A reader asks, “Sir, My wife and I are both working in the same company and do wish to have children. We are both aged 27. We have just started working in well-paid jobs, so our networth is essentially zero. Our dream is to put an end to salaried existence in at least 13 years’ time by the time we turn 40. Can we achieve financial independence in 13 years, starting from scratch?”
When we sought more details, the couple mentioned that their current monthly expenses are about Rs. 30,000. They did not wish other details to be disclosed in the article.
Let us find out what the freefincal robo advisory tool coughs up for this scenario. The assumptions and inputs are listed below.
Age at the end of the current year: 27
Age you wish to retire 40
Years to retirement 13
Total average monthly expenses (annual/12) Rs. 30,000
Percentage by which your monthly investments can increase each year (until you have accumulated enough for retirement) 10%
Monthly investment in fixed income, including total EPF/NPS contribution. If the EPF/NPS contribution is greater than this, adjust the equity investment to align with the suggested asset allocation (above graph or columns H & I
28
27,799
18,533
29
30,579
20,386
30
33,636
22,424
31
37,000
24,667
32
40,700
27,133
33
42,680
31,937
34
44,648
37,431
35
46,583
43,703
36
48,459
50,856
37
50,245
59,002
38
51,902
68,269
39
53,389
78,799
40
54,654
90,753
The suggested asset allocation schedule is given below.
Suggested asset allocation before achieving financial independence
After retirement, the calculation assumes the use of a retirement bucket strategy as explained here:
In summary, can this couple achieve financial independence in 13 years, starting from scratch? They certainly can if they invest more than twice their current monthly expenses. This is possible with a large total income and low expenses. They should ensure that lifestyle creep in future does not affect the investment schedule.
However, this should not come at the cost of reducing their wants today. They must find a balance between needs, wants and future goals and not deprive themselves of any pleasure – especially those that can only be enjoyed when young. If they are not able to invest the suggested amount, then we recommend not fretting about financial independence and investing whatever they can. They will still be on course to normal retirement.
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Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 13 years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), LinkedIn, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.Our flagship course!Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions!⇐More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.Increase your income by getting people to pay for your skills!⇐More than 800 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner seeking more clients through online visibility, or a salaried individual looking for a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you. (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos! Our book for kids: “Chinchu Gets a Superpower!” is now available!Both the boy and girl-version covers of "Chinchu Gets a superpower". Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. The narrative revolves around what he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management. What readers say!Feedback from a young reader after reading Chinchu gets a Superpower!
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Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 13 years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), LinkedIn, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.
Published by CNBC TV18, this book is designed to help you ask the right questions and find the correct answers. Additionally, it comes with nine online calculators, allowing you to create custom solutions tailored to your lifestyle. Get it now.
This book is designed for young earners to get their basics right from the start! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.
This is an in-depth exploration of vacation planning, including finding affordable flights, budget accommodations, and practical travel tips. It also examines the benefits of travelling slowly, both financially and psychologically, with links to relevant web pages and guidance at every step. Get the PDF for Rs 300 (instant download)