Fire is considered to be one the greatest invention for
mankind. Humans discovered fire in palaeolithic
age which has given human life a new dimension – ability to cook , clear
forest, make stone tools to keep predator animals away. In some sense it put humans on top of the
food chain. No wonder all the major old religions treat fire as one of the gods
or as important part of their rituals.
Like humans of Palaeolithic age , whose main concern was
survival and getting food for the day , what are priorities for modern age man?
As yuval noval Harari argues, today’s human have to engage and manage lot of things compared to stone age man whose
only priority was food and survival. Over the centuries humans have evolved.
Does FIRE has the same significance today ?
FIRE – Financial Independent Retire Early
One of the things I hear from some of my friends is “I have
to work for money” is it really so ? do we have to work only for money ? This
made me think and finally I am writing this article on how to get out of this
circle. For a salaried employee , I cannot control my pay, my bonus , my
appraisal ( all 3 are dependent on my boss and how organization is performing)
but one thing that I can control is my
savings. So we analytics folks say one of the most important variable is how much do you save each month .
Before we get into
FIRE , lets define what FIRE means for us , atleast for me FIRE is about doing
things which I love without thinking about monetary
aspects or benefits also ensuring at the same time take life style and future needs of my
family are taken care of.
I would define Early retirement is a stage where don’t work
“only for Money” but no where it
means you stop working.
Sounds exciting , if the answer is yes , lets get into how to achieve it.
From our corporate world , all of us understand the
important of planning , in FIRE also there are broadly three steps
1)
What is your destination -
2)
By when you want to achieve it
3)
How to achieve it – Most important part
What and when is
your destination - Destination clearly means what is the amount
of money which will ensure your current and future lifestyle does not change
from the current one.
For ex – Say for mr X current expense is 50K a month , kids schools expenses is 3 lakh a year,
holiday expenses and others would be additional 3 lakhs . so current expense is
12 lakh but looking at future he would
want minimum 25 lakh a year to be in a safe condition.
Now comes how –
Lets follow the thumb rule – average rate of return in India
is 10% so anything over and above that is a great thing (refer to table below)
but let’s a take conservative no of 8% (which is return of debt option) then for 25 lakh I need 2.5 cr – 3 cr so that I can manage my
expenses and also create a kitty for unforeseen circumstances.
Calculation are all fine but I am not sure if I actually
need retirement –
Recently there was a news that some folks from TCS /
Cognizant were asked to go. At these high salaries they will need 2-3 years to
start something which gives the same money so that is the time FIRE helps also some other reasons I can think are
1)
Because you can !
2)
Give you freedom, courage – You can decide how
much shit to take or not take
3)
Your money works for you – Napolean hill in “Grow
Rich” talks about the same thing
Btwn lets be fair, not everyone hates their job
, I don’t . people love to go to office.
Main Aim is peace of mind that if
anything unforeseen happen at least they will be financially secured.
This is first article in these series, thanks to my friend Ravi for asking me to write it. will try and add more to this
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