Today, each of us has far more choices.
Gone are the days when one would work at one or two organisations for the length of one's career, and retire at 60. Today, in most of our discussions with our clients, we are seeing a trend of people wanting to retire earlier and pursue their passions. It becomes imperative for us, then, to understand what working on one's passion means, and whether it has any financial implications.
Passion can be something you enjoy and in which you have a strong interest. Lucky are those who can work on their passion in their regular jobs. But for most, passion is distinct from what one does for a living.
These could be many types of passion — travelling the world and understanding different cultures; running a café; doing community service; giving back to society by teaching the poor; sports; music, etc.
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Financial planning often looks at life goals such as retirement, children’s education, building an emergency corpus, buying assets such as cars / houses, etc. It often ignores that with improving life expectancy, you would still have lots of energy and time, when you may not want to do your regular nine-to-five job.
This requires some thought from a financial perspective, and we feel it would increasingly become one of the core goals to plan for.
How is this similar / different from other goals?
| Amount Needed | Timeframe | Importance | |
| Regular Goals | Can be estimated | As per plan | High |
| Passion Goals | Can be estimated | As per plan (trend of reducing) | Aspirational |
Meeting regular goals is important, else they tend to fund themselves by borrowing monies from other goals. For example, if you have not saved enough for your child’s education, most parents would dip into their retirement corpus to plug the gap. But with passion goals, if you have not saved enough, you tend to downscale your plans.
Similarly, since this goal is aspirational, one tends to take a higher risk to accumulate funds to pursue one's passion (if you are falling short). Equity, as an asset class, tends to be a good fit for generating higher returns and can comprise the bulk of the allocation for this goal. However, as you reach closer to the time when you start spending for your passion, you may want to move the funds to lower risk assets (e.g. multi-asset, equity savings, arbitrage, or short-term debt funds) so that momentary market volatility does not delay your plans.
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Let us try and detail what would planning for such a goal — e.g., setting up a cafe — entail:
- Identifying a business opportunity: café positioning / product.
- Identifying a location: property purchase / rent.
- Interiors: creating the ambience.
- Staffing: finding the right resources and paying salaries.
- Working capital: for raw materials and operational expenses.
- Branding / sales: marketing expenses / cost of discounts, etc.
- Expansion: additional capital / resources.
And other one-time and recurring expenses which we need to plan and manage .
On the personal front, leaving the existing job would mean a reduction in one's regular income from that source. Expenses would, however, continue and we would need to spend money to maintain our lifestyle. One would need to understand if the money to meet these expenses (both personal and for the cafe) would come from the monies generated by one's passion, or would you need to dip into the passion pool (money saved) till the café starts generating enough cash.
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If we put down all the cash flows (inflows and outflows), we will arrive at how much we need to save to manage our passion without dipping into resources meant for other goals.
Conclusion
An early start in allocating some of our savings for this goal would make it more likely that we would be able to pursue our passions.
The author is Director, Fission Wealth Private Limited, an AMFI Registered Mutual Fund Distributor
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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