[Newtown]

It is very hard for me to pen this but here goes.

My grandfather was a lawyer who established a well trusted practice. The place was Bombay in the late 1930's early 1940's. They had multiple homes, holiday homes, all sorts of cars available in India at the time and more.

As advised by his trusted friend at the time, he invested into a business, something he knew nothing about. For a few years things were good. My father had the best of everything at a the time. When he was about 9 or 10, my grandfather's friend cheated him out of business so badly that they were brought to the streets. They had no roof over their head and for some time relied on relatives. He got a small job somewhere but earned not enough to afford even a simple sambar for my father and he used to stay hungry.

My father from being chauffeured to school now walked 10 kms to school and back. He finished his schooling and knew that he had to start earning right away. He did and over the years did well for himself. Our life was always more than comfortable.

As many of the previous posts talked about, my father did the same. Slowly invested significant portion of his wealth into building a holiday house out of Bombay. It started as a hut and eventually became this palatial structure. He continued to pour his wealth into this one structure which I eventually grew up to hate as it impeded on our family wellbeing.

I went abroad to do my post graduate degree. Along with research work I worked dining halls, teaching, tutoring & a call center. Was putting my way through quite well. One morning was suddenly called to be told that my mother had an aneurysm and may not make it. I flew back immediately. It was a tough few months peppered with up's and down's and 42 days in the ICU.

Insurance was not such a thing then and the hospital bills were enormous. Investments and savings were little to speak of as everything was thrown into the while elephant structure that was built. To make matters worse my dad was close to retirement age and found it very hard to get any meaningful employment. While he got something short term, I went back abroad and completed my post graduate degree. After what I had seen in these few months, I lost my drive to work and stay abroad and returned to Bombay.

The white elephant had to be sold eventually and with it went all the heart and soul and memories my parents had put into building it. It was a distress sale and well below the property price at the time. Even after that ordeal my father was advised to put away the money into another property in a Tier II city where it was said he would get enough rent to stay on. For a few years this was tried but it was never really sufficient to live.

My father eventually gave in to my pleas and let me handle his financial matters after that. I was doing reasonably okay in my field of work by that time.

Few things that I would like to mention here:

1. Don't think that everyone has your best interests. Read, learning and understand.
2. Plan, plan, plan, plan as much as you can well ahead.
3. Learn that saving is not a crime and needs to be done.
4. Invest, Insure, Plan for medical exigencies.

I have said too much here but I sincerely feel that this will serve as a lesson to many on the forum.

[am1m]

Originally Posted by Newtown

It is very hard for me to pen this but here goes. mention here:

Thank you so much for recounting your personal experience, hard-won. It has certainly helped me.

Originally Posted by ninjatalli

Would be interesting to hear about your experience in a separate thread if you can.

I'm not sure it warrants a separate thread. And I've already posted most of that in separate posts on this thread. But summarizing: Have spent months together at smaller towns in coastal Karnataka and North Karnataka. Thanks to remote work, I still go and stay there for a weeks and months at a time. Mostly rentals.

Of course that is different from living there permanently, I realize that. But cumulatively, I must have spent a couple of years living in smaller towns compared to Bangalore (where I've spent most of my life). And mostly recently. Realized the difference in expenses- obviously I always knew it would be lesser, but by a factor of how much really astonished me. So much so that I now feel there is absolutely no value for the money I now spend in Bangalore. It's just wasting money and a total rip-off IMHO.

Also, I feel a genuine better quality of life there. Again, I realize most people will not see it that way. Almost boring, but it works for me. Which is why I think it would work for my latter stage in life.

I'm not trying to 'convert' anyone to this way of thinking, nor am I preaching. I'd love more holes to be poked in this, since it involves my retirement plan. I would be grateful. But I'm just presenting what I think is a viable alternative option. Mainly for me and people like me. I certainly am not saying that money or saving as much as we can is not important - it is very, very important! But perhaps I'd like to trade one kind of life to gain a decade or half-decade of my middle-age with an earlier escape from the accumulation cycle, without it jeopardizing my being able to retire on my own steam. That would be worth more to me than having a higher standard of living (real or perceived) in a big city.

[Gsynch]

A lot has been written on this topic by many learned BHPians and i am sure, many of us have benefited from these pearls of wisdoms.

There is another aspect to it, especially those who romanticize FIRE concept to get rid of mundane corporate routine and spend their time as per their wish. The focus on retiring early may not be suitable for everyone. It may create unrealistic expectations or cause individuals to overlook the importance of enjoying life in the present, especially if the pursuit of early retirement becomes an all-consuming goal.

[condor]

For all those trying to calculate how much your monthly expense can be -

I am doing a small experiment right now, both situation wise and activity planning wise. I am tracking my expenses.

What i noticed is how easily expenses can come up, and throw your earlier estimates out of the window.

Being more free after retirement (voluntary or otherwise) -a person can easily end up spending more than the estimate. It can either be because of trying to do something, or doing something because of not having much to do.

So suggest to plan for a little more than what you think may be required.

[PatienceWins]

Originally Posted by Newtown

Few things that I would like to mention here:

1. Don't think that everyone has your best interests. Read, learning and understand.
2. Plan, plan, plan, plan as much as you can well ahead.
3. Learn that saving is not a crime and needs to be done.
4. Invest, Insure, Plan for medical exigencies.

I have said too much here but I sincerely feel that this will serve as a lesson to many on the forum.

Thank you for sharing your experience. What resonated with me most is to be diversified in savings/ investments with enough liquid assets (cash, gold, mutual funds, equity etc), especially for emergency purpose. The physical assets like land, house etc are difficult to be liquidated when required, as I have learnt from experience. It is difficult to get a good deal when the market knows that you are in need for cash. As Charlie Munger says "Money is in waiting". And to wait by facing life's adversities (god forbid) it is important to have enough margin of safety with liquid assets.

[am1m]

Originally Posted by PatienceWins

And to wait by facing life's adversities (god forbid) it is important to have enough margin of safety with liquid assets.

This is something that worries me sometimes. Some sort of once-in-a-lifetime economic crash that wipes out all my savings/investments. The sort of thing that affects even 'too-big-to-fail' financial institutions. We've already seen one major crash (albeit in the US) in our lifetimes. If one is young enough, one can probably wait it out, but shudder to think what will happen if one is in one's 70s or 80s when something like that happens.

[Fx14]

Originally Posted by kap04

Are there any other options i can look at or should I just postpone the annuity for the next 14 years and forget about it for now?

If you are keen to do it yourself there are options.

The lumpsum amount can be invested across various fixed deposit / Mutual fund schemes of your choice.

Similarly the monthly payment received by way of annuity can be invested in either Recurring Deposit / Mutual fund SIP basis your risk appetite.

[GreenerPlanet]

Retire early? Retire?
Whatever does that mean?

I work a salaried IT job which pays quite decent. In addition to my usual PF, I save an additional 15% of my salary in VPF. The PF-VPF account just manages to keep pace with my annual salary, an observation over multiple years. Effectively, any time I retire, my PF will provide only 1 year salary!

Inflation is a real killer.

I will mostly work till the day I can get up and move about.

Retire?
Not for me.

[vinya_jag]

From reading the first post, I now have a new way of looking at things. If our grandparents had it tough, if our parents too found it hard, I’m sure we will also find it hard someday. Just accept the situation as it comes. How much ever we plan ahead, we will not be able to control something that is going to happen 20-30 years from now.
Also, we all have peak earning years around 35-40, in this age. So let us be ready to enjoy our difficulties that might come later, the same way we waded through our difficulties earlier in our lives.

[vijaykr]

Originally Posted by GreenerPlanet

Inflation is a real killer.

Yes, inflation is the "silent enemy" that eats away at a corpus in the long run. It requires factoring in appropriately and looking for investment options that can beat it to ensure a net real return.

Originally Posted by GreenerPlanet

Effectively, any time I retire, my PF will provide only 1 year salary!

Are you saying that your accumulated PF corpus will last you only an year in retirement? PF is earning tax-free returns, right? Not sure I fully understood your comment here.

[Varun_HexaGuy]

I’m 22 and I’m doing fairly well for myself at this point of time. Amongst a lot of things, retirement is something that even I’ve started to plan for. I do not see myself a part of this rat race for too long. That doesn’t necessarily translate to the fact that I do not like what I do. I really like what I do. But as on date, the only thing that really isn’t in my hand is my time. On most days I work for 15-16 hrs a day. While it does translate into good moolah coming in, I do not really have a say on how I actually want to spend my time. In the recent times I did manage to get active control over my time and actually balance things out, I still feel like I do not have a complete say on how I spend my time and quite understandably so.

The main motive to retire early is to lead a slow paced life and live a life as per my will (debatable). While buying yourself time does sound good, doing something with that time is an equally difficult conundrum to be in. Thankfully for me, I know what to do with it when the time comes (one of the few things in life that I’m clear about). With that zeroed in and an approximate timeline of retirement, the next big thing that comes to my mind is the corpus needed in my kitty before I call it quits.

To zero in on that figure, I’ve been tracking my expenses for the past 1 year and I’m fortunate enough wherein my parents have ensured we never struggle for the bare minimum in life (roti, kapda and makaan is something that I do not have to worry for in my lifetime). While I do have an active control over my fixed expenses and have actually manage to cut down on those over the past 6 months, what throws your monthly budget in air at times is the unexpected expenses that come up. This is something that most people, atleast from what I see, fail to underestimate. I’m currently tracking the kind of unexpected expenses that can pop up and then decide on what my ideal figure should be adjusted with inflation.

Another thing that I have tried to keep my fixed expenses under control is the age old trick of Earnings - Investment = Expenditure. This necessarily doesn’t have to translate in cutting corners either. But it does ensure you save a higher percentage of your net earning MoM.

Also starting out early gives you an edge in a lot of things. My term insurance cover for instance, costs me barely anything for the cover amount I have (plus a non-smoker). Same goes for lower health insurance premiums as well.

Apart from the mandatory monthly investments and having more than adequate term and health covers, maintaining a minimum liquidity is a must. This is something that I’ve learnt from last year wherein I had locked up all my money in investments or intangible assets where liquidation was a problem. Since then, I maintain minimum liquidity to take care of expenses (expected/unforeseen to a certain degree).

Another key takeaway for me from this exercise of tracking was to keep my wants to something more attainable. Read, my wants now lie in the criteria that I can COMFORTABLY afford for without looking at my bank balance. Even if that means a compromise in what I actually want vs what I get, I would rather get something that I can comfortably afford. For me, the stretch isn’t worth it, atleast mentally.

This above mentioned change has bought in a new perspective on what my actual needs and potential wants are. Suddenly a lot more things which seemed complicated seem simpler because I now could draw a line with my wants and not get unrealistic. While people may say it is too young to be realistic, I would rather want to be realistic from the get go and chase that is attainable. Ofcourse attainability changes from time to time (and it should) but I have made it a point to not chase something that is not attainable at that given point of time.

[sunilch]

Originally Posted by vijaykr

Are you saying that your accumulated PF corpus will last you only an year in retirement? PF is earning tax-free returns, right? Not sure I fully understood your comment here.

He means that his PF Corpus usually stays equal to his annual salary / CTC, after getting the required interest on it.

So he will have 1 years earnings in hand if he withdraws the PF now.

[am1m]

Originally Posted by Varun_HexaGuy

While people may say it is too young to be realistic, I would rather want to be realistic from the get go and chase that is attainable.

Kudos to you. If I had half the maturity you seem to have, when I was your age, I'd probably be giving better retirement advice on this thread today, instead of general gyaan!

It's never too early to plan for retirement. At the same time at your age, do take the time out to enjoy life too. That doesn't necessarily mean spend money unnecessarily (lots of us equate spending big = enjoying life, not necessarily), but don't miss out on life experiences because you will be looking at everything purely from a financial angle.

Understand that the demands on your time and money in your early 20s will be very different from those in your early 30s, early 40s, and so on. And your mindset will be very different too.

Some other stuff I wish someone sat down and told me in my early 20s:

* It's never too early to invest (wisely, not in crypto schemes! ).
* Let your lifestyle lag a little behind your salary increases and save/invest the difference.
* Always make time for your health and family.
* Forget what other people say about what you need.
This is very important in a status-conscious society like ours. People have all sorts of ideas about the kind of car you need to be driving at a certain salary, the amount you need to spend on your wedding (after 5 years, guarantee no one, not even you will remember the details!), and the number of kids you need to have! Do what makes sense for you and your long-term goals.

There is a lot of great advice on this thread, but will re-post what has probably been the single most useful point to me here:

Originally Posted by V.Narayan

Hence so long as we are not living beyond our means EMI to EMI most of us will save up enough to sustain a decent lifestyle. For most of us the bulk of our savings come in the last 10 years of our commercial careers. Also many of us will and do have a second career after 60 or 65. It may earn us less but it is there. The savings for retirement is not as dire as it is made out to be.

[splitinfinitive]

Originally Posted by condor

I am doing a small experiment right now, both situation wise and activity planning wise. I am tracking my expenses.

What i noticed is how easily expenses can come up, and throw your earlier estimates out of the window.

This is so true. I have tracked pretty much every rupee spent since 2016 using one of the apps that read your SMSs and auto categorise spends (was called Walnut, now called Axio - a privacy nightmare, but that's another story).

Turns out that, over time, non-budgeted expenses (healthcare, gifts, dining out, entertainment, travel, etc.) are pretty much equal to fixed expenses (household staff, utilities, insurance, subscriptions, etc.). Just something to account for when planning for the long term.

[vijaykr]

Originally Posted by Varun_HexaGuy

I’m 22 and I’m doing fairly well for myself at this point of time. Amongst a lot of things, retirement is something that even I’ve started to plan for.

I am seriously impressed at your level of maturity and the clear-headedness of your post. As others have said, if I had your wisdom back when I was your age, things would have been very different but no regrets anyway!

Originally Posted by Varun_HexaGuy

Another thing that I have tried to keep my fixed expenses under control is the age old trick of Earnings - Investment = Expenditure. This necessarily doesn’t have to translate in cutting corners either. But it does ensure you save a higher percentage of your net earning MoM.

It appears you have a fair idea of when you want to move out of corporate world, what you need to accumulate before that and what other considerations need to be taken care of - financial and otherwise. This is definitely a happy place to be in and I like your approach of putting investment first from earnings.

Once we get used to this way of thinking about putting away required investments directly from earnings on a regular basis, then very detailed tracking of expenses will not be necessary. It helps to have a general idea of where your outflows are for sure. By keeping the primary focus on investments for life's goals (whatever they may be) and tracking their progress, I feel we are better off. In my years of monitoring expenses, I have seen it fluctuate and have had some months/years where things have been way out of my plan and others where I have done a better job than I expected.

I now mainly track expenses to make sure I am not having to borrow (credit cards, take out of savings etc.) for lifestyle expenses. But I use the same 'trick' as you in investing per plan first each month. Increase the investment amount at least 10% annually diligently. Over years I have seen this style works better for me personally. And I am less stressed if unexpected expenses or occasionally have to indulge in things I like.

I am sure you will be successful with your planning and I look forward to hearing about your journey in the coming years. All the very best!