The most oft repeated words by a person who has just started on his/her career and you ask him/her to invest an amount of his/her earnings is this -" I don't earn enough money to do the savings". This is an issue as the more the money comes later, it will occupy the wants and there will not be a time when he/she can do the savings.
It is always when I earn enough I will save. But this comes back to bite when you are reaching your retirement age and you find suddenly that you haven't saved enough to lead a desired, peaceful retired life.
Thus all your planning for a peaceful retired life is shattered if you are not financially comfortable at the time of retiring.
Financially comfortable is not only a physical term but also a psychological term.For eg, while a 1 crore Rupees in an FD may be enough to manage in physical terms (if you have a house/flat to live and not paying rent), psychologically you have the fear of running out of money and thus the psychological value will be say 5 crores. The psychological value goal is the goal that retirement people should aim at and not enough to get by.
Like someone said, it is %age of income that is saved that matters when you are young and not the %age of return.
How then should youngsters go about savings. From the 3rd Salary (assuming they want to indulge on their likes 1st two salaries), the should say a % age of salary goes to savings. They should say that this is what is my salary to spend (after deducting the savings). If this reduced salary meets the bare minimum of food,transportation and shelter then fine they should live with it and every salary they get, they should transfer the saving to a savings instrument (I have a separate blog on how to go about investing). If it does not meet the basic needs, then they can tweak the %age and reduce the savings. This will ensure a discipline which will be carried forward even when they get their bonuses and increments.
Even after getting married and with children too, this saving discipline will help in growing the wealth value and by the age of 50, you should be in the comfort zone as you have given 20-25 years in the development of this wealth.
The above process will give a peace of mind as you approach your retirement age and not panic due to lack of savings.
One of the key questions that needs to be asked is "When do i start to plan for retirement"
My take has been, from a very young age or when you first draw your salary.
Please note it is often said, Death and taxes are permanent. I will add Retirement is also permanent.- at least for most of the people.
If you start your retirement planning at the age of 20-25, you have a long way to go and go through ups and downs of market as well as compounding effect. I have seen people panic at the age of 40-50 that they have goals to meet and retirement being one of them and if they live long how are they going to manage when they retire.
Either you have a son, who is a big businessman and takes care of you in your old age (not necessarily true- Vijaypat Singhania is a prime example) or you plan your retirement early to build a corpus which is sufficient and does not scare you of being without money.
Put off events or purchases just to show who you are in the society and stick to basics. A spend of a crore in a wedding can be put to good use investing in markets which could give a return. Skeptics say if market crashes you lose everything. My argument is if market crashes, the whole world crashes and value of money is zero in those cases.Assume you have crores in cash and market crashes with no end in sight, the value of your crores is also reduced to nil as govt. crashes and nothing works. On the other hand even if market crashes, there will be others taking those places and after some years it becomes normal. It is these crashes that you take advantage of and not think this is end of world. If it is end of the world, the money everything is useless. you have 100 crores or 1 paisa it is the same as end of the world is destined according to some.
To conclude on early investing, when a famous investor was asked what was his life regret. He said, I came to know about investing at the age of 11 years. Wish I had come to know when I was 2 years old. This is called time in the market.
