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Part 4 -Building your “Wealth creation” plan

This is part 4 of my Financial Freedom Planning. In case you have not read my previous articles, I would suggest that you go through the following posts first to get a better background and understanding of these articles -

As I mentioned in my article on goal-based Financial planning, I was not very convinced with the traditional financial planning approach. I have a single long term goal - creating wealth which is huge enough to take care of all my requirements in the future plus much more. Hence I created my long term financial plan using a bottom-up approach (lets call it wealth-creation based financial planning).

However, there was a lot of groundwork which I had to do before I could actually start working on my financial plan. I’ll try to explain my approach below:

Current status of all assets and liabilities:

I made a list of all my assets and the proportions in which I had invested in them along with expected growth rates from each.

More on this is covered in Part 2 of this series.


I estimated the average monthly expenses which I incur today (My wife and I have been tracking each and every expense – no matter how small - for last 14+ months now). You might already have an idea of your monthly average expense, however, a tracker provides you the necessary visibility into your expenses and helps in planning as well. Atleast in my case, my “estimate” of the monthly expenses was way off from what we were actually spending (grossly under-estimated).

I then estimated my future annual expenses and increased them by probably more than what we would actually end up incurring. These are the basic monthly expenses & bills which we would definitely incur to continue enjoying our current lifestyle. This includes the EMIs & interest payments as well. However, big ticket/ one-time expenses are not included here.


I found out the exact post-tax external income I was getting in my bank/ PF account. Please note this does not include returns on your existing investments unless you are explicitly withdrawing them. Rental income could be included here. All other dividends/ interest income is reinvested to further compound them.

I took a conservative estimate of the income I could expect to increase on a year-to-year basis – anything above that is bonus and would simply reduce the time I would need to achieve financial independence! Plan is to deduct your expenses and invest everything remaining (Goal based approach – save as per your goals and spend the rest).

Final planning to building wealth:

Now comes the interesting part.

Once I estimated my annual income and expenses far away into the future, I got to know the savings I could expect on a year-to-year basis. This provided me a clear picture of where I actually stood and where was I headed if I continued to do what I was doing (even though it seemed that my assets were growing, however, in reality the situation was quite different as I was hardly beating inflation with a meagre post-tax growth rate of around 5%).

However, now I had my playground ready to play in. The annual savings are what I would work on to optimize and invest as per my portfolio allocation strategies (Part 3)

Posting below a few snippets of the overall financial planning:

Financial Planning Personal Finance

Financial Plan over the years

Portfolio allocation over the years

Also, now I could find out that given my current level of expenses, when could I possibly achieve financial independence. A point where even if there is no source of external income and with all my expenses getting paid out from the returns generated, my corpus continues to grow perpetually.

Now I could also enter the different goals into it – what would happen if I travel twice every year? Or 4 times? What would happen if I increase by expenses by 10%? What would be the impact of big ticket expenses in a particular year. Or can I achieve financial independence earlier, if I work on reducing my current expenses?

Similarly all major unplanned expenses can be entered as and when they arise, and I continue to have visibility into the overall impact of such expenses.

I feel that this wealth creation approach has given me more flexibility and control as compared to the goal-based financial planning approach. Also, it has allowed me to be fairly conservative and not undertake huge risky investments to achieve a desired growth rate. I have effectively planned investments that I am comfortable with, derived a growth rate which I can reasonably hope to achieve and then planned everything around it.

The above planning technique seems to be working for me. However, I am no expert and cannot really comment if it would work for you as well. Do try to find out or reach out to me if you need any help 😊

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