This question comes up in the mind of everyone.

Will I be able to attain Financial Independence?

If so, by when?

Or will I also become part of the Rat race and get old working?

So thought of answering this in detailed way for anyone who has the similar questions.

Why 40?

The idea of retiring by 60-65 does not sound exciting. You do not have energy to do most of the things that you wanted to do after retirement. At 40, you have good amount of energy and time left to enjoy life, do things you always wanted to do and get over with the burden of daily financial needs.

Now, before we start let’s make it clear it is not get rich quick scheme and it’s not like that, you are 39 years old with regular job and very little savings and investment and tomorrow you decide on you want to retire when you reach 40.

Even if you are 40 or 50 years old, this video is still for you.

True, you won’t be able to retire by 40 years old but you can plan accordingly for your investments so that you can retire comfortably without any fear of losing sleep on how you are gonna pay your bills.

To achieve that you will surely need to start at least a decade before, a lot better if you have a decade and half with you. What I am saying is, if you really want to retire by 40, you should start by 25 to be really safe. Saving money and growing the wealth is a time consuming process - because this is where the magic of compounding happens. And as per Einstein, it is the 8th wonder of the world.

Some folks got around the time factor by either starting a disruptive business or maximising the benefits of investing early in the technologies like Shiba Inu and other cryptocurrencies.

In today’s video we will talking about the common people who come from common backgrounds and a make their living working a regular job through out their life but Dream to get out the mindset where they NEED to work to pay their bills.

So without any further delay let’s get started.

What does You mean by Retirement?

Before we begin lets understand what do you mean by retirement. Does that mean, leaving the daily 9–5 job and do something which you are really passionate about after you attain financial independence or do nothing at all.

Because this will change the parameters of investment and money saved to retire. Also, what is your current age, salary and earning potential.
You will also need to define for your self what is the lifestyle that you are planning to adopt after retirement to make adjustment for you expenditure. Are you going to live a royal lifestyle with parties and luxury or a monk style or a normal lifestyle maintaining the same level of expenditure that you have.

So, if you are waiting for a short answer, here it goes: 25x of your current annual earnings invested by the time you reach 40 (calculated by the earning of 40th year) assuming your expenditure is less than half of your current earning. This is the standard and to be on safer side you can do 30x of the amount.
There you have it.

Case Study

For planning the retirement, I have considered the above case. Not some high paying job or extraordinary person. But a regular person, with regular job but a dream to achieve Finanacial Freedom and Retire Early.

Expenditure and Investment Plans

In the above table you can see the age: 25, salary: Rs. 25000 and what all expenditures that one can have.

On the right side, it is broken into two sections:

• How to create an Emergency Fund
• Basic investment plan

Total amount after Year 1: Rs. 1,08,000

The Year 2 table shows the increase in salary and expenditure.

Right side details about the investment returns from the Year 1 investment at the end of Year 2 and the new investments done in Year 2

So basically what is the total amount that you will have in savings + invested at the end of Year 2: Rs. 2,23,545

The plan for year 3 - 5 has few more options like the new investment done with a Step-up SIP of 10% annually. New Job, new plan of expenditure and not withdrawing the investment amount and let it grow as one make new investments.

Added a new Asset class: Cryptocurrencies

Final amount shown is the one after year 5: Rs. 11,08,609

Few changes from the earlier plans, apart from new Salary. Taking a loan for Bike, repaying in 3 years and adding that amount in Monthly Expenditure.

Other changes include, investing in Public Provident Fund and National Pension Scheme as those are tax saving investment plans.

Final amount after year 10: Rs. 69,36,273

This is the time where you actually see the magic of Compounding happening.

So by the time of retirement at 40, you are sitting on a corpus of: Rs. 2,40,97,905

And the above amount does not include your investment of Rs. 15,00,000 in PPF and Rs. 5,00,000 in NPS.

If you include the above amounts, you will easily be sitting in corpus of around Rs. 3 crores.

Assumptions

The above assumption is basically restricting the future returns. I have calculated the lower end of return so in actual you can expect better returns.