You earn money with hard work. Investing it in assets, which can generate enough returns to sustain through your retired life, is very important. Investing is a lifelong affair and one has to devise an efficient plan to save and invest throughout the working years.
What if you choose not to invest? You can read it here. What if you choose not to invest?
Assume you earn 50K per month, of which, you spend 30K towards the cost of living, and therefore left with 20K in surplus every month. If you choose not to invest this monthly surplus, your cash will be left as it is.
Now, the question is, at this rate, how much money will you have by the time you retire? For the sake of simplicity let us ignore the effect of tax and make a few assumptions –
· Your employer is kind enough to give you 10% salary hike every year.
· The cost of living increases by 8% year-on-year.
· You are 30 Years old (now) and plan to retire at the age of 50, this implies you have 20 working years left.
· You don’t intend to work post-retirement.
· Your expenses are fixed and don’t foresee any other expense.
· The balance cash of 20K per month is retained in the form of cash, probably in your bank’s saving account.
· After 20 years of hard work you accumulate 1.7Crs.
· Expenses are fixed, your lifestyle has not changed over the years, you probably even suppressed your lifelong aspirations – better home, a better car, international vacations etc.
· Post-retirement, assuming the expenses will continue to grow at 8%. 1.7Crs is good enough to sail you through roughly 8 years of post-retirement of life. 8th year onwards, you are likely in a very tight spot with literally no savings left to back you up
You can understand math here. What if you choose not to invest?
Now consider this, instead of keeping the cash idle, you choose to invest the cash in an investment option which grows at 12% per annum. For example, the end of the 1st year you retained 2,40K which you decide to invest at 12% for the next 19 years. The 2nd year you retained 2,71K, which is again invested at 12% for 18 years, so on and do forth.
You can understand math here. What if you choose not to invest?
If you add up all the final values, you get a massive corpus of 4.2Crs, which is a whopping 2.4 times higher than what you would have otherwise saved. Clearly, this will happen if you choose not to invest! You have 3 compelling reasons to start investing today –
1) Fight inflation – By investing one can deal better with the inevitable – growing cost of living – generally referred to as inflation.
2) Create wealth – By investing one can aim to have better corpus by the end of the defined time period. In the above example, the time period was up to retirement, but it can be anything – children’s education, marriage, house purchase, retirement holidays etc.
3) To meet life’s financial aspiration – better home, a better car, quality vacations to name a few. Now that you are hopefully convinced, here is a bigger question – where to invest? You can have a more related knowledge!! Happy Finance!!
You must be logged in to post a comment.