How Passive Income Helped Him Take a Career Break?

I started thinking about or planning to take a career break back in 2022 the work life balance was no longer working out for me that means that I need a mechanism to draw that much passive income I think that Financial Independence is a necessary condition to retirement not a sufficient condition like is there a fire number in your mind no I have a framework in my mind what is your current passive income like my expenses per month are between 1 to 2 lakh okay uh at the end of the day the passive income sort of has to balance the expenses got it which fluctuate between 1 to two so that also fluctuates between 1 to two L per month so there's a let's say a pool of liquid money that I use for my expenses right and then I backfill it as required in a quarterly reconciliation method or mechanism could you elaborate essentially at the end of the quarter let's say that I realize that my anticipated expense for the next 3 months are going to be X so as per that I adjust FD allocations in such a way that that much money has to come from monthly payouts in the next quarter mhm that kind of quarterly and if there is a difference if the expenses are more then if the expenses are more then more money goes into those kind of aties if the expens are going to be less then I lock it up basically no suppose you estimate it is X but it is X Plus y then how do you fill that why no no there's a buffer right there's a pool it's like a first in first out mechanism ah okay so it shrinks and it expands I try to control the the shrinking and the expansion of that but that's how it works so I know that if in a certain month for example if you're traveling so the expense is going to be higher more towards the higher limit of 2 lakh fine it'll shrink a little bit but probably in the next month it'll be lower so it'll all adjust out and that mostly comes from FD or you also withdraw from Mutual F no I try not to withdraw from Mutual Funds at all you graduated from it bom in 2013 2013 correct and what was the first job like the first job was a consulting job that was mackenan company got I was with the with the firm for 10 years oh so that was the only job that was the only job exactly how does it feel to be in the same Arc for 10 years pretty uncommon right so the growth trajectory was pretty great actually as in Consulting in in any uh you know in any consulting firm you will find that the learning curve is steep the will the compensation increases at a very steep rate as you progress in your career but for me it was more like uh the excitement of working with a different set of people every five or 6 months so it was like you asked how was it being 10 years in the same job it didn't really feel like that you talk about comp what was the starting compensation like and before you took a break how what was it like I think I started at around 10 lakh perom and in 2023 just before I took a break it was somewhere between 4 to 4 and A2 million ND new Taiwanese dollars because I was based in Tai right so convert that to INR it'll be 1 to 1.5c got it didn't you feel key what am I doing am I leaving too much money on the table for me this is a marathon H so my career started when I was 23 years old I'm 33 now so 10 years and if all goes well I'll probably be working till I'm 63 or 65 so let's say 30 more years which means in the longer or bigger scheme of things I'm just 25% into my career hm so thinking about hey I'm leaving behind such a hefty salary would be detrimental uh when I think about this as a marathon in the long term because hey I want to still be alive at 65 right in order to in order to be able to work and make the most of or or create impact in the world through my profession and then how did you decide to take a break why did you take a break I started thinking about or you know planning to take a career break back in 2022 when I real realized professionally I realized two things number one the work life balance was no longer working out for me so you know when I was in my 20s working for 80 to 85 hours a week was fine but then age caught up when I became 30 years old and and then in general in my 30s I realized not sustainable uh for a long period of time number two all my work was mostly in operations but I didn't really visualize myself doing manufacturing and peripheral operations for the rest of my career so I wanted to switch but I also realized one more thing that I have a Long bucket list of activities or Hobbies outside my professional sphere that I had no time for so I did some hand waving math in my head and I I realized that if I really want to focus on these activities and catch myself up I should take a one-year career B and for that I decided that there broadly have to be two rules number one I cannot compromise on my lifestyle uh which basically means that my monthly expenses are not going to reduce and number two I cannot let inflation beat my net worth well mathematically this means that if you take any arbitrary time period in the career break the net worth that I start with you add to that the uh passive income that I make you add to that the let's say the growth of uh uh illiquid assets yeah and you take away taxes you take away expenses that resulting number has to be more than the netw that I started with adjusted for inflation so when you combine these two rules I realize that that means that I need a mechanism to draw that much passive income uh so that these two rules can be maintained still career breaks are not that common right how did you think about the world downside because there is some certain risk you are taking absolutely I mean yeah there's always uh a lingering question that what if the career break actually works in detriment of your overall progression so far far but then I realized that the upsides of taking The Courier break they outweigh the downsides by a lot if you try to draw a correlation between the the quality of life that you're having on the y- AIS and the money that you're running on the x-axis it look kind of like an inverted Parabola H and the shape of this Parabola is I mean look it starts at 0 it goes up as you have more money your life improves h but then there comes an inflection point which is the vertex of the parabola Beyond which you need to make sacrifices to your life in order to get more money and then it just goes down now the thing is this Parabola the shape of it is different for everyone you can't survive without money at the end of the day right yes absolutely but how much money is determined by this curve and well I put it very mathematically but it's still a very subjective concept you'll realize that okay this much money is enough for me actually or you mentioned you want to work till 60 5 but that's more from a impact or keeping yourself busy enjoying work kind point of view but like is there a fire number in your mind I think that Financial Independence is a necessary condition to retirement not a sufficient condition I'll tell you why do you remember the movie zind in that Rik rashan says something like yeah I'm just going to slog it out till I'm 40 and then and then just call it a day right at the time I was like yeah this is amazing I should do this that was 15 years ago but over time I realized that that won't work out for me right maybe but do you have a number in your mind no I have a framework in my mind okay right uh remember the equation that I mentioned about not letting inflation beat the net worth yes so essentially if you retire early or like whenever you retire right I think the the thesis should be that you should make up a model such that your expenses start eating up into your net worth in such a way uh that the slope the downward slope of your net worth does not hit a certain threshold minimum till you are let's say 85 H your life expectancy basically so which is why I don't have a number in mind because I haven't really done that calculation yet because I'm not not exactly looking to retire right now right but that's the fundamental like basically have a framework have you define your net worth and then start eating up into it start start planning your expenses and obviously your passive income in such a way that you're okay with not having any or not having money Beyond or not having a net worth Beyond a certain minimum Threshold at the end of your life you mentioned that you wanted to focus on health what are other things you wanted to do in career break and how are they going I've always liked coding so I wanted to be able to code comfortably that was one number two uh I wanted to finish a couple of books well writing a couple of books not reading that would be boring plus I was already working with three startups uh at very early stages all three of which were actually interested in me uh joining in an advisori capacity uh also as an investor so that also takes up a lot of time got it what's your portfolio split like between fds mutual fund roughly 40 to 50% of my liquid assets are in fds that's where the main passive income comes from got it how much in mutual funds mutual funds uh probably add another 30% on top of that got it the house would be like 15% and the remaining is in uh more higher risk Investments for example as I said investing in startups and cryptocurrencies and such how's your relationship with money uh change essentially uh I believe that money is an enabler you can use it to have a great life or a luxurious life but that's not what I visualize I mean you would never hear me say things like hey I'm just going to buy a Mercedes because I can afford it which car do you have you have by the I 10 okay it's a great car it takes me where I want to go huh you mentioned one to two lak of expense but what are the broad categories of expense uh travel food um this travel for leisure purpose right yeah yeah yeah entirely for leisure okay let me explain to him what that is so that is Starbucks cups oh is it yeah oh when I saw it I seriously thought you must have invested in some startup D2 inventory um yeah it kind of looks like that right no but uh those are Starbucks mugs oh basically I started I was in China in 2015 in a city called her and I went to Starbucks for a coffee and I saw this cool mug and I bought it a week later I realized that hey why not like start a collection right because I do travel a lot and at at the time I thought the max 10 years and now I ended up with like 160 of them so coming back to the Yeah question you asked so travel food leisurely Pursuits like books and all and then uh and and in food I'm also including groceries and and stuff like that that's about it basically and this one to two is this is Joint expensive no only mine okay my wife is working so she also has an active salary uh my framework of my career break was made such a way that it excludes anything that she brings to the table but obviously in on a day-to-day basis it's all combined what perspectives that you got into this career break that you'll carry forward when you start working I think the biggest advantage that this career break has had apart from obviously focusing on things that I didn't have time for is that there are some aspects of my job that I miss more than the others so I know that those are the aspects that I'm going to carry forward uh whenever I join back whenever I join the professional world again work life balance I did know for sure that it was bad but I didn't exactly know how to articulate what good looks like H but now now I know what are your advice to people who are considering taking a career break I would say uh think about why you want to take the career break and articulate that clearly as a list then think about can you actually achieve all the elements on that list while making changes to your current job or maybe switching jobs if the answer is yes then don't take a career break because it doesn't make any sense if there are some things that you think cannot happen for you outside of a career break then by all means but then build up a strong financial framework for you to be able to support yourself during that career break thank you for watching and supporting our Channel if you like the stories we tell here's your chance to be a part of it if you or anybody you know has an interesting Financial journey to share then please fill the form in the pin comment below and we'll get in touch with you

Channel: Wint Wealth

Views: 423,697

Keywords: passive income, career break, consultant, mckinsey

Id: FnZ7ZjvtuJ8

Length: 12min 51sec (771 seconds)

Published: Mon Feb 26 2024