Let's say you are currently 30 years old and plan to retire by 45-50 years.
It's Definitely achievable as I have a similar plan!
I need few assumptions which are as follows:
You are Married.
No Kids.
Living on Rent.
Have savings of around 10–15 lakhs.
Combined salary (couple) is 1 lakhs.
The ballpark figure we want to achieve is 10,00,00,000 &
Following is the plan how we will be achieving it:
( STEP 1 ): Budgeting is the most important part of the whole plan. It is like the diet plan when you join a Gym.
The 50/30/20 rule;
This is a popular rule for breaking down your budget. The 50-30-20 rule puts 50% of your income toward necessities, like housing and bills. Fifty percent should then go toward financial necessities, like paying off debt or saving for retirement. 30% of your income can be allocated to wants, like dining or entertainment. In which you use 20% of your income for financial goals.
The 20/10/70 rule (I personally follow this)
This is a popular rule for breaking down your budget. The 20–10–70 rule puts 20% of your income toward necessities, like housing and bills. Twenty percent should then go toward financial necessities, like paying off debt or saving for retirement. 10% of your income can be allocated to wants, like dining or entertainment. Out of which which you use 70% of your income for financial goals.
‘IF YOU WANT TO RETIRE EARLY FOLLOW SECOND RULE’ else ‘IF YOU LIKE THE RAT RACE THEN FOLLOW RULE ONE’. Please be wise enough?
In case you find that your income is not sufficient towards the necessities 20 percent, then either pick skills which will land in a high paying job or downsize the lavish house, if you can.
The 10 percent is more than enough trust me for a month as it will keep you in check and also you need to follow the rule of “Wait for one week before you buy something costly”.
The 70 percent you will be investing now will give you a kickstart and will push your financial goals in a very comfortable zone from the starting itself.
‘Once you have WON this race , we will move on to the next one’
( STEP 2 )
Now retiring at 45 is like you are plucking the mango at the perfect time. F.I.R.E is an approach that is followed by many and is mostly famous in foreign countries where people earn enough to let the amount cover their expenses for the life afterwards. It means Financial Independence Retire Early but you need to be as frugal as possible to retire as early as possible.
I hope you have thought of these before retiring:
What will you do once you retire? (I have planed to start my e-commerce along with a Hedge Fund )
Have you got your family covered of any unwanted expenses or accidents ?
Do you have a place or shelter where you can live peacefully and grow your family ? (Can be skipped if you are including the rental income as a monthly expense too.)
( STEP 3 )
Once you have the reply to all the questions above we can move on for the plan . If you will retire at the age of 45 then your average life expectancy will be somewhere at 70 . That gives us 25 years and hence one should have atleast save 25 years of expenses in his/her investment account.
( STEP 4 )
Now have a quick foresight and think of a few financial goals which are not yet achieved like Children education, their marriage and alike. So you need to have these saved too, So that your family doesn’t have to turn to someone else for someone else or take a loan for the same.
These 3 steps will give you a Head start and I hope you and your family will prosper always.
Hope you enjoyed reading this article, please comment us your plan which is more 'favourable and quick to exit rat race'. Our sole purpose is to Keep educating others.
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