Want to retire early? Here’s how…

A few years ago young people seldom thought about retirement. Stereo typically retirement meant old age. The Govt. jobs with job security till sixty and then an indexed pension endorsed that. Now things are changing and people have started thinking about an early retirement, especially with the corporate grind leaving people burnt out. To me retirement is financial freedom; that is, a state of having sufficient personal wealth to live indefinitely without having to work for basic necessities. How big a retirement nest one needs differs from person to person, depending upon individual life goals and financial circumstances, however the way forward remains the same.

Here are the elementary steps to financial freedom.

1.      Save

Save at least 10% of your net take home salary in the first year of your job and plan to increase it to 50% in next five years. The sooner you start the better it is. Compound interest is a beast; use it to your advantage.

2.      Mind your EMIs

     Do not fall prey to fancy loan offers. Your EMIs should never be more than 30% of   your net take home pay. Learn to differentiate between a good and a bad loan. A home loan and an education loan are considered good loans while a personal loan and a credit card loan are bad ones. Once you get into these its hell to get out. They rip you apart. Try not to borrow money for anything whose value depreciates. Keep your needs in mind while taking a loan rather than wants. Hint - big cars, swanky mobiles, electronic toys, tablets and fancy TV are all BAD LOANS.

3.      Have an Emergency Fund

Create an emergency fund which would cater to your household expenses for six months. Keep this money in a liquid fund.

4.      Buy Medical and Term Insurance

Even if your company provides, buy a personal medical insurance plan you and your family so that you enjoy protection even when you stop working and do not have to dig into your savings in case of an illness. And if you have dependants buy term insurance, approximately 15-20 times your annual income. That will give you the peace of mind.

5.      Create a Discretionary Spending Fund

Splurge once or twice a year on big holidays or purchases, but not on loans. Start saving from the beginning of the year with a Systematic Investment Plan (SIP) or a Recurring Deposit. Doing this will ensure you don’t dig into your monthly saving plan to fund such expenses and you would also earn higher return than a savings account. Happy retirement planning!! Stay Blessed!!

Have You Made The Best Investment?

"I have put on weight, have acquired type 2 diabetes and have also started medication for hyper- tension", said Vishal, an old acquaintance who I bumped into recently at a wedding reception in response to my “oh my God you have changed so much!”  “I am genetically prone to obesity and diabetes”, “ye to hona hi tha”, said Vishal. Wow! How convenient it is, to blame our genes for diabetes and hyper- tension. Somehow we never give credit to our genes for the good marks, the IQ, the promotion etc, etc. That is our ability and hard work :-). Well for the records Vishal is 35 yrs old and runs successfully his family owned business and his big paunch and his 100+ kg weight endorse that :-). Incidentally Vishal is not the only one, there are many, sailing in the same boat; and most of them are pretty young and they are frustrated with themselves and have unsuccessfully tried everything- right from gym memberships and herbal diet supplements to weight loss programs at fancy places.

According to a survey conducted by the Research Society for the Study of Diabetes in India (RSSDI), India is seeing a rise in lifestyle diseases and is on its way to become the world’s diabetes capital with more than 60 million diabetics, expected to cross 85 million by 2030. I am sure we all are going to live long thanks to the advanced medical science. But what are we going to do with that increased lifespan; occupy hospital beds?

Well obesity, the mother of all diseases is the result of not moving your body or moving it as little as possible. Hence the BP, cholesterol and the diabetes pills are the part of the daily diet. The hard earned money goes to the doctors, hospitals and the pharma companies. This is what my concern about. The Mother Nature has designed the human body for continuous activity and it works on a basic principle- use it or lose it. The least we can do is 30-45 minutes of exercise at least thrice a week if not daily to keep it in good shape and condition.

So what does it take to invest in health? Not much. A few changes in your lifestyle and a little perseverance and you are done.

1.     Those who say they do not have time for exercise are lying to themselves. You definitely can take out 30-45 minutes every day from your busy schedule. Do not fall into the trap of – will start post Diwali / weekend / holiday. It will only make it more difficult. 

2.    Eating correctly has to be a lifelong commitment. Do not fast and do not feast. Eat simple home cooked fresh food. Do not go for herbal diet supplements without checking up with your doctor. Everything that is herbal is not necessarily safe. Remember nicotine and marijuana are herbal too :-).   

3.     What is the best exercise? Any exercise that is done on a regular basis and makes you happy :-) . Work with a qualified trainer and learn the basics of right technique. Yes; it costs money. Be prepared to pay to your trainer / gym membership / yoga class and ensure good health.

 “Life is but a pause between the first breath and the last. The only thing you can guarantee at somebody’s birth is his or her death, everything else is unpredictable”, said Dharmraj Yudhishthir , according to a story in Mahabharat. Agreed. Everything is unpredictable in life but why take a chance. Do your bit and the rest would follow. Health and wealth or bad and poor habits. Make a choice. Invest in your health today. Wish you good health!! Stay Blessed!!

Guilty About Spending?

A friend of mine took an impromptu trip to Goa with her children, had a wonderful time there but returned feeling guilty about spending through the nose. Another woman I know has a habit of sneaking in her shopping bags in her husband’s absence so that he wouldn’t know about her extravagance. Incidentally, both these women are financially independent and make good money. This leaves me wondering; why do women feel so guilty about spending money even if it’s their own?

Most women are programmed to feel guilty. In fact it is wired into their DNA. They feel guilty about having yelled at the kids, about ordering food from outside over the weekend instead of cooking themselves. They feel guilty when they shop for themselves or pamper themselves at a spa. In fact any kind of indulgence leads to guilt. Well nothing can be done about feeling guilty after yelling at the kids; for everything else consult a financial planner.

A lot of guilt, especially around spending, comes from not knowing where you are financially and where you ought to be. A little planning can help you by checking your cash inflows and outflows systematically, planning for a surplus every month and last but not the least planning investment in line with your future goals. I believe that once your necessary outflows in terms of routine expenses; EMIs, rentals, education expenses and insurance premiums have been taken care of, set aside some money to spend as you wish. Call this discretionary spending fund. Now that you have earmarked this money for your own consumption you will find it easier to let go of guilt. More so as you have worked hard for it, you have the right to be happy.

Cheat sheet for guilt free spending:

1. Create an annual budget for discretionary expenses. Break it down monthly and give yourself the allowance to spend within that limit each month.

2. If you would like to splurge once or twice a year on big holidays or purchases, start saving from the start of the year. Start a Systematic Investment Plan (SIP) for 12 months. Redeem it at the end of the year. Use this to pay for your holiday. Doing this will ensure you don’t dip into your monthly budget to fund such expenses and you would also earn higher return than a savings account.

3. If you are married, create a separate account for your discretionary expenses after budgeting for essential expenses and investments. Use this money without guilt.

4.  Use a debit card for your discretionary expenses. This way you ensure that you don’t spend more than what you have. It would save you the guilt of high credit card bill the following monthJ.

5.  Get more bang for your buck. Look out for discounts or deals on things that you enjoy spending on; clothes, footwear, and perfumes or anything under the Sun.

Step by step guide to build your spending money:

1.  Set aside 10-20% of your disposable income for investing for your long term goals such as retirement planning or children’s education. If you receive a bonus, it must be used for clearing liabilities such as loans first, before using for discretionary spending.

2. Add up all your expenses and average it out into monthly expenses. Regular expenses are more or less constant every month such as EMIs, rent, utilities, domestic help, groceries, fuel etc. Insurance premiums, property tax, and school fees are generally annual. These can be termed as your needs. Once these needs are taken care of set aside some money each month to build at least six months of average monthly expenses in your account as emergency fund.

3. The remaining is what you can spend on your wants. Creating a budget would give you better control of your finances and you will free yourself from the guilt of spending. All you need is a start.

It’s a good thing to spend on you. Go meet your friends for lunch in a nice restaurant, get a smashing haircut, indulge yourself at a spa, and buy yourself that dress you have been eyeing for quite some time. Go ahead; it will not break the bank! Do it! Guilt free!! Stay Blessed!!

Before You Quit Your Job

Incidentally during the past week three different people have called; seeking advice on quitting their respective jobs. Let’s call these gentlemen A, B and C. Mr A is stuck in a bad job with a very bad boss (common scenario :-)). Mr B is also unhappy with his current job and is inspired by his distant cousin who according to him is a full time investor. He too wants to follow his footsteps and attain financial freedom. And last but not the least Mr C wants to follow his passion- photography. As for Mr A and Mr B I agree one hundred percent that getting stuck in job which you don’t like can be quite frustrating and painful but decisions taken in frustration are seldom good ones. Mr C was very candid when he said “enough is enough”. “I want to be happy; do whatever I want and whenever I want; not whenever my boss permits”.

 This makes me worried. Not that I mind playing the devil’s advocate but quitting a job is one of the most important decisions of one’s life especially if you have dependents; and secondly quitting a job to follow your passion might be a lovely thought except when it comes to your finances. There is no dearth of people who want to be their own bosses and do bigger and better things with their little time on this planet; but again there is no dearth of people who take this decision in haste and then regret. I am concerned about the latter. Nevertheless if you have decided to quit; please do so but ask yourself following questions.

1.      Do you really want to quit?

Can you follow your passion along with your work?  If yes, then do not quit. In fact read somewhere that ignoring your passion is slow suicide. Never ignore what your heart pumps for. Mould your career around your lifestyle not your lifestyle around your career. But instead of quitting your job right away, try freelancing on the side, testing the waters. See if you can actually monetise that and create a business / enterprise out of it. You may learn new skills and acquire better qualifications if you have to. In other words have a plan B. Quitting the job must be the last resort when the burden is unbearable. In our case Mr C can certainly follow his passion alongside and be happy.  

2.      Do I have the family’s support?

Quitting your job must be an informed decision and should not come as a shock or surprise at home. I know somebody who did not tell his wife for good two months that he had quit. Do talk about it at home. You cannot bring in turbulence in otherwise smooth sailing lives of your wife and children.  Mr A, Mr B and Mr C have school going children; while their wives are home makers. All the more reasons to have a buy into this decision from their better halves.

3.      Am I placed comfortably on my finances?

Quitting a job and living a fulfilling life is not as easy as it appears. Things get scary at times because all said and done we get used to the fixed cash inflow every month. Before you take a decision to quit, check your savings. Ideally you should have 30-35 months expenses; along with zero financial liability. Pay off all your loans before you quit. In fact it’s not a bad idea to practise lean living a year before to avoid instant compromises. Do not get inspired by a friend or an acquaintance who’s a full time investor (Mr B in our case) and makes handsome money. You need to put in money regularly to grow your wealth. Only speculation would give you instant money but then it can also take away your money instantly. In case you plan to start your own business; start saving for initial capital before quitting. And once you start, keep your expenses low till you start generating income.

If the answers to above three questions give you confidence then follow your heart; break free, get going and honour your path.  After all you have a right to live as you want and do whatever you want in your limited time on the planet Earth. Stay Blessed!!

Health Insurance for 70+ in India

A week ago I happened to overhear a gentleman’s conversation with probably his friend while I accompanied my friend’s father for his routine check up to the doctor and was sitting, waiting for our turn. This gentleman had come to seek a second opinion about his father who had been advised an angioplasty by another cardiologist. I first thought he was concerned about his father’s health but he appeared to be more concerned about the expenses.  To read more  visit  http://www.google.com/url?q=http://www.investmentyogi.com/health-insurance-for-70-in-india/&usd=2&usg=ALhdy2_xDLOXLvq9LNNTAseLLo3sUniobQ

How To Buy Mutual Funds Online?

A few years ago people made customary trips to the banks for their regular transactions; then came   the net banking. Now transactions are done with a click of mouse, sitting at home. Convenience is of prime importance today. However, when it comes to investment many people still do the traditional way, through an agent. Online investing is still not very big in India but it's a convenient option. To read more visit 
http://www.investmentyogi.com/how-to-buy-mutual-funds-online/ 

Business Insurance : Partnership

It’s not uncommon for entrepreneurs to start their business in partnership. In fact a huge portion of business houses across India are partnership firms. And they are doing wonderfully well. But many entering into partnership contract ignore an important aspect; the partnership insurance. To read more visit 
http://www.investmentyogi.com/what-is-partnership-insurance/