“Is Early Retirement Or Becoming Financially Independent” A Wishful Thinking Or Is It Achievable?
First think why you need to retire early or be financially independent. Financial independence means having a lot of time to do what you enjoy doing without having to worry about your daily living expenses.
As we are growing up, we are brain washed into believing that good education followed by a good job will make us rich. If your job pays you very high salary, you may lose that job any time but if you own businesses or income generating assets, you can be on your way to retire early. Most of the people themselves do not have any idea what it means to be financially independent. Unfortunately, financial independence or money management is not taught in schools and colleges. Financial independence means having enough wealth that generates income in the form of dividend, rent and profits. Of course, the income generated should help you maintain your life style even if you stop working.
You must have been reading in the newspapers or must have heard from TV channels that India’s gross domestic savings rate is high. The Gross domestic savings is approx 30% of GDP. Have you ever wondered what this means and where does this money go? Most of it goes in to bank deposits. The savings in India historically has been high. Until the 70s, people used to save money without taking any risk. Savings in a bank account fetches simple interest. The interest earned from savings bank account and or a fixed deposit account is not enough to beat inflation. This effectively means that the value of your savings is depreciating.
If you are seriously thinking of getting rich by saving your hard earned money, think twice. Is it the savings that will make you rich or the investments that you make by proper financial planning will make you rich. If you want to see your savings grow, it must beat the inflation and the value of your investments must grow at a compounded rate over a period of time. Investments always carry certain amount of risk. Even if you invest a small amount every month with discipline for several years, your investment will grow into a big corpus.
Once you understand the power of compounding, you will realize the value of starting early. Invest your savings by proper asset allocation so that the compounding works in your favour which in turn will help you to retire early.
In order to achieve your financial independence, you may have to seriously write down your financial plan, cut down on unwanted expenses and look at the possibility of increasing revenue if necessary. Also it is advisable to make use of tax planning very well so that all the taxes saved are added to your corpus.