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Saturday, 5 August 2017

Retire Early with Financial Independence !!!

Retiring early !!! Financial Freedom by 35. Sounds like a Dream, isn't it? Can this really be achieved? Can we start from Zero and still achieve it? If yes, HOW? Read on...

Dearest investors and friends,

The markets are making new highs and I am hoping that wealth is getting created with quality stocks. Most of our portfolios, if chosen wisely, would be at their highs as well. 

Today, I am going to cover a very important aspect in our investing journey - Financial Independence. Most of us love to achieve Financial Independence early in life. We dream of enjoying the best holidays, wearing the best clothes, owning cars, gadgets, farm houses, bungalows etc. in this lifetime. But, how many of us really work towards achieving them? How many of us save to enjoy all our dreams? How many of us have a plan in place? Think.

There are many success stories in the Share Market. Stories of rags to riches. Stories of 0 - 1000 Cr. 0 - 10000 Cr etc. These stories are not the stories of majority of investors. The people who made such returns were in the markets and that was their bread and butter.

Majority of small investors always play a zero sum game since they don't know how to play it the right way. Win few times. Lose few times. The losers outweigh the winners most of the times. Then, again playing to retrieve the loss. This is the normal story. Most investors are in the dream world and try to make quick money to achieve Financial Independence. 

When we try to play aimlessly in the Share Market, we end up wasting our time and missing out on the real Wealth the Market can create for us.

So, what are the steps for Financial Independence? Can the Markets really give us the independence we are looking for? Can we really Retire from our 7 AM - 11 PM work life (includes travel nowadays)? Let's see.

Step 1 - Beginning Early - The Habit of Saving

Most of us begin working in a paying job when we are 22 years old. This is the time when usually, our responsibilities are restricted to close family - ourselves and our parents. If our close family is financially independent, it's definitely a big advantage. We get good time to focus on our learning curve in the job and work really hard to stand out. 

The early years are the ones where the Habit of Saving needs to be inculcated, with understanding. This is also the only time when we can save a good part of our salary and spend the rest. Save more and Spend less should be the mantra in early years of career. The more we can save in early years, the speed towards Financial Independence exponentially increases.

Step 2 - Knowing our Expenses

Financial Independence is achieved when we have enough wealth to cover all our Monthly Expenses. So, knowing our Monthly Expenses is key. I have been maintaining an excel sheet of Monthly Expenses for the last 10 years and it has helped me enormously to understand where the outflow really is. This record also helps us to retrospect and understand where we can cut costs and where we can spend more. If we can document exactly to the rupee, it will help us enormously. If we know our expenses, we will know how much we can really save. Sometimes, a small cost-cutting here and there, would give more money to invest for our future.

Step 3 - Instant vs Delayed Gratification

The biggest mistake we do in our early years is Spending on Unnecessary Wants. Please remember - Every Rupee unspent on an unnecessary desire, is a Rupee saved. In our early years, we need to ensure that we make each rupee count. Whenever we are going to spend, ask this question - Do I really need this now? Or can it wait? Let us delay our gratification sometimes. It is hard, but very much possible and very rewarding in the longer run.

Step 4 - No early commitments

The biggest mistake anyone can ever make in their early years is Taking Heavy Debt. Any early major commitments is detrimental to Financial Independence. The early years must be used to create wealth and not to get locked for 15 - 20 years in EMI Debt. Settling for a Good Second Hand Car, a Decent House on Rent closer to work, Avoiding regular visits to Fancy Restaurants, Cooking at Home, Using Public transport etc. would give us peace of mind and good health as well, especially in early years of career. If we lock ourselves in a property worth 40 - 50 Lakhs early on with heavy monthly commitment, we will never be able to achieve Financial Independence in our Prime. Think about it.

Step 5 - Avoiding the Ego Trap

The biggest trap is the Ego Trap. Many times we take decisions to please our ego and impress others. We always try to buy things, which we don't really need, with the money which we do not have, to please someone who really doesn't care. Buying a car to show your position in office instead of using Ola/Uber, buying an expensive House just to have a high position in family and friend's circle, regularly spending/treating in big hotels etc to impress others, visiting Race courses and Gambling dens to show off are just a few examples of cases where we are denying ourselves Financial Independence. Let us understand our needs and our bigger picture while taking any decision.

Step 6 - Taking the right Medical & Term Insurance

Taking a Basic Term Insurance early on helps because the premium is very less when you are 22 years old. As we delay this, our premium would increase. Having a good Medical Insurance early on also helps. Try not to get stuck in Insurance plans which give lots of unnecessary features etc. Insurance is basically to help us in Medical need and in case a major catastrophe happens. It is not an investment, rather a protection and it should not be treated as an instrument which gives us returns.

Now, when we have followed the above steps, we will have some amount every month, to invest for our Financial Independence. Now, where do we invest this money?

I have, in my previous articles covered a few instruments of investing. Please read the following articles:

Investing in Well Managed Mutual Funds or Compounders in Equity is the best way to create wealth over the long term. 

Amit and Prachi are two close friends who have big dreams and have just finished their graduation at 22 years. Both of them read this article and then decide to save a part of their monthly salary for their future right from the age of 22. They are in a decent job which pays them around Rs 15000 per month initially. 

Amit has some family commitments and hence his monthly allocation is lesser than Prachi, who allocates more part of salary to her savings. In their workplace, they meet Ramlal who works as the office staff. They explain to him, the importance of saving and he also starts saving from the age of 22 years. 

Here is how they move towards Financial Independence with the Magic Power of Compounding !!!

As you can see, small drops added early makes a mighty ocean.

The total investment is also shown in the table. I have also included investing in RD (5.6% post tax returns) just for comparison purpose.

In 15 years time, Ramlal would have around 25 to 60 Lakhs. Amit would end up with 70 Lakhs to 1.42 Cr and Prachi would end up with 1 - 2 Cr of liquid cash. And I have not included Dividends in this calculation which are tax free. 

The beauty of investing in Equity or Mutual Funds is that with a click of a mouse button, all the money would reach your account within two working days. It is not a virtual asset like a House. It is not a depreciating asset like a Car. It is REAL MONEY !!!

With a little bit of early discipline, we can all become Financially Independent by the time we are 40. 

The earlier we begin, the faster we can achieve Financial Independence.

Think about it :-)

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Good luck,
Fundamental Investor

Real Example of Retiring early with Disciplined Investing:
My very good friend Amit Gadre Retired from the Rat Race just recently after 13 years of work. The best part is that he achieved Financial Independence before the age of 35 which should be an inspiration for all. I wish Amit all the very best for his future passion driven endeavors.

This was his article on Financial Freedom which he penned long back when he was still running the RAT RACE, very fast.


  1. Great article!!

    I wish I could have started saving at the age of 22.

    I just have started saving at the age of 30. Do you think, it is too late for achieving financial independence.

    How can I achieve it if I start it at 30(my current age). Can you please guide me.

    1. Dear KD bhai. You one one among a million who atleast is thinking starting somewhere NOW. Its never late to begin. Today, the advantage you have is that the SIP can be much larger than what you could 8 years ago. Wish you all the best. Email me in case your need any help. Thanks.


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Our aim should be to learn and share the art of investing in the Indian Stock market. With right perspective, understanding of stock market basics and a sound attitude, we can all identify Multibaggers and evolve towards Wealth Creation. Are you ready to own businesses? Welcome aboard !!! Lets learn, serve and grow together !!! 
- FI