How To Retire Early And Live Your Life To The Fullest
We all want to follow our passion and spend time doing the things that we love. However, unless you are one of the chosen few born with a silver spoon in his/her mouth, you are constrained by having to spend your time and energy working on stuff that is necessary to put food on the table. So, how is it possible to retire early and at last be able to follow your heart and your passion?
Set achievable investment targets and then follow them
We all set investment targets but how many of us actually set specific targets for specific goals? Goals could range from buying a new home, a new car, a vacation out of the country, education and marriage of children and yes setting aside a corpus for retirement. If we specify a certain goal and then aside a certain sum every month for that it can be a powerful incentive to stick to the goal. Want to splurge on that absolutely gorgeous 4k TV? Thinking of taking a loan and paying EMIs? Why not do the reverse. Put the EMI amount in a recurring deposit and continue saving until the entire sum has been saved? Chances are the price of the gadget may come down anyway as newer gadgets are launched. So, what are the constraints one faces in investing?
Would love to invest but do not have any savings
This is a very common complaint. Whenever we receive a bonus, raise or a certain windfall we rush to spend it on some gadget or vacation immediately. Then we complain that we have no investible surplus. The simplest trick to investing is not to invest what we are left with after spending. The trick is to spend what we have left after investing. A simple thumb rule is to invest at least 15% or better still 20% of our monthly income. The remaining 80-85% can be sufficient to take care of our home loan EMIs/rent, household expenditure, commuting, kid’s school fees, credit card bills, etc. There are umpteen ways to control our expenditure. One simple question one needs to ask oneself is not what one can do with in life. Ask yourself what you just cannot do without. However, even if one can invest one does not always invest. Why is that?
Can invest but do not understand investing
This is a common enough problem that is hardly insurmountable. Your friendly neighbourhood relationship manager banks on the fact that you are not proficient in personal finance to sell you those products, which give him maximum commission while not taking care of your financial needs. The first thing to do is to take out insurance for yourself ranging from life to medical. While it does not sound sexy or path-breaking a simple term insurance is still the best insurance that provides you with maximum life cover at the minimum premium. Also, it is better to have a medical insurance policy apart from the one your employer is providing you. This is because it is possible your future employer may offer you insurance cover at much worse terms. Hence, it is prudent to buy yourself personal medical insurance. Now that this is done, how can one proceed to multiply one’s wealth?
Okay, so I have insured myself now how do I multiply my wealth?
Congratulations! Now that you have freed up a lot of your money by going with term insurance plans you should put it to good use by investing it in the equity markets. If you do not have any understanding of the stock markets it is much better to invest in equity mutual funds. You pay your fund manager to manage your money and if he is good at his job then you can multiply your wealth easily in the long run. It is always better to stagger your investment in the form of simple investment plans (SIPs) to avoid timing the markets and seeing your wealth get wiped out in a market crash. In fact, market crashes are great opportunities to invest in the markets and easily multiply your wealth. If one can maintain discipline in investment, one can generate wealth that allows one to take an early retirement and take out time to follow one’s real passions in life. Happy investing!