RETIRE AT 40
"Retire at 40" is a series of articles aimed at giving an insight into planning and investing ones finances towards attaining that elusive goal of retiring by the time one is 40 years old.
My father was a very hard working, middle-class, government employee. He was also a sound manager of finances. Considering the constraints under which he lived his life, he provided his family with the best of education, medication, food, shelter and opportunities. He got both his children married. In short, he accomplished what every man dreams of. After his retirement at 60, he passed away after a prolonged illness at the not so old age of 65. My and probably his only regret in life was that after 40 years of enduring the grind of employed life, although he was financially and emotionally well settled he did not have the physical strength to enjoy life. The proverbial spirit was willing but the flesh was weak.
This is probably the testimony of 90 % of all retired persons. The solution lies in retiring early, probably at the age of 40 when you have the energy, time and zest to appreciate the better aspects of life. Spend the next 20 years or so doing all the things that you have given a pass due to the rigours of life like, play golf, visit other countries, learn about their cultures, gardening, yoga , cooking, Tai Chi whatever. Also, retiring at 40 yrs of age gives you the opportunity to spend more time with your children especially during their turbulent adolescent years. Easier said than done isn’t it. Well, actually not. Retiring at 40 and not having to worry about money is actually achievable. It only needs 2 things to be done. Firstly the initiation to personal financial management by the time you start earning and secondly the discipline to stick to those financial principles for the next 20 years of your life.
What are these principles that we talk about? Research conducted across 6 metros in India found that an average middle class Indian saves 20% of his salary, spends 45% on expenses, the rest 35 % of his income is either unaccounted for or is frivolous spending. The secret behind retiring at 40 or retiring at 60 is how you utilize that 35% of your take home. It is that 35% which decides what kind of education your child recieves . I have very often heard the argument “it is that 35% of overhead expenditure which makes life worth living”. Probably yes, but only that it has a few counter points
(a) Although unemployment is on the decline, if there is any adverse economic environment like a recession or protectionist employment policies by the foreign outsourcing companies, there will be no buffer money to see you through. Imagine lowering the standard of education of your son or consulting a second rate doctor when your daughter is ill.
(b) Educational expenses increase exponentially with time and do not conform to normal inflationary rates. Especially education in medical colleges and business schools. So unless you save wisely, your child will have limited options.
(c) Look at it this way, out of 100 rupees you earn a month if you save 20 and spend 80, when you retire you will have only 20 rupees to spend, for the rest 60 you have to depend on someone else.
I hope I have managed to persuade you to go easy on the spending and focus on the saving/investing. In the next part of this series we will see ways to give our kids a head start by inculcating good financial habits as early as when they begin to count.
