Skip to main content

How Much And How To?

We are talking about much desired “Financial Freedom” in this blog.

Two numbers dominate this topic:

-          How much do I need to get on to the shores of “financially free” land

-          How do I reach the magical number. And that too rather quickly!!!

The latter part – “how do”, receives overwhelming attention. It mostly translates to targeting highest return on capital invested.

“How much” translates into a specific number, mostly without basis. Getting a hang of one’s “expenses”, which happen to be the foundation of arriving at “how much” does not get the focus it deserves. Maybe it is difficult to track expenses on daily basis.

Or is it? What worked for me is a simple solution – do all your expenditures from one bank account. Fund this bank account monthly from your source of income and by the year end you will have fair idea of your annual expenses. Keep up at it for few years and you will know about your annual inflation also. Mostly. No detailed tracking required!!! Maximum one hour per year will go the job. Maybe less.

Do the first step and then google “The 25X Rule” for retirement. More on this later!!! 

Comments

Post a Comment

Popular posts from this blog

Debt Mutual Funds: Can They Still Provide Better Returns Than Bank Deposits or Direct Bond Holdings?

Now that you are done with quickly deploying money in debt mutual funds in last few days of FY 2022 - 2023 to take advantage of indexation benefits which stand withdrawn from 1 st April 2023 onwards, what would you do with any money coming your way which you do not want to put in growth (risk) investments like equities? If you go by news, the money would move back to bank deposits now that fixed income investment area has been tax-levelled. We’ll see in a while what numbers say. Though for me, bank deposits beyond the insurance amount are a strict no. That said buying GILTS from RBI Retail Direct portal does deserve a serious thought now. But first let’s look at some subjective benefits of keeping money in bond funds. I could think of two: -           Liquidity. Bond funds are very liquid, while I cannot say for sure whether direct government bonds will be that liquid as I have never sold a GSEC in secondary market. In fact, not bough...
Post a Comment
Read more

War And Equity Investments

Uncertain times are upon us. There is a shadow of war post killing of tourists in Pahalgam. So far, equity markets have not shown any signs of cracking up despite of high expectations of armed conflict with our wayward neighbour. Is it the calm before the storm as far as equity markets are concerned? It is anybody’s guess that if a protracted war does happen, economy will take a hit in near term, which in turn will impact our daily lives, including equity markets. When and how this will happen is again anybody’s guess. Should you take a relook at your equity investments in such a scenario? Nothing wrong in being a little conservative in such times. Here’s what I think can be considered:     -           Scenario I: You have designated INR 100 for equity investments and are fully invested. While you do have money in non equity investments, in case of equity market downturn, YOU WILL NOT PULL MONEY OUT OF SUCH INVESTMENTS AND DEP...
Post a Comment
Read more

Equity Investing – The Worst Case Scenario, 10 Year Horizon Basis

10 year CAGR for the period 1 April 2010 – 31 March 2020: 6.19%. Covid 19 made equity market tumble and we had to contend with a lowly equity market returns. We can safely say 10 years is long enough investment horizon. Investment return of this quantum will easily qualify as worst case scenario. And it was. If we consider only point to point figure. Here’s what unique to listed equity investing: it is NOT like buying property where you lock in “one” price at a point in time. Then why look at worst case (or even best or average case) on point to point basis? My opinion – to get an idea of real worst case scenario, looking at data on 3 year moving average basis makes better sense. Let’s see what numbers say. Point to point returns of 10 year period ending: -           31 March 2018:                          ...
Post a Comment
Read more