I was once asked by my father that do i know who is Warren Buffett. This question was put to me some nine years back. My father was surprised to see a dumb expression on my face: actually he never expected i didn’t knew the great investor of this century.

At that time i had just started my professional career as an engineer. I was working for one of the most respected organization of India and was enjoying my job with immense job security. T

My pay scale was not bad hence within first few months of my employment i purchased a motor bike, television, fridge, furniture’s, desk top computer, mobile phone. This was not the end, my recurring expenses on clothes, dining, fuel for motor bike, shoes, club expenses was flowing in quick succession.

I never knew that my father was noticing my expenses. I remember one day he asked me how much savings i had in my bank account? As on that day my account had only Rs 800. After completing six months of my job this saving was miserable. My father was disappointing.

In the month of march, we Indians are supposed to declare our tax savings. I was not knowing then how important it is to save tax. The salary that i received in march was almost fifty percent less of my regular pay cheque. It was the first time i went to my father for help. My father smiled at me and i could see a feeling of satisfaction on his face. He patiently explained me that because i had not done any tax savings hence income tax was deducted from my pay cheque in march.

I asked my father that if now i will some tax saving then will i get back my deducted tax. To my surprise the answer was No. That day i started to save my money with the purpose of income tax savings. My earning getting deducted as income tax was like me throwing my earnings in drain. This money is never going to come back to me.

My father helped me to start my first income tax savings scheme. That day i bought a National Savings Certificate (NSC), Life insurance policy (LIC), Medical Insurance (Mediclaim), Employees Providend Fund (EPF). By buying these savings schemes it helped me increase my monthly cash in hand by almost 10% of my regular monthly salary. With this increased cash in hand, first time i though about how to make more money.

I again went to my father and asked him that what can I do to increase my income. His answered me with just one phrase, ‘start Investing’. I had heard this word (investment) before but had no idea that what it meant.

My father had his typical style of explaining me the concept of investment. Instead of giving direct answers he preferred to ask questions back to me making my Alma matter think more logically. His first question was

What you should I do first to start investing?
I thought and then gave up. My father again used his favorite word ‘Save’. According to him unless we are saving we can never invest our money. My father said that as a rule of thumb i should save at least 25% of my monthly earnings.

What options are available to invest my savings?
My father know that my knowledge as far as investment option is concerned will be very limited so he explained himself. He suggested that as i am very young, i should invest in equity. He told me that i should focus on creating an investment portfolio. This investment should consist of shares and equity linked mutual funds.

The third question of my father was most difficult.

What i will do with this investment portfolio consisting of shares and equity linked mutual funds?
My answer was that i will use this money to buy other requirements of life. My father dismissed my answer as wrong. He told me that the accumulated in this investment portfolio shall be used to buy real estate. He explained that real estate investment will generate streams of rental income which will only grow in future. The rental income works as an excellent inflation hedge.

At the end, my father asked that why I am investing?
My answer to this question was very simple that i want to make more money in addition to my present source of income from my job. My father liked this answer. For the first time he used the phrase ‘Financial Independence’. He said that the streams of income generated from rental income will reduce my dependency on income from my job. He explained that supposing my monthly expense is 100%, and if my income from rental income is sufficient to meet 100% of total expenses, then in that case i can call my self as financially independent.

Today almost nine years from that day not only i adore the great investor Warren Buffett but i have also been able to build a reasonable investment portfolio. Very soon i expect that i will be able to buy my first real estate investment.

Today when i am able to balance my income, expense, savings and investment, my father has set a new milestone for me. He tells me that when i inevst in shares, mutual funds, real estate, i am buying an asset. But in order to get rich and become financially independent faster, i should focus on ‘creation of asset’ more than buying an asset. Like Bill Gates created the asset called Microsoft, Steve Jobs created Apple and Warren Buffett created Berkshire Hathaway, i should try and create a small asset of my own. I am thinking to start a small business of my own that will generate at least residual monthly income.

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