In my last post I spoke about living your life.

One of my sisters commented that my post was so depressing that she actually decided that I write a lot of crap because before buying a Rs1400/- dress she started thinking how it could it impact her future and did not buy the dress.

Well she got out of that low feeling by going out and buying an even more expensive dress – but to come to the Rs1400/-…what it could mean if she delays the gratification.

Assume that my sister is 25 years of age.  She has a long runway.  given how medical science is progressing she will at-least live till the age of 95-105 on an average….that means she has 7-8 blocks of 10 years each…25-35, 35-45, 45-55 and so on.

I have earlier written how small differences in percentage can make a huge difference in outcome.  Now lets assume she gets 15% per annum return on this money….which means every 5 years the money doubles….so in 10 years the money becomes 4 times, in 20 years it becomes 16 times.  By the time she is 55 she will have 64 times the money that is close to Rs90000/- and at the age of 75 it will be close to Rs14,00,000/-.

The same thing if she is able to earn at 25% in 10 years Rs1400/- will become Rs14000/-, in 20 years Rs140,000/-, by the age of 55 it will be Rs 14,00,000/- and at age 75 hold your breadth Rs 140 million (14 crores).

What this means is – if you start early and every month just avoid that one dress or that one meal outside, you can actually stop working for a living  by the age of 35-40 and earn from your investments and live a more contented life, travel the world and what have you

India presently is in such a stage of growth that these things are possible in our country.  just defer your gratification by a little and you could be a millionaire multiple times over.

Carpe Diem!!

When you plan your financial journey one of the big challenges is moving targets which don’t let you LIVE your life.

You start by thinking you will save “X” and by the age of 40 or 50 or whatever you will leave your job and do something on your own which will give you happiness and help you get to your dream.  But then you get married, you have kids, their education, your parents and their ill-health and inflation and suddenly you realise you have not been able to save enough so you cant retire.

So you change the target for retiring but then your children get into higher education  and you have to pay for their fees and the dream of doing something you like only remains a dream and life just passes by.

All the above has actually happened to me and I have lived it and understand the frustration that causes.

I was watching the movie “Zindagi na milaegi doubara” by Zoya Akhtar….this a Hindi movie and a favourite of mine.  One of the leads is a character played by Hritik Roshan who has this need for money to define himself.  But when he goes scuba diving, he suddenly realises what he’s been missing in life.  All the characters one by one realise the fears that were holding them back and get liberated.

Life is passing us by everyday…let us not waste it by living only for our obligations and saving only for a rainy day.

Create a bucket where you can also save for going after your own dreams…what Tony Robbins in his book “Money …Master the game” calls the dream bucket.  Make money work for you and keep putting things in your dream bucket so that you can live a fulfilled life.

Carpe Diem….Sieze the day!!!

There was a lot of inputs on my blog from my friends asking if I have become a financial advisor or if I am teaching people a method on how to become rich.

While the concepts of compounding are the basis of becoming rich, the idea of this blog was something totally different.

As I had mentioned in my first blog, I did not know about the magic of compounding till about 4-5 years back.  Due to that I used to do a lot of things because I had to.  I was in a job because I had to, since there were so many liabilities on me – my parents, my in-laws etc and my son was getting into university.  Since we were a single income family there was always this question on how we would manage our finances if I did not have a job.

And as I had mentioned earlier also, since I come from a typical middle class family – a job was what we did all life….our whole existance was centered around being in a job.

If I had the freedom to choose things without having to worry about how my basic necessities would be taken care of then maybe I would have lived my life differently.  Maybe I would still work, but then I would do a job because I want to work and not because I had to.

The whole idea of starting the blog was that if there are people out there who struggle the way I have, they may find that my experience may allow them to live life differently.

By utilising the magic of compounding from early on in life, you don’t have to be a slave all your life.  In the initial years you struggle but invest wisely so that over a period of time you have enough invested such that the earnings from the investments take care of your basic needs and you do what you like to do and life a much more happier and fulfilled life.

In my next blog I will take a few examples of how by keeping a moving target we frustrate ourselves and how achieving financial freedom may not be such a difficult thing.

Till then….

Carpe Diem!!!

Wish you all a very happy Diwali

I have been on a break from writing the blog for the last two – three weeks

These last few Diwali holidays I could get time to watch television and all the finance channels like ET now and CNBC etcetera, had programming talking about how well the market had panned out in the last 12 months

That got me thinking on to what I have been writing about for the last few posts on the power of compounding

If you look at the fact that some stocks grew by 40% and there were others which grew by 25% and and maybe some only group by 15%.  On an average if there was a growth of 25% then in 3 years you will double your money if you follow the equations I spoke about earlier.  Which means if you have a working life ahead of you for the next 15 years then you will double your money every 3 years and by the 15th year your money would be close to 30 times what you started with

So if you start by saving 100000 in this year in the next year year year 100000 and then 1 lakh in the subsequent year

The first one lakh will become 2 lacs by the end of the third year, 4 lacs by the end of the 6th year, 8 lacs by the end of the 9th year, 16 lacs by the end of the 12th year and 32 lacs  by the end of the 15th year by the 16th year you would have another 32 lacs (from the 1 lakh that you saved in the second year)and by the seventeenth year another 32 lakhs (from the 1 lakh you saved in the 3rd year)

Suggest by saving 1 lakh for the next 3 years you would end up close to about a crore of Rupees in the 18th year and this is without doing any work

Now I understand that there are caveats to this discussion. Obviously the fact that you need to be doing about 25% per annum, but the fact is if you can monitor and manage your Investments in instruments which can give you this kind of Returns you would really become financially free without too much of a hassle

That’s the power of compounding which can make dramatic differences to where you start from and where you might actually end up. The fact is that the earlier you start and this point I have been ranting about in my multiple posts, the chance of you retiring or living a life on your terms is extremely high.

So this Diwali make a resolution to start investing wisely and let the power of compounding work for you.

So till next time figure out how you can just start small but early and on a consistent basis keep investing.

Carpe Diem