How to enjoy a young and rich retirement....

Retire Young, Retire Rich.

Three friends(Ajay, Ravi and Vineet) from a small town after finishing graduation moved to freedom-three-friends-jumping-sunset-concept-41330671 Bangalore for Job search. The Job market was ripe and their good grades helped them to secure an IT Job in MNC’s with a pay scale of Rs 20,000 per month by early 2004.
Few months later “Hey guys we have been earning much more than we need and we have extra funds which could be used to invest for future” Ajay said. To which Ravi who was thinking on the same lines replied ” yes why don’t we start an SIP”(Systematic Investment plan Read more here).
Vineet who was more of a party animal and frequent buyer of high end gadgets wanted to live his life lavishly said” I want to live my life to the fullest and i already have my credit card dues which eats up a huge chunk of my Paycheck, anyways money is not a priority and i want to live everyday as if its the last day of my life”.
However Ajay and Ravi did not quite agree with vineet and decided to invest 50% of their paycheck for the future. Ajay who believed that money should work for him had learnt about stock market investing with the help of his maternal uncle. He had high hopes on India and believed that India being an underdeveloped country has huge potential to grow. With some research and help of Investment advisors Ajay decides to invest Rs 10,000 per month in a company called “Asian paints”.(New investors please note investing in a single stock is quite risky and it is advisable to buy 8-10 stocks as a part of the portfolio)
Ravi on the other hand was not sure of the stock market and did not understand the value of compounding, hence decided to invest Rs 10,000 per month in Fixed deposits with a bank which gave him a 9% interest per annum(In India Bank Interest are taxable).
Both Ajay and Ravi had started their investments in January 2005 at the age of 22 and they always invested on the first business day of every month with great discipline which was commendable.
A Decade later..
By now all three friends were married and were constantly in touch. They were doing professionally and financially well(Except for Vineet).
Ajay has compounded his wealth at 46% to 1.39 crores which is a rare phenomena however if you invest in right companies you will do way better than average investors and the average market. Ajay plans to continue his Sip for 10 more years and even if he compounds at the rate of 21 % it would earn him 10 crores by the time he is 42 years. This is a huge corpus for anyone to take an early retirement and Ajay would be in position to do so.
On the other hand Ravi has earned 19.12 lakhs in 10 years and if he continues with SIP for 10 more years and with 9% interest rate he would end up with 64.45 lakhs. Which would not be sufficient for an early retirement considering the inflation rate in India.
Well you must be wondering what is Vineet upto , He still is a party animal and a spend thrift, as they say “old habits die hard”. He has compounded the number of credit cards and to add to that some personal loans. He is working extra hours to pay the bills on time and stay even. Assuming he continues to live with the same attitude forget early retirement , I presume he will have to work even on his Death bed. I might be harsh but that might soon be the case.
You might see these characters in day to day lives and you might be able to identify yourself with one of them. Ajay’s in today’s world are very hard to find(Do no include the ones who come to markets to make quick buck).There are still a lot of Ravi’s who do not take any risk and are content to work till they are sixty without dreaming of getting rich. Off late i am seeing a lot of Vineet’s and i wish they realise before its too late. Financial Education is something which is not taught in schools and people learn the hard way.Its time for you to decide do you want to work for money or the money work for you? ‪#‎Retire young,Retire Rich.