Fools Work Hard..... for Others.

Last weekend, I spent my time in reading a book "Fools work Hard....for Others. Smart People Work Hard For : Freedom From The Race" by Ravindra Potharaju. It was a nice reading and written very well in a narrative manner. The author created 3 fictitious characters (Bob, Tom & Lou) to explain the concept through dialogues between them.

The concepts were not new but was put very aptly. The author tries to explain how to achieve freedom from the ‘Race of life’. "Fools depend on others for Security" and "Smart guys depend on themselves for Security". He says that he is not against working, but make a plan for future while in job, which will expedite the process to Freedom.

The process to Freedom, he says, can be achieved by following the 7 steps.

1. Choose "Freedom-based Goals"
2. Cultivate "Natural Motivation"
3. Fall in "Love with Wealth"
4. Align "Natural Talents" to your profession
5. Develop the "Right Skills"
6. Prepare and Execute a "Simple Plan"
7. Review "Progress" and "Motivation Fuel"
   

In essence, the author says, Fall in love with wealth, as you do for your children. Deploy your natural talents with the right skills. Develop a simple plan and monitor the same.

The plan is nothing but an Income and Expenditure statement with a slight difference. The bifurcates the Income into Assured Income (dividend, Interest, Rent etc.,) and non-dependent (like salary). He tries to increase the non-dependent income. While on expenditure, he tries to control the expenditure (not cutting them). Then he is re-investing the surplus to generate more independent regular inflow of money. Though he does not talk about how to generate the wealth or to get more returns, he discusses on how to get into the habit of getting regular income. He explains how to compute the number of year to achieve freedom:

N = Freedom Flow/ (AIOP * Ploughback)

Where:
N = Number of years required to achieve threshold of “Freedom”
Freedom Flow = Total Expenses – Assured Income
AIOP = Assured Income that can be generated as a percentage of ploughback
Ploughback = Total Income – Total Expenses ( the amount available for conservation to assured income)

Assured Income = Rentals, Dividends, Royalties, Interest and others
Non Assured Income = Salary, Bonus, etc.,
Total Income = Assured Income + Non Assured Income

To make this equation work, the Freedom flow should be as low as possible. That means, increase the Assured Income and reduce the total expenses. The more you reduce your expense, freedom will be achieved faster. The AIOP to be maximised. This can be achieved by taking proper financial advise.

To conclude, if you feel that you are not living the lifestyle of your choice, dependent of your monthly salary, being in a job you don't like or you are not able to put your natural skills to your job, I suggest you to read this book. It will not give you answers, but can guide you.

Author : Ravindra Potharaju
Publisher : Vikas Publishing
Price : Rs.150 (~$3.50)

Cheers,
Gopal