Achieving financial independence is the mantra of most folks around today.
However, it needs special focus and skills to chalk out the nitty gritties involved in creating a retirement corpus, planning a monthly investment, creating contingency funds, managing a daily household budget and so much more.
Do not let these heavy terms scare you.
They are meant to help you.
Let us consider that you are an early bird. You want to start investing from the beginning and get a head start into saving for your future.
Awesome!
Now let us create an ideal persona.
You are 25 years old and have at least 35 years until you retire. Folks are going for extension but let’s take the traditional route for now.
1. Manage your monthly expenses
Your current monthly expenses offer an insight into how much you have to save for your retirement. This does not imply that you need to curtail on simple joys and pleasures of life. But having a fixed expenditure can help you plan how much you should be adding to your retirement corpus.
2. Talk to retired folks around you
They are your go-to source to understand retirement in the current age. Ask them about their monthly expenditure. Add at least 6% inflation rate to that to know what you might be spending 30 years from now.
Now you have a number in hand. Add another annual expenditure to the expense bucket and include the monthly spendings to your estimated monthly expenditure.
3. Get your annual expenditure
Having an annual expenditure at hand will help you determine a major portion of your corpus. Double the amount in case you have or will have a partner – totally cool if that’s not your plan so far but we got to prepare for all the scenarios!
Hence we recommend that you add expenditure for your partner in your retirement corpus.
Now we have an exact number of how much you should be saving!
4. Time for action
Once there is a tangible amount for your pre-mediated retirement corpus, it is time to start planning and saving for it.
Start with dividing your savings into different buckets.
One bucket can be the major corpus pool like an FD from where you will ideally be withdrawing your post-retirement expenses from.
The other bucket can be divided into investments in small, mid and large cap funds. Since you are starting young, allow yourself to take risks.
The sequential investment is bound to help you add to your capital investment.
If possible, use the profits from these investments, and put them in your FD corpus to build the value of your savings.
We do not recommend putting all the money in your FD because
- It does not make your money work like SIPs and MFs
- All eggs in one basket is never a good idea.
You can also add a potential side income to supplement your savings or maybe use that money to indulge in your lifestyle, while you use your major source of income to build your corpus.
These investments, when done right, have the potential to fight inflation and help you get the savings goal you have been eyeing.
5. Talk to a financial advisor
Your financial advisor knows you, your spending habits, your hopes and aspirations (if you are open in sharing) and even your capability!
They know tangible ways to push you towards your retirement goals and have a no-nonsense approach to build your savings.
They might even help you understand different elements of your goals, add new ideas and even turn them into a more fun activity!
Final Takeaway
Saving money does not equate to being miserable.
We are finance folks and we love saving money, even if it is yours!. But even we don’t recommend depriving yourself of little joys in the name of building your retirement corpus.Â
We only ask you to start small and start now. The earlier you join the saving bandwagon, the less sacrifices you will have to make in order to fulfil your retirement dream.
Don’t think creating this retirement map is your cup of tea?
Talk to GoalFi experts!
Note: This blog is for educational purpose only. Please do not consider this blog as a professional financial advice.