The life in jobs and businesses is uncertain. Amidst the Corona Pandemic there was an economic slow-down and it continues even today. There have been mass layoffs even by large Corporations like Facebook, Twitter, Amazon, Pepsi, Google, Microsoft etc. The loss of job/income creates a very stressful situation for individuals and families. However, there are ways by which one can plan to handle the unforeseen turbulences and overcome such situations. And to retire at 45 years of age is also possible. The advised steps are as under.
1. Strategize and Implement Your Financial Freedom Plan
Here the roadmap of investment and the diligent implementation of the same plays a major role. We generally start earning in our early 20’s. During that period be serious and committed to create Financial Roadmap for yourself to enable you to attain Financial Freedom and retire at 45 years of age. Here investing rightly is the key. Invest aggressively and plan in such a way that you reach a point wherein the investments made by you start giving you return which is equivalent to your current active income.
Below is an example cited for reference.
If your income is Rs.12,00,000/- per annum at the age of 25 years , and by normal course you expect it to reach Rs.36,00,000/- per annum in next 20 years, you should start investing Rs.50,000 monthly in equity mutual funds over period of next 20 years to attain a corpus of approximately Rs. 7,00,00,000, which will help you create a passive income of about Rs.40,00,000/- per annum and enabling you to attain Financial Freedom and help you plan to retire at 45 years of age. In the illustration above, the expected returns are in line to historical returns of 15%, the actual returns may change as per market volatility/ investment option where the funds are invested.
“As in all successful ventures, the foundation of a good retirement is planning.”
An individual or family should create a reserve of at least 12 months of expenses. For instance, if the monthly expense of Rs. 100,000/-, a reserve fund of Rs.12,00,000/- to be available at any given point in time. This emergency fund will help family sail through uncertain times like job or income loss.
When the income starts again, one can invest in Recurring Deposit in bank or liquid SIP to regenerate this amount. Once the target amount is achieved, one can stop the SIP/ RD and stay invested in Liquid Fund/ Fixed Deposits.
3. Just Spend on Basics During Tough Financial Times
When there no or low income, try spending only on essential goods. Avoid unnecessary shopping/ purchases that can be postponed. Avoid going to movies or leisure vacations during these times. You should also try to renegotiate your rentals if you are staying in a rented apartment. You may opt for EMI holiday (if you have home loans) or ask for reduction in EMI by increasing the tenure of Home Loan. Stay away from Credit Card spending and keep the limits open just for emergencies.
4. Get Family Health Cover
In organizations, health cover for the individual and family is the integral part of package. However, once you are no longer associated with the organization, the health cover ceases. Health is one vital area of life. And the expenditure is high when there are serious health issues, therefore it cannot be left unguarded. Family floater plan becomes a priority should be kept as a backup always and is a must between the range of Rs.500,000/- to 10,00,000/-.
The above strategies help you de-risk yourself financially and can help you plan to retire at 45 years of age.
By Sameer kaila
Sameer has 22 years in Capital Markets. He has been in Leadership roles with Organizations including Religare Securities, ICICI Securities and J&K Banks. He is the Founder and CEO of Dhan Creators, which was established in 2016. He provides investment advisory services to Enterprises and top notch senior level executives.
