This question comes to the mind of all of us: what to do if you take your first retirement after 40 years? We tend to think too much about responsibilities, careers, and homes, so much so that these thoughts remain just thoughts.
You all will be surprised to know that this is possible. And to fulfill this dream you will not have to work hard. Well,
God has given us all a mind, we have to use it properly and have faith in ourselves.
It requires careful planning, disciplined saving, and strategic financial decisions. Here are some steps you can consider taking in your 20s to work towards early retirement:
- Set Clear Financial Goals: Define your financial goals for the long term. Outline the amount of money you need to retire comfortably and the lifestyle you want to maintain. Having clear goals will help you create a roadmap for achieving them. Like for example, what is the amount you want when you consider yourself retired?
- Create a Budget: Develop a realistic budget that tracks your income and expenses. Identify areas where you can cut unnecessary spending and allocate more funds towards investments.
- Avoid lifestyle inflation: Just because your income increases doesn’t mean your spending has to follow suit. Embrace a frugal lifestyle, save aggressively, and invest the surplus.
- Eliminate High-Interest Debt: Prioritize paying off high-interest debts, such as credit card balances. The interest on these debts can accumulate quickly and hinder your ability to save and invest for early retirement.
- Invest Wisely: Learn about different investment options and consider a diversified portfolio. While investing always involves risk, a well-thought-out strategy can help you maximize returns. Soch kar samajh kar invest kar!
- A secret that I follow. Whatever your age is, subtract it from 100. The reminder you get, invest that much percent of your savings in equity and the remaining in secured assets, e.g. gold, PPFs, etc. E.g. your age is 30, so 100-30 = 70. Hence, Invest 70% of your savings in Equity (Shares, Mutual Funds) and the remaining 30% in Gold Bonds or PPFs, etc.
- Savings is not the same as investment: People often relate savings with investment. But that is not the case. Savings means the amount of money from your income that you do not want to spend at the moment and want to save for later situations. The moment you think of saving your hard-earned money, you should invest the same so that your money will work for you even if you are not working.
- Do not mix investment with insurance: First of all, one should know that investment and insurance are two different things. Most companies sell two in one like ULIPs and so, which offer insurance as well as investment but the returns on those are lower and these ULIPs come with many charges like mortality charges, portfolio management charges, and premium allocation charges, all of which ultimately lead to ROI @6% or so.
Remember that early retirement requires discipline, sacrifice, and a commitment to financial independence. It’s crucial to regularly reassess your goals and adjust your strategy as needed. Consulting with a financial advisor can provide personalized guidance based on your specific situation and aspirations.
