The traditional way of retirement in India has been to work for about 30-35 years, gradually save money and retire at the age of about 60. But now due to the increasing influence of FIRE Movement i.e. Financial Independent, Early Retirement in India, many young professionals have started questioning this old model. The idea of the FIRE movement is that people should save and invest well in the early years of their careers, so that money works for them later and they do not have to be completely dependent on the job. Although it is not possible for everyone to retire at the age of 4050, but this thinking has definitely started a new discussion regarding savings and investment.
It is most important to start investing early
The biggest lesson of FIRE is that the earlier you start investing, the better. Suppose a person at the age of 25 invests Rs 20,000 every month in an equity mutual fund and gets an average return of 12%. So by the age of 60, this amount can reach around Rs 13 crore. But if the same investment is started from the age of 35, then in 60 years this amount will amount to only around Rs 3.84 crore. That means, starting investment just 10 years ago can make a difference of crores of rupees.
If income increases then expenses should not increase by the same amount.
As the salary increases, people often increase their expenses accordingly like expensive gadgets, more holidays or spending on eating out. This is called lifestyle inflation. If someone’s salary increases by Rs 10,000 every month and he invests Rs 5,000 out of it, then with 12% return in 25 years, this amount can become around Rs 9095 lakh.
Create assets that continue to generate income
Another important principle of FIRE is to make investments that can provide regular income. The goal is that your future needs can be met from your investment income. For example, if someone has a retirement fund of Rs 5 crore and he gets 8% returns annually, then he can earn around Rs 40 lakh annually.
Know your Financial Freedom Number
The FIRE movement says that people should know how much money they need to become financially independent. A common rule is considered to be 4% Withdrawal Rule. According to this, if someone’s annual expenditure is Rs 12 lakh, then he needs a retirement fund of about Rs 3 crore.
keep debt under control
High-interest loans like credit cards or personal loans eat up a major portion of your income. This leaves less money for investment and the pace of wealth creation slows down. Therefore, it is very important to avoid unnecessary debt and control expenses.
Prepare for a long retirement
Nowadays the age of people is increasing, so many people can live up to 2530 years after retirement. In such a situation, the retirement fund should also be big. It is also important to keep in mind future inflation and health expenses. Retiring early is not possible for everyone, but some of the principles of the FIRE Movement such as starting to invest early, increasing investments as income increases, building income-yielding assets and keeping debt low can strengthen every person’s retirement planning. If people adopt any of these principles, they can make their future more secure and comfortable.