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Archive for February, 2012

This is the question that we usually ask when we have amassed a decent balance in our savings or checking account. For some, it might be 10K and for others a million. The amount is irrelevant. We are willing to venture out and ready to take risk as long as the return is higher than the savings accounts or fixed deposits.

Should we invest in real estate, mutual funds, stocks, gold or insurance? We turn to our accountant for advise, watch or listen to stock channels and other investor friends. We start reading Money, Fortune, Kiplinger’s or other personal finance magazines. In addition to all this, the endless hours are spent surfing Morningstar, MSN money, Motley Fool and other financial websites, researching the best performing mutual funds, industries or stocks.

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Most of us have wondered about this by now i.e. how much is really enough to retire comfortably. In case you haven’t, I am sure you will at some point in near future.

Actually “Retiring” is not the right word, I should use “Financially Free”. Many of us want to start a business, pursue our interests and hobbies, travel, spend more time with the family. There can be many reasons to leave the corporate world. But before we take the plunge, we need to be absolutely sure of our investment plan that will allow us to live comfortably without having to work again.

I have wondered about this number and studied extensively on the subject for the last 4-5 years. I also spoke to many friends and relatives to find out their monthly expenses. The idea is to keep it simple to begin with. We will make an assumption that we have already paid for our house, cars and have separate buckets/savings for kids college education and for any other major medical expense. It is easy to come up with these numbers or any other one time(like settling costs) expenses.

What I’m going to focus on right now is the corpus we need for our recurring monthly maintenance expenses like food, utilities, clothing, transportation, kids school education etc. I will use two separate examples:  one for living in the US (similar to other developed economies) and second: Living in India (similar to other developing countries).

Regardless where we live, our investment plan or the Freedom Portfolio (like the term?) 🙂 will have to ensure following three things:

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