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Posts Tagged ‘savings’

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The Indian story is pretty simple and straight forward, as you grow you are told to study hard to find a good job. When you finally find that good job you work harder day in and day out trying to keep up with work pressure and your expenses. Then comes in Jack Ma announcing that he plans to retire early and says “I would rather die on a beach than in my office”. This one line is enough to reignite the dreams and fantasies to retire early and move to a quaint town away from the hustle and bustle of the big city. If this is your dream then read on to find out how you can retire early.

Rome was not built in a day and Jack Ma didn’t become a billionaire overnight. While you don’t have to wait to become a billionaire to retire early, you will need to save and create a substantial corpus to be able to take the plunge. This would require dedicated regular savings and beware, sacrifices will have to be made. You will have to try and save as much as possible which would mean spending less on your life style expenses, and trying to live a modest life.

  • List down all your goals-Just because you are going to retire early doesn’t mean you wouldn’t want to live a full life and realize you goals which could include travelling, sending kids overseas for higher education, buying your dream home etc. Yes you can achieve these goals and retire early too, but you will need a good plan which will take the cost of funding of these goals into account and adjust it against inflation.
  • Know your expenses-Most people especially the ones who live in a metro don’t know how much they spend on a monthly basis. Knowing your expenses is important for two reasons one it will help you know how big your retirement corpus needs to be and two you might need to cut down some unnecessary expenses to be able to save more. Take your life expectancy into consideration and your expenses till that time to calculate your corpus size.
  • Set the SIP for the 1stweek of the month- For most people the only investments that happen are either a minimum SIP started some time back or whatever is saved at the end of the month. This way you will never be able to retire, forget retiring early. Your savings and investments have to be planned and in line with the future goals that you have. So invest before you pay your bills. This is also what Robert Kiyosaki the author of “Rich Dad Poor Dad” believes is the secret to getting rich.
  • Ensure it’s not a one sided love story– Giving up a good lifestyle and a free hand on spending can take its toll. It can be very frustrating at times, that’s why its very important that your spouse supports this choice a 100% else you might find your self quite often at the receiving end which trust me is neither pleasant nor encouraging. From time to time you might need to remind yourself of your end goal and it should bring you back on track when you start to stray away. I would highly recommend not giving up on things that you love and keep aside some money for some indulgence every now and then if not regularly. Remember Jack Ma will retire at 55, so you will have to give yourself a considerable amount of time to prepare for the big shift.
  • Secure your self and you family-We can not stress enough on the importance of a sufficiently large personal life and health insurance. Its better to take one now while you are still young, this way the premiums will also be lower.

Albeit retiring early and getting away from the rat race and the pressures of the world, spending your days relaxing in a quaint house on the hills or by the side of a brook sounds so inviting, it can get boring and mundane after a while. Having spent so many years crossing one hurdle after the other throughout your life, doing nothing after a while doesn’t feel so enticing; so plan for a small business or some activity that would keep you busy in your free time or else you might find yourself missing and craving what you have left behind.

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In recent months, there has been a sense of euphoria about India and Indian financial markets. The current highs that the Indian equity market is witnessing, is on one hand creating elation and on the other hand causing regret, making many investors feel that they lost the opportunity.

Many investors may believe that those who are invested in the equity markets, turned out to be ‘better’ investors. One year ago, investors who did not invest in equities were looked upon as better investors.  So how can one truly be a better investor? I would like to say that all of us can strive to be better at investing by following a few simple steps:

  1. Save and Invest:

All of us do understand that we need to invest but very few of us understand that we can invest only if we first save. Know how much you earn and spend to arrive at what you can save.

  1. Understand where you are investing your money:

Today investors have a plethora of options to choose from – Equities, Fixed income, Commodities, Gold, International Funds, Real Estate. Each of these asset classes comes with associated risks and benefits. Know these details when you are investing. Understand the risks you are signing up for and resultant return expectations.

  1. Understand why you are investing your money

Many a time when we make the investment we do have the reason or goal in mind. But over time, especially when markets go down, we forget these goals. We forget that we were investing for a goal which was many years away, and therefore there is no reason to panic.

  1. Systematize your investing

Being busy individuals, handling paperwork, cheques, banking errands are the last thing on our minds. Hence the need to systematize. By this I mean, automate investments to selected avenues on monthly, quarterly yearly basis by using technology, available systematic investment plans (SIPs), triggers, alerts, ECS and such facilities available today.

  1. Consistency pays

As we all know from the current scenario, emotions do interfere with investing, sometimes they work for us and sometimes against. As we usually decide with our hearts and not our heads, create a discipline to invest a certain amount every month and systematize it.  There are many examples of SIPs in diversified equity mutual fund schemes generating sizeable corpuses, where investors have consistently run SIPs.

  1. Discipline is key

Discipline yourself to refrain from wavering from an agreed asset allocation and investment strategy. It is easy to get swayed, just because someone else invested and made a short term profit and his investment option seems superior. Look at your agreed investment strategy periodically. Portfolio churn is not necessary value adding to your portfolio.

  1. Take professional help

As is the case where we need dieticians, doctors, lawyers, etc. sometimes we need professional help to nudge us into an investing habit. Hire a SEBI Registered Investment Advisor to help you with your financial life.

  1. Monitor and Review

After the effort of making a investment strategy and implementing it, comes the time to check whether the plan is working for you. Review if you were able to stick to the savings plan and investments plan. Were you able to maintain consistency? Review whether improvements are possible to the savings plan. Control what you can control i.e. items such as saving and investing. Review your investment products every six months to see how they are performing against an appropriate benchmark.

  1. Correct and Act

Make corrections if you have swayed away from agreed savings/investments plan, asset mix and exit underperforming investments, even at a loss. Here is where a professional nudge would help. A professional could provide that much needed nudge as she is not emotionally connected with your investments.

  1. Repeat the Loop

Repeat this loop consistently and religiously to better your investing experience.

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