way.

Not having to worry about money was in Gump’s words “One less thing to worry about”

The movie was released in 1994, others have written about how if Gump was real and they did invest in Apple back then it would be worth a few billion dollars or something like that ( Link : Forrest Gump & Apple ) . That is nice but the IPO came in 1980 and the stock till about 1998 hardly moved an inch for 18 long years, not sure if people would have waited that long! So the lesson is not that.

The real lesson is that financial independence is having ‘ One less thing to worry about’ and if we see around this is the number one cause of worry for most people, even among the middle class and sometimes even among the rich ! And the surest way to reach financial independence is finding out where we are and planning to get to the next stage till the final one of Independence is achieved. This is not an impossible task, there are few steps to financial independence whereever you are aspire to go up the next level and diligently plan for it.

Step 1 : Stop living EMI to EMI and pay off all debts. ( Home loans for the house you are living in is fine!)

Step 2 : Start saving for a rainy day. Aim for 6 months expenses saved in a FD, may be tall order for many but this is essential.  Get enough Insurance cover both life and medical, buy plain term plan in life and opt for a healthcare insurance for all members of family.

Step 3 : Start investing if possible monthly or quarterly, this should be for your future goals and financial independence. This should be invested in equity and bonds and not just saved, ie the money has to work for you and not sit in the bank FD where you lose half the money to inflation and other half to taxes !

Step 4 : You are now financially secure, your investments in step 3 earns now enough to pay for most of your living expense, ie your money works for you now. You may still have to work to meet life goals like your childrens education or luxuries of life like being able to go on trips abroad, etc but the basic expenses are covered by investment returns.

Step 5 : Financial Independence is some time after stage 5, income from investments via dividend or interest is enough to pay for all expenses small plus the luxuries that you want. In Indian context generally step 4 itself is financial independence as we don’t indulge in big luxuries but times they are a changing.

On the coming Independence Day take a pledge to be financially independent too !

 

 

Post a Comment

Your email is never published nor shared. Required fields are marked *