I know for most you young readers, the topic of retirement planning will not catch your interest only because a retirement isn’t even on the horizon for you at this point, but out-of-sigh-out-of-mind things don’t stop existing. Perhaps at your current stage in life your priorities might be starting a family and children’s education but trust me; life has a knack of sneaking up on you.
We live in a material world and our lives are consumed by material things. So many things beckon our attention today, moving from iPhones to Androids, new season shoes and clothes, Vitz to Corolla. As we move forward in life, the need to upgrade our standards of living from what it was last year becomes inescapable.
But let’s face it; your salary isn’t able to match the inflation rate, the value of your house is eroding with time and in your late 40s with children growing up, their college funding, marriages & your own standard of living biting a big chunk of your money every month, you’ll notice there is little room for savings.
If you just took a moment to reflect on your own financial position right now, then perhaps it’s time to tie in your expenses with your financial goals now.
Time is a luxury that people between 20-35 can afford while those between 36-50 can catch up with, if they try hard – but where you may have the time to plan for your future, don’t let the daily mundanities of life keep you distracted away from the bigger picture.
The paradox is that in your youth, you have the power of time compounding in your hands. This can be utilized, with just a little effort, to plan an ideal retirement – a time when one can be financially independent and free to follow one’s dreams – take up a hobby, travel the world, spend time with grandchildren or simply move to a hillside cottage in Nathiagali and watch the smog free diamond studded blue velvet sky.
The average inflation rate for Pakistan in 2011 was 12% and who knows what it would be 20-30 years from now. Unfortunately for us, with the rising inflation trend in the country the cost of living would keep going up rather then down; so imagine how much a tube of toothpaste that costs Rs. 200 today would be priced at in 2032!
However having said all of that, all is not lost if we start saving nominal amounts every month from this day onwards. It’s not as hard as it sounds, because even if you start small today over the years your money will grow.
Consider this: If you smoke one less pack of cigarette every day, it can lead to a monthly savings of Rs. 3000. These Rs. 3000 each month in a savings or an investing account (at an assumed rate of 14% ROI) will in 20 years become Rs. 34 lac!
Can’t relate to that?
One less lawn suit per month at Rs. 5000, invested every month at a safe average of 12% ROI in 20 years will have Rs. 1 Crore, 52 Lacs against a total investment of just Rs. 18 Lac.
Now does a sprawling house of your own and a cottage in Nathiagali seem unachievable?