Why we need to forget about “pension after retirement” & focus on “financial freedom” – Paisa Vaisa Podcast Part 1

Published: July 31, 2018 at 10:14 am

Last Updated on

I was invited as a guest on the Paisa Vaisa Podcast hosted by Anupam Gupta, a CA and equity research consultant. The podcast was co-hosted by CFP Anees Rao. In the first part, we discuss what exactly is financial freedom, why it is for everyone and why we need to replace conventional notions of retirement and pension with financial freedom.

In this post, I have added explanatory notes for the podcast to help beginners. So share this with your colleagues who have not done anything for their retirement. You can also download two free ebooks to plan your financial freedom below.

So this is the link to the podcast: Paisa Vaisa Ep. 137: Financial Freedom – Part 1. There are two more parts where we explore fin freedom with examples and simple thumb rules.

Suppose you receive a letter from your employer that your salary will remain the same as the present and will not increase in future? What would your first thoughts be? Will you continue to work for the same company? Why?

You would instantly recognise that with the same salary, you will find it hard sooner or later to manage your day to day expenses, fund your near and future goals and dreams. Every day, we see our simple expenses like food, water, transport, basic clothing etc increase. We call it inflation.

We recognise this increase, shake our heads in disappointment that we need to spend more and move on. Why? Because, we earning today – either as a salary or as an income (business, rent etc). We feel that the situation “is manageable” as our income will gradually increase.

Hang on a second. We cannot keep working forever! Even if we want to, we may not be able to, due to poor health.  How would we manage our daily expenses then? Many people assume that what they invest in the EPF or NPS or PPF will be enough for them to a pension at that stage.

But a pension will not increase like our salaries do*. Our expenses will not stop increasing year after year because we have stopped working.  By the way, most pensions that people draw are much lower than their last drawn pay. So how will such a constant pension be enough to handle expenses after retirement?

Join our 1500+ Facebook Group on Portfolio Management! Losing sleep over the market crash? Don't! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free! Did you miss out on the lockdown discount? You can still avail it! Follow instructions in the above link!

* Well, there is a plan where the pension increases at 3% a year but the interest rate would be much lower! So don’t get any ideas.

Simple common sense immediately tells you that unless a retiree curtails expenses, a pension will not help. This is where the idea of financial freedom comes in – it is the ability to handle an increase in expenses (due to inflation or unexpected) when we cannot or do not want to work for a living. Simple common sense also tells you that financial freedom is for everyone, not just for those who wish to retire early.

At this point, someone somewhere will be thinking, “did our parent not manage with pensions?”, “all this talk about inflation is nonsense!”. Well, good luck. Our parents did not have cable, internet and smarphones for most of their lives. If we remove these, they will happily find ways to entertain themselves. Read more: Caring for elderly parents: An emotional and financial crisis

For us, the internet is vital as food and water. The smartphone is our best friend. So our needs are very different and therefore we need to think differently and act differently.  No more pension business for us. We cannot live off an interest. We need a decently sized corpus, we need to invest it right, we need to invest it safely and derive an income on our own. To be continued ….

Hey, don’t forget to listen to the podcast: Paisa Vaisa Ep. 137: Financial Freedom – Part 1.

Download free E-book: How to retire early in India

E-book: Post-retirement income generation strategies

If you are a beginner, yet to get the basics right, then start with: Download Re-assemble e-book: Step by step guide to the basics of money management

Do share if you found this useful
Join our 1500+ Facebook Group on Portfolio Management! Losing sleep over the market crash? Don't! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free! Did you miss out on the lockdown discount? You can still avail it! Follow instructions in the above link!

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!)

About the Author

Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com

About freefincal & its content policy

Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. We operate in a non-profit manner. All revenue is used only for expenses and for the future growth of the site. Follow us on Google News
Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication.Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)

Connect with us on social media

Our Publications


You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingThis book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
  

Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want

Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new

This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when traveling, how traveling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download) 

Free Apps for your Android Phone

Comment Policy

Your thoughts are the driving force behind our work. We welcome criticism and differing opinions.Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

1 Comment

  1. Do you have a spam problem on this blog; I also am a blogger, and I was wondering your
    situation; we have created some nice practices and we are looking to exchange solutions with others, why not
    shoot me an email if interested.

Comments are closed.