Now that you are into a Job for quite some time now, do you remember the days when you were just awarded with your first job and your father told you to open a recurring deposit account in a bank and make all your tax saving investments in provident funds.
At that time there were not many investment options available or a more appropriate fact to quote here will be that people were not aware of all the investment instruments available to them so they rather trusted the very basic investment options available like the Recurring deposits and more easier way, to park their money in their savings account itself and earn interest on that.
After all, they always preferred the options that would give you assured returns with a capital guarantee. And the advised you to do the same. Those were the words of wisdom then, but not anymore. Times have changed drastically now and lets see to what extent.
Today, with all the things getting expensive, the inflation is eating into your returns even when you are sitting in front of your computer reading this article.
Lets quote an example here to understand this in detail:
If your monthly expenses today are Rs 10,000 and annual inflation rate for the economy is 5%, 20 years later, when you will most probably retire, you can expect your monthly expenses to rise to at least Rs 26,000. Now, taking the best case that Bank deposits will give you a return of 6%, but post inflation and tax; you will be left with a rate of return which actually runs into the negative. This means that while on the paper, you will be happy to see your returns as a handsome 6%, your capital is actually eroding in the real scenario.
Thanks to the increased life spans with the advancements in medicine, research shows that you are now going to live much longer. Your grandfather worked and earned an income for 25 years of his life, he lived for another 10 years after his retirement. Your father worked the same number of years but lived for 20 years post retirement. You will probably work almost the same number of years that they did, but in every probability live even longer! Therefore, you have to SAVE a lot more to plan and enjoy those extra twilight years of your life.
Today, you like to drive around in an SUV, are a member of an Elite countryside club where you go golfing on the weekends, you treat your family to a fine dinner at least once a week and of course, love those weekend getaways to the holiday resorts with your children. Do you ever ponder over the thought of how many of these luxuries will you be able to actually afford after you retire?
Wealth creation is all about making money last till the end in order to continue enjoying all of these luxuries.
Most of the large expenses in life are planned expenses. For instance, purchase of a home, your child’s education or marriage, your own retirement and so on. These expenses are to be incurred no matter what you do about them.
All of the above listed points take into account the importance of Investing in one lives by taking real life time examples and the actual problems faced by the most of us. Readers are welcome to share their individual thoughts on this topic in the comments section below.
Rather than cribbing about your financial sources and your job, we have to Plan accordingly and successfully create wealth to meet our individual needs.
Remember one thing in life:
Failing to plan is Planning to fail.
So, plan, save, have a happy life and Happy Investing!