My Mother Made Me Financially Educated Before I Became A Teen

I was reading this wonderful article by MMM and it reminded me how almost everything I know today was taught to me sublimely way before I was a teen.

Like many other kids, I received a small amount of money every month from my parents. It started with 100 Rs a month and grew to 500 Rs a month over the years. I stopped receiving this amount completely when I turned 18.

My mother encouraged me every month that I don’t spend all the money that she was giving me. She further encouraged me that if I am able to save 1000 Rs, I can give the money to her and she will give me an additional 10 Rs a month or roughly 12% gains per year.

Before I became a teenager, I was able to save up to 5000 Rs from the pocket money, Eidi and other cash gifts I received from my relatives. For handing this over to my mother, she gave me an additional 50 Rs every month in pocket money.

In hindsight, if you think about it, I wouldn’t have saved more than $100-$200 through-out my childhood. In addition, I wouldn’t have generated more than $100-$200 in compounded interest. Despite making no significant amount of money, I learnt the number 1 way of getting wealthy. I learnt how the money can do the work for you. That each dollar is an employee that works non-stop 24/7 to get you more employees every day. It’s even better than a pyramid scheme.

This, I think, is the single biggest differentiator between people who are able to get wealthy and those who do not. How much wealth you’ll accumulate over your life is never determined by how much income you make. I’ve known enough broke people in my life who make over $10,000 each month and still struggle to do well financially.

They do every thing in their power to make contributions in the form of “sweat equity” but make no progress whatsoever to make contributions in the form of “financial equity”. Sweat equity can get you a lot of income, but it’s often the financial equity that buys you the financial freedom.

I was lucky to be taught this way early in my life. It breaks my heart to meet people who make it to the top percentile as far as income is concerned, yet fail to buy themselves financial freedom. I hope I’m able to pass the same learnings to the readers of this blog as well as to my child.

Achieving Gender Equality In Tech

It is often statistically reported that women are paid lesser than men in most lines of work. In tech, specifically, it is said that women are paid 5-40% lesser than their male counterparts.

Another striking statistic that is often highlighted is that women make up only about 25% of the tech workers. This particular statistic doesn’t bother me because in comparison, healthcare industry employees 77% women. One gender could be more inclined towards working in a particular industry than the other and there shouldn’t be anything wrong with that.

Coming back to salaries, Fiverr, a freelance platform reported that on their platform women at average earn $96 against their male counterparts who earn $100. This represents a 4% difference and is by far one of the best reported figures I’ve read regarding the gender equality.

I’ve often written on this blog that freelancing, remote jobs or distributed companies have many advantages. I’ve often highlighted the location and time independence as the most major advantages. You could be anywhere at any time living the millionaire lifestyle.

But the data published by Fiverr has given me new reasons to celebrate the digital nomad lifestyle. You could be a man or a women. You could be a Muslim or Jew. You could be in Syria or Romania. You’ll get the equal opportunities and wages as everyone else on the platform.

Distributed companies, remote employment and freelancing is the answer to gender inequality. Not just gender inequality, it is also the answer to racial inequality or any other kind of inequality. Obviously in addition to granting you freedom and wealth.

The Fundamental Error We Make When Planning For Retirement

The key to retirement is understanding a fundamental concept called savings rate. A lot of people only focus on the savings, and not the savings rate. Let me explain to you why the savings rate is more important than the savings.

A friend of mine was saving $200 every month while he was making north of $1000. A few years later, his business really took off and now he was saving $300 every month while making nearly $3000. While he was making progress in saving more money, he thought that he was going to retire much earlier now. But that isn’t true. He actually delayed his retirement. Sounds strange, right? Let me explain.

His savings rate before was 20% of his income and a few years later despite increasing the savings amount, he reduced his savings rate to 10%. The reason why this matters is because his expenses have gone up considerably. While his savings have gone up by $100 each month, his expenses have gone up by $1900 per month.

Now that his new lifestyle requires much more money to maintain, and assuming that he doesn’t want to downgrade his lifestyle once he retires, his savings will now support him for considerably lesser time period. And hence he will have to work for a longer time period now before he can retire.

Here’s a retirement calculator for people in Pakistan.

How Can You Be Wealthy?

Each person looks at this term differently. Probably for some, it means being able to afford Lamborghinis without a second thought. Or being able to stay in presidential suite in Las Vegas. Not for me. I don’t think of wealth like that. Because if you do think of it like that, then there’s always going to be someone ahead of you, there are always going to be things you can’t afford and this is a never ending cycle.

I define wealthy differently. For me, it’s the ability to pay all your bills on an automated basis, without working. In bills I generally include the unavoidable bills including rent, utilities, grocery, school, medical etc and some leeway for vacations, gifts, shopping etc.

I recommend you to find this numerical figure. It’s extremely important to do so. For example, you have calculated that your annual expense end to end is Rs 2 million. This means Rs 165,000 per month or approximately $1079 per month. If you can create a way to generate Rs 165,000 a month without working, you’re wealthy. You are financially free. You can actually retire, regardless of your age.

The second step is finding a way to acquire assets that generate $1079 a month. The mistake that most people make is they don’t wait to spend on luxuries. I want to spend on luxuries too, and I feel everyone should be able to do it. But not without following the right framework.

The right framework requires earning money, saving it, acquiring assets, generating income and spending that income. What most people do is earn money and spend it. Doing what most people do is a perfect way to work until you die. Doing what I recommend you to do is a perfect setup to retire between 5-15 years.

To generate $1079 per month, you can acquire (or build) SaaS/Blog/App for $32,370 (at 30X monthly multiple). If you’re more into “real assets” you can acquire property that does 5% per year for $258,960 or you could invest in stocks that generate annualized average 8% per year by investing $161,850 in stocks. Or you could do a mix of these things by diversifying and invest a total of $100,000 to generate $1079 per month.

It may sound tough, but it really isn’t. Especially if you’re young and have the ability to save more. All you have to do is have a clear goal: A) the numerical figure that you need every month, and B) the numerical figure required to invest to generate ‘A’ every month. Once you have these numbers, you need to see how much can you save each month, and calculate the number of months it’s going to take you to save until you’ve hit ‘B’. By doing so, you’ll have a set date for you to become wealthy.

I recommend you to read the book “Rich Dad, Poor Dad” by Robert Kiyosaki. It’s not the best finance book to read, but it is the best first finance book you should read.

Financial Freedom & Spreadsheets

I have met few people who are financially literate and do not use spreadsheets frequently both in their personal and professional lives. I love spreadsheets and use them to track my day to day expenses, taxes, donations and just about everything.

Just as you can’t run a business without tracking revenue, costs and making projections, I feel it’s reckless not to do the same in your personal life. Because in the end the fundamentals of money are the same. If the expense is higher than the revenue, whether its business or your personal life, the result will be the same.

I recommend everyone to create spreadsheets for their household expenses. This will help you project what your annual spending is going to be like. Once you have your annual expense projection, you can set your income goals accordingly. You can plan savings, project wealth generation and eventually plan retirement. It all starts with a spreadsheet.

My monthly expense sheet layout is very basic and does the job for me.

Financial freedom is often misunderstood as people equate it to really high salaries. Most middle class people who start working by 25 can retire by the latest at 40. I’m not kidding. It is the only truth I know, and without any generalization. For now, how about you simply track and ensure that you’re earning more and spending less and once you’ve done that, you can head over to MMM to learn how the rest works.

My Sweetest Failure Made Me $17,239.85

Everyone says it’s great to fail. They say if you don’t fail enough times, you stand no chance at succeeding. I agree with that. But this post isn’t about that. It’s about one particular failure. A blog that I abandoned. Yet, it netted me $17,239.85. Which by the way is not an arbitrary figure. I exported it from my bank statement to know exactly how sweet was my failure.

Sometime in 2010, I started a technology blog. I was supposed to write about jailbreaking iPhone, rooting Android and all the other crazy things that you can do with your phones. Except that I don’t do crazy things with my phones and I had no interest in writing in this area. I started it because I heard the CPMs (Revenue per 1000 ad impressions) in tech are great (and they were). I also started it because many of my friends and colleagues were doing great with their tech blogs. The blog was inspired by Taimur Asad‘s RedmondPie and Zawad Iftikhar‘s SegmentNext. Since it wasn’t something I was passionate about, despite a good start, I just didn’t have the patience to run it for the long haul.

Stats for RewriteTech since inception till date of publication

Personally I gave this blog about two weeks. Later I hired some writers and let them contribute content with no oversight by me but eventually stopped that too since I couldn’t see any growth. Over the past 9 years, I have passively generated $17,239.85 (average $160/mo) after costs from the leftover traffic that Google kept sending in small numbers. Like someone said, you miss 100% of the shots you don’t take. This post is about that. About taking a shot. Almost missing it. And still walking away with a pile of cash. Could it happen, if I didn’t take this shot? Will it happen, if you don’t take a shot?

Distributed Companies

I love distributed companies. It hasn’t been a tough challenge for me running one thus far since I’ve never had more than 10 employees at any point in the lifetime of my business. Although we’ve worked with over 200 collaborators and partners concurrently but we were able to manage that just fine.

One of the companies that has proven how far a distributed company can go is Automattic. They are the team behind WordPress, WooCommerce, Jetpack, Simplenote, Longreads, VaultPress, Akismet, Gravatar, Crowdsignal, Cloudup, Tumblr, and more. They have more than a thousand employees. It’s a remarkable company to say the least.

I’d list below the top 3 reasons why I love and believe in distributed companies.

Better Talent Pool

You are not restricted by country while trying to find talent for your company. Most companies are restricted by cities. You’re often missing out on better talent pool, sometimes even paying a higher wage to lesser talented workforce since a better alternate lives in Vietnam or Ukraine. Not only would they cost less, the quality of work will be way superior.

Lower Costs

On top of money saved in wages, there are much bigger costs that you can avoid. You wouldn’t need to rent office space, spend on furnishing, security and many other associated costs of maintaining a workspace. Although, setting up a workplace can be cheaper in Pakistan compared to many other parts of the world, it can still cause a significant damage to the company’s finances. For example, we have saved over $120,000 USD ($1000 x 12 x 10) over the period of 10 years only in rentals by running a distributed company.

No Ties

Both the founders and the employees have the freedom to move around, be anywhere in the world at any point in time with no ties to any geolocation. This has a huge impact on a work-life balance as well as happiness index of the team.

Please let me know in the comments if you think traditional companies are still a better choice than distributed companies.