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Posts Tagged ‘Investments’

Secret of Achievement

The title of this post should be “Top 5 Reasons to be Financially Free at 35” instead. It is okay to continue working if you love your job or the business that you’re in. The problem is that most of us don’t even know whether we have an option of retiring early. That’s what the corporate world does to us; it can kill the Creative, Imaginative and Adventurous side of us if we are in it for too long.

But what’s the big deal if we retire at 35 or 40? What’s in it for us?..one may ask.

I have prepared top 5 reasons to retire early in current landscape: in terms of economy, our lifestyle, relationships etc. They say we only live once. With that in mind, let’s see if we have anything to gain by dropping out all of a sudden…of course with careful planning behind the scenes 🙂 .

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I got the inspiration to write this post after reading a book titled “Cashing in on the American Dream: How to Retire at 35”. This book was written by Paul Terhorst about 25 years back. The main idea is to save enough from a high paying job in the US and then move overseas (cheaper location) to live off your investments. And you do this while you’re young, living life to the fullest and doing what you really love.

 

Cashing in on the American Dream

Paul used to work for a major accounting firm when he retired at 35. Once quit, he never looked back. He still travels and blogs; you can get the latest updates and some tips from his blog at this link.

I’m surprised that even 30 years back, people were thinking of an Extreme Early Retirement. I guess the “Desire to Break Free” has been in our blood since time immemorial 🙂 .

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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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Passive Income means that you don’t have to actively work for it. In other words, these are not your earnings from primary job but from investments such as Real Estate, Bonds, Stock dividends etc. It is a regular income that doesn’t require much effort.

I first heard about Passive income in the book called Rich Dad, Poor Dad (highly recommended for starters). I’m not a Robert Kiyosaki fan by any means. Perhaps I was in the beginning as his books gave me enough motivation to map out a definite plan for financial freedom. We all need different level of teachers, mentors at various stages in our lives.

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