by Varun Mayya
NPS: The New Pension Scheme is for people looking to set aside a retirement fund. You’re probably in your twenties thinking about what the value of setting up a retirement fund is. Like I mentioned before, I’ve realized it’s almost impossible to see a future you cannot comprehend. There might be a day where you want to call it quits, but cannot because you don’t have enough money saved up. If you’re above 18 years old, putting at least ₹50,000 in NPS is a good idea. Remember, the aggregate total of tax-free savings for NPS and ELSS is ₹1.5 lakhs; so our above split is perfect. Not only are we saving money, we’re also saving on tax.
Health Claim/Mediclaim: An individual Mediclaim is one where you cover yourself against the financial liabilities of landing in a hospital. If you meet with an accident or fall sick, a Mediclaim corpus will cover your treatment. No human is infallible, but our ability to take precautionary measures is what makes us one of the smartest creatures on the planet. There are also some tax deductions to doing a Mediclaim up to ₹15,000—an added bonus.
It might also make sense to buy a “Family Floater”— something that insures your immediate family against hospitalization costs, but since this is a very simple savings model, I’m going to skip it.
You might notice how I’ve not put any life insurance in this plan; neither have I mentioned any particular policy to pick. In reality, you will need a life insurance plan at some point in your life, but I believe (and I know there are varying opinions on this topic) that you can skip it until you hit 30 or get married. It makes more sense to save a higher corpus into life insurance at a later point in life rather than block out a big part of your income right now that you should rather spend on learning new skills and making real money.
I also haven’t picked a particular policy or a vendor yet because it really doesn’t matter. Most ELSS, NPS and Mediclaim plans from different providers/vendors are very similar; just go with whatever makes most sense to you. I would also recommend you open a demat account and invest in stocks manually, but this is a simple financial model, so we’re going to skip that part.
c) Monthly spend account: At the beginning of the month, have a standing instruction on your business bank account and have 25% of after tax funds moved here. Link this account to a spending app on your phone like Walnut to track recurring spends. You might own a gym subscription or use Netflix often. You need to keep track of these expenses, along with bigger expenses like your house rent, stepping out for dinner, etc. In the past I used to recommend getting yourself a credit card for this account (to improve your credit score and take loans later), but my controversial stance on this is that these days I think that’s a bad idea.
The world around us is an increasingly distracting place. There are many things you can be tempted to buy with money you don’t have. As you move up the freelance game, it becomes easier and easier to spend more out of this account guilt-free. After all, the entire point of this account is to try and go broke (we’re smart enough to have other accounts that do the actual saving)!
Within this account, I’ve also mentioned a learning/experiment fund. I encourage everyone to spend money on improving their craft (and learning other ones). Abhinav and I both constantly spend on new software and courses. I like keeping up with Game Design theory even though I don’t make games and Abhinav always keeps up with design.
d) Splurge fund account: Don’t be fooled by the name of this account. This account will double as a “rainy day” fund if you’re doing badly as a freelancer and a car/house/Euro trip fund if you’re doing well. Just like your savings account, you aren’t allowed to touch this money for a while.
Remember what we said about goal setting? Suppose you have a goal of buying a car that costs ₹4 lakhs in two years. You need to make sure you save up enough for it first, right? That is exactly what this fund does. However, the magic with this fund is that in case you lose a big project and don’t have enough money to put in your savings account or your monthly spend account, the Splurge fund account doubles up as your backup. Every month, until you land another project that resuscitates your Business account, you withdraw money from the Splurge fund into your Savings and Monthly spend accounts. If you do manage to land a project, then you can continue saving money into the splurge account as you would normally do from the next month. In time, you will have enough of a corpus to make a big purchase!
I personally call this the motivation account. It motivates you to keep landing projects and stay cash flow positive so you can buy that dream car or that dream house, but also doubles up as a backup account when things go bad. Two birds, one stone.
Some more rules to remember:
Avoid debt: There is no better way for me to say this. Once you start freelancing and making some money there is a temptation to spend, whether it is buying a new car or a new house. Think hard about your purchases and only spend planned amounts from the Splurge fund. Whenever you buy something that costs a lot but is in actuality just an upgrade, pre-plan it. Never buy a car or a house on impulse even if you have the money, ever.
Talk about money: For some weird reason, it’s taboo to talk about money in India, even though it’s an integral part of society. Have foundational conversations about money with your parents and significant other. Whether it is how much you’re saving or understanding the value of a rupee this is critical to understanding finance. I personally believe that a person should have done freelance, as well as hired someone, at some time in their career. This teaches people the time value of money and how a certain number of hours of a person’s time equals an iPhone or how many hours of work you have to put in to afford one liter of petrol. When you “get it”, you’ll realize how this imaginary concept called the market automatically balances the price of various resources depending on demand and supply—whether it be human labour or the price of a potato.
Diversify: As your savings grow over time, where you invest your money becomes more significant. Make sure you are investing in a diversified way. Spread your risk among large and small companies, across exchanges. It’s tempting to put money into cryptocurrency, but the government seems to be on the fence about it, so I’d skip for now—although understanding the technology behind blockchain and smart contracts is a good idea regardless. Putting all your money in what you hope to be the next home run can leave you with a big hole in your savings.
Habituate to a frugal lifestyle: It’s actually very easy to live a frugal, healthy lifestyle in India. The lower your personal “burn rate” (the amount of money you spend on yourself every month), the more money you can put into learning new things and trying out new and creative ideas. It’s entirely possible to buy a Ferrari off your splurge fund (as long as it was pre-planned) and live on under ₹1,000 a day.
Chapter 11
Managing Stress and Ambiguity
“Adopting the right attitude can convert a negative stress into a positive one.”
—HANS SELYE
The hardest part of freelancing for most people isn’t a technical concern, it’s an emotional one. In a stable job, you never have to worry about where your next pay cheque is coming from, unless you’re about to be fired. It’s low stress, but there’s also a cap on how much you can make.
In this section I’m going to tell you of my personal struggles with the stress and ambiguity of doing something all on my own. I’m rarely stressed these days not because I’m used to doing new things all the time (of course that helps), but because stress itself has no meaning or control over me—I’m simply desensitized to ambiguity in general. Abhinav and I have had multiple conversations about this. At some point in your career, failure will not matter to you. We don’t know when this happened to us, but we know it happened around the same time—around four years into our freelance/entrepreneurship careers. At this point, everything you do is a “project” and it really doesn’t matter if a project or two sink. But getting to this point is difficult, and I’m going to try to briefly describe how to deal with the ambiguity and
stress of being a freelancer and getting to that point.
Don’t take it too seriously
A lot of people will stress on the importance of having one (or multiple) of the following in your life:
– A stable job with a stable salary
– A nice house and a nice car
– Getting good grades
– Getting into a top-tier college or doing a PhD
– A stable marriage
First, here are some facts: The modern human evolved around 200,000 years ago. Compared to that, the first house came up 12,000 years ago and the concept of modern paper money only came into effect just 1,000 years ago. The first modern university was established just 300 years ago!
What I’m trying to say is that these concepts of what makes a person “successful” have existed for only a small fraction of our history as humans. It’s astounding how seriously some people take these concepts. There are young children being forced into studying for college at the age of 12 only to find out in their thirties that they’ve missed out on a fun and healthy childhood. The world is an incredibly complex system which consists of several smaller systems that somehow manage to work in tandem. Most importantly, these systems are disrupted every single day.
Fifteen years ago, there was no Facebook, Whatsapp, Instagram, Upwork, LinkedIn or Snapchat. When these technologies came in, they broke the foundations of how we communicate. We started seeing people change their lifestyles rapidly to become respected or liked in their online circles while disregarding their actual interests. We started seeing people cancel their cable subscriptions just to be overwhelmed by the plethora of choices available on Netflix. The game has changed everywhere, so why do we still take metrics that were once important in the previous generation like having a stable job and good grades seriously?
Let me tell you from my experience at Jobspire why good grades are important: When a big recruiter wants to hire people, they typically get hundreds of thousands of CVs a month. They would love to interview each person individually, but it’s simply too exhausting to sift through so many CVs. Using a GPA (grade point average) system helps them pick the top few CVs without having to interview that many people. Colleges are designed to put you up against deadlines all the time, simulating what it would be like when you start working at a large company. GPA in most colleges is a good measure of how well someone can follow instructions and how hard someone can work, plain and simple.
From experience, recruiters in India make the final hiring decision based on gut feel rather than using a solid metric, regardless of how many tests they put the candidate through. Even to massive companies, your ability to learn and your attitude are more important than your GPA. GPA is simply a filtering system and it’s been around for a very short time considering how long humans have walked the Earth.
Similarly, it made a lot of sense in the past to buy a house because it seemed like a long term investment. Today, with economies of scale and rent rates, you will have to live in one house for nearly 40–80 years to justify your investment. Are you 100% sure you will live in the same place for the next 40–80 years, considering the number of opportunities and globalization that airplanes and the internet have brought us?
Marriage is the final cornerstone of “success” that I’m going to dissect. Marriage was seen through most of history as a way to form strategic alliances between families, with the youngsters about to be forced into wedlock having no say in the matter. Until hundred years ago marriage didn’t even consider men and women equal, with women and children being considered “property”. Fewer people these days are considering getting married and more couples are choosing to cohabit. The rates of marriage in Europe decreased by 30% between 1975 to 2005. While I’m still on the fence about marriage, I still don’t think it should be a metric of “success” like your uncles and aunts would have you think.
Because of the society we live in, we tend to take some things extremely seriously, whereas other, irreversible things, like taking care of your health, take a back seat.
How does freelancing play into this equation? With rising automation, I personally don’t think there will be many non-start-up jobs around in 40 years. Why? Because most large companies want to automate (they’re already doing it, FYI) most human tasks. At this point, the mechanical, one track concepts most corporate employees would have learnt will be useless. As Eric Hoffer observed, “In times of change learners inherit the earth; while the learnt find themselves beautifully equipped to deal with a world that no longer exists.”
Freelancing is less about making some money now; it’s more about gaining the ability to learn new skills, adapting to unstructured situations and being prepared for the future. Over the last seven years, I’ve learnt at least 40–50 new skills each year. Whether it be the ability to use Photoshop (I learnt that in year 1) or the ability to do my taxes (I learnt that in year 3). Both Abhinav and I have always been forced to learn new things. It isn’t because we’re particularly inclined or motivated to learn new things, it’s because we have historically had no choice. When you’re doing a project and a client says “You need to know X”, you have two choices. The first option is you tell your client you don’t know how to do X and risk losing the project or you say you already know how to do X and learn it on the fly. Abhinav and I have always taken the second option, and in almost every case, so has every other successful freelancer.
I don’t freelance anymore, but I still maintain the attitude of learning things on the fly and never shying away from absorbing something new, however difficult it seems on the surface. Everything becomes easy with repetition, even if the first few days of learning something seem hard. Most people either don’t know this or even after knowing, they haven’t experienced it. I’ve been through it so many times that I expect confusion whenever I start doing anything new. I also know that with enough practice, the confusion disappears and the feeling of “flow” sets in. Every freelancer or serial entrepreneur knows this. It is extremely critical to adopt this mindset of “I can learn anything” whenever you’re faced with any learning task—be it cooking or machine learning.
Remember this image from before? The fastest way to learn is to copy something and understand how it was made. There will be some initial confusion, but that will pass.
Where creativity plays into the equation of freelance work
Overcoming anxiety
If you ask most people in the world how to be successful, they’re going to tell you to “focus”. Unfortunately, recent research in psychology disagrees with this sentiment. The mind is a simulation machine. Say you have to deliver a presentation at 6 PM tomorrow. Even if you’re fully prepared, the mind continually simulates this event in your head. A lot of people will commend you for staying focused on the event. You know what this is actually called though? It’s called anxiety.
By its nature, the mind cannot stay focused; let no one tell you otherwise. This is why it’s important to write very tangible goals on a piece of paper and avoid using your head to stay focused. Coming back to that public speaking event, it makes more sense for you to completely distract yourself until it’s time to actually go on stage. Worrying is completely useless—there is not one single thing that worrying accomplishes. This is where distraction comes into effect. You simply don’t think of the event until it’s time for the event itself. In order to distract yourself, you need to find something outside of work you like doing.
Whether that’s hanging out with funny friends, watching a movie, playing some music or playing a computer game, do whatever is necessary to avoid thinking about the stressful event. If my co-founder and I have a stressful event coming up, we typically fire up a game of online Overwatch or Dota and distract ourselves until the event.
The same thing applies to the ambiguities of being a freelancer. When will I land my next project? When will the client pay? Am I going to make it? We’ve been through some of these questions before, but it helps to distract yourself
because some of these questions can’t be answered at the moment and the brain enters loops that don’t really answer the question but put you in “analysis paralysis”. Sometimes, it’s important to not think, but do, and this is one of those times. As long as you have a plan on paper, just defer any unanswered questions to a later time. Put faith in your abilities and hustle your way through to the other side.
The only times you should focus are when you are setting your goals, when you’re learning and when you become aware that you are wasting too much time. Otherwise, it’s all good fun—there’s nowhere to go and let nobody convince you that you’re running out of time.
Freelancing can be a tad bit harder on people who have a hard time with stress, ambiguity or anxiety, but there is no better feeling than the freedom you will have once you crack the formula for your success as a freelancer.
I’m going to leave you with this quote I found on Reddit a long time ago. It has nothing to do with the technical aspects of freelance, but getting good at the freelance game is 90% managing your expectations and anxieties, especially when it comes to dropping a full time job to do this:
Listen, become one with the anxiety. I promise you this, you will never understand anxiety if you have any kind of aversion to your experience. Anxiety is simply a certain energy that is labeled as do-not-want and it’s sustained only by your labeling and complete misunderstanding of the energy. The energy that you have labeled anxiety can be the absolute best feeling in world, it can be pure excitement, it can be bliss. Instead of being so self-focused and seeking a certain feeling, take a step back and observe the energy you are experiencing, how does this energy relate to my thoughts, how does this energy relate to what I do, is there fear, fear of what, get to the bottom, go into the dark corners of your thoughts, what is the worst possible thing that can happen, look at it, is it real, does it have any reality of its own? I promise you this, no thought can harm you, no matter what you experience, it will pass, like everything else. Anxiety is the greatest teacher there is.