Retirement: Means be MONEY-EARNING FREE!

When I say ‘Retire’ just too many people think it means old age. Sorry wrong understanding. Retirement, let us redefine.

Retirement is when you can do what you WANT, not what you MUST. You do not HAVE to earn to pay off the EMI. Or for paying for the kid’s education or marriage. Thus retirement means FINANCIAL FREEDOM.

There are various reasons why a person wants / cherishes being ‘MONEY-EARNING NEED FREE’. They may continue to earn money (Azim Premji, Ratan Tata, prime examples). One person who retired a couple of years before he turned 60 (official retirement age) said “I do not want to say ‘nice meeting you’ and meet people whom I do not like meeting’ so he gave up about Rs. 40 lakhs of cash flow!!

Sure, one way (and a very imp way) is to simplify your life. If you can live on less, you dramatically reduce the MONEY-STRESS. This happens when you start living for yourself instead of living for ‘what he/she will say/think’ kinda fears.

Most stress free people I know lead a simple life – I am not advocating this for everybody, but many of the people I know have done it successfully. But quite often, people are afraid of freedom because with freedom comes risk! Imagine the guts one requires to do things which NORMAL people in society do not do. When you choose freedom, you make choices for yourself. Nobody else makes them for you. And when you make choices for yourself, the responsibility — or the blame — for the outcome rests with you.

Can you imagine going off to Himachal Pradesh in winter, stay as a paying guest, do some mountain climbing and write a book? Even if he / she has an accident everybody around you will say ‘Why the hell did he have to go to H P?’.

To be able to shrug is a very important trait if you want to be RETIRED. Alas. Time to tell the world….

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23 Responses to “Retirement: Means be MONEY-EARNING FREE!”

  1. I’m able to connect to this piece. I decided to ‘retire’ at the age of 33, 6 years ago.

    Initially when people asked me what I do for living, I said ‘nothing’. Being pestered, I told that I’m a personal financial advisor. They asked whether I mean that I’m a LIC agent. There after I stopped saying anything. This is as far as relatives and neighbourhood is concerned.

    I’ve a home office and another small office in Mount Road. Unless I’ve to meet someone, I always work in a home office. Since people see me most of the time at home in a cotton pant and T-Shirt; they have enormous sympathy for my wife:-)

    They don’t ask me anything. On occasions when people did, I gave it back nicely; softly but firmly.

    The interesting thing is there is a change in perception now. Not because of what I do, but since they see me in local media:-)

  2. Assuming you started earning at 23 years, you earned ENOUGH in 10 years to :

    buy a house and an office, pay for your marriage, and generally all other big and small events, kid’s expenses…and RETIRE. Is this assumption correct?

  3. Started earning when I was studying in evening college- at the age of 17.

    So there was 16 years of earning. Used to be very frugal. Before marriage in 2004, used to save 70% of my income. Luck enough to know about markets, stocks and funds in the mid nineties, when I started my carrier with a stock broker.

    In 1997, got the opportunity to get into BPO sector. Rs.6 lakhs annual CTC in the year 2000-01, in Chennai, when the monthly expenses did not exceed 10K was a boon.

    Reorganizing my approach to investing in 2000-01 after stumbling across Buffett, followed by a huge bull market was sheer luck.

    Like wise, me and wife deciding to buy a house in Adyar before marriage and booked it around Rs.2200/- per sq.ft. Now for the 8 year old flat in L.B.Road, the going price is Rs.14,000 per sq.ft which is crazy.

    We never buy anything on loan whether it is car, A/C etc. We borrowed only a part of the home cost as housing loan just to be sure that bankers due diligence is also there. It was repaid within 2 years from our annual variable pay. We have zero debt and do not ever sign surety.

    My wife was working till last year when we were blessed with a son. Now all the three of us are at home.

    It so happened, that I’ve to dip into my passive income only for first 3 years of profession. For the last 3 years, I’m earning decently. Still given our present life style, we can manage life with passive income alone. We’ve term cover, medical cover and fire insurance cover for home.

    Even if I’ve to quit my profession tomorrow, both me and my wife are employable and can earn some decent income even on a part time basis.

    Financial independence is based on both life style and the money we have. If you are not rigid about the numerator, life is manageable.

  4. Office is on rent. I don’t own it.

  5. I don’t know whether many of us have ever heard about Hetty Green, the first richest woman in the world in late 1800’s. Even New York City was dependant on loans from her for its survival few times. None of us may definitely not want to live the life the way she lived but still understand the power of saving and compounding. She was miserly to the core. There is no using in having money and not enjoying life. Being frugal is different.

  6. i was in LB Road, and had a look at property. Saw the new building @ 14k and an old building at 8k. This is very Chennai like – saw something in 7th cross street. ‘Being employable’ is different. Completely being able to live on passive income, adjusting for inflation, is different.

    Estimate your retirement requirements, If I am not wrong on a 20k p.m expense, you will need at least Rs. 75 lakhs + the need to buy white goods, a house (this house will need a replacement) …so about Rs. 2 crores..NOW assuming YOU DO NOT WORK.

    I also saw properties in OMR, Adayar, and was convinced that Hyderabad, Bengluru and Ahmedabad are better value for money than Chennai, at least for an investor

  7. I understand. Last year one flat in our apartment went for the price I mentioned.

    We do have a decent financial corpus.

    When I say we can live on passive income it not only means present expenses can be met but includes regular future savings to maintain life style accounting for inflation and also for other requirements like education etc.

    We can definitely manage with what we have. Probably in next 3 to 4 years, we may be there where we are most comfortable.

    Also what I’m currently earning now doing what I like is sufficient to take care of my domestic and official expenses and as a back up, if required and even to keep ourselves occupied in the way we want, the employability factor can be kept in mind.

    Even now I get lot of opportunities for teaching assignment on an hourly basis which I don’t take it up. Here you get paid Rs.1250/- per hour of teaching and getting 20 hours of teaching a month is not difficult. In fact, in the first 3 years of profession, teaching supported me a lot for regular income and then I gave it up.

    My wife is a post graduate in math and computer science and has 12 years of experience and was a project manager when she quit her job last year.

    If we are not particular about income or salary, we do not see any problem in getting even part time employment.

  8. Muthu,

    Cool! I am really amazed by your achievement. That is what all of us should desire for. Congrats maan, is all I can say.


  9. Nice to read about Muthu and Subra’s write up. Retirement – Yes i agree to what has been written. I do want to build a decent reitrement corpus, especially keeping in mind that my profession IT is a bit risky and you dont get pension.

    I keep things simple. Trust me, i dont have a credit card, No Loan… I dont own a house for myself as i dont think it to be asset. For now i pay rent, this does not mean i will not buy one for myself, yes i will do it but probably with very less loan.

    I have taken invested in land, bank balance slowly building and it will be quite decent when i retire. i plan to retire at 45.

    I do like to talk about personal finance. The basic thing in it is as Subra sir has written, live for your self not for others.
    I come from a small place. Even today , i prefer BMTC bus over Auto.
    i know it is not always possible but i have it in mind not to shell out more.

    Prefer to eat in darshini over decorated high priced hotels.
    I ensure every hike i get major portion of it goes towards saving/investment. Yes passive income is something that is one area i need to work on. I mean something other than bank interest.

    i keep small targerts. Like i pay 12 k as rent. i wanted it to be out of some extra earning. today 12k does not go out pay cheque. invested with a target to get 12 every month …

    Next step and Next target underway :)

  10. Completely retire without NEED to work is very very difficult to achieve unless you have inherited wealth. Doing it while being in service is WELL IMPOSSIBLE. I mean impossible in your 30s.

    Also Muthu has no clue what his son will do. If you think an Ivy League school is out, that is fine, but schooling today costs at least about 60k a month + hobbies. So education is about Rs. 10 million for one kid at the lower end and about Rs. 25 million at the higher end.

    If you want to estimate a little accurately – just multiply your annual expenses by the no. of years you expect to live. So if your annual expenses are Rs. 4 lakhs and you expect to live for 30 years, it is Rs. 1.2 crores. And you need to provide for other unfulfilled dreams/goals like kids education, marriage, etc.

  11. Agree. But the wealth also compounds. Even assuming only passive income, a significant part of it would be saved and re-invested. So that should take care of the future needs.

    For any one, individual or corporations, resources are always finite. So beyond a point there is no use in planning. Doing what is best to my knowledge at this point of time is what some thing I can do.

    Though I’ve no scope of any inheritance; my wife probably may inherit some thing significant in future. But this is not accounted in our planning at all. So over all we should be fine. There is no feverishness to accumulate anything. In a country like India, we are blessed to have this luxury and life style. I do not have any wealth target. Both me and my wife can reduce our cost of living, if need be. To cite Buffett, one’s cost of living is not equal to his standard of living.

    Being born to us, at least till he turns 18, Vedanth has to share our life style only, which is definitely not bad- having a house, car, 2 maids, driver, all white goods like A/C, LCD TV…if this is not enough, I’m sorry my son. He can decide for himself once he turns 18.

  12. My clients children who study in PSBB, Vidya Mandir, P.S. Higher Secondary (where my father studied in late 1940s), Shishya , Shankara, Hindu Senior etc. pay annually only between 30K to 60K. From what I understand for all extra curricular activities it roughly works out to 5K per month. None of my clients spend more than 1L per child per annum.

    All the above are good quality schools.

    What you are talking holds good for international schools like Abacus; which we are not even considering for our son.

    We would prefer any one of the middle class school above.

  13. When I did my MBA-Finance in IFMR, I paid a total fee of 15K. Even now it is roughly 2 lakhs. IFMR is considered as one of the best institutes for finance in the country.

    In education, learning is more important than teaching. No need to chase any brand names. More over, unlike me, my wife is good in academics and she is a good teacher as well. So what we look in an educational institution is a middle class one, with drug free environment etc. This is not as expensive as you are suggesting. We would do our best to create a learning environment at home.

  14. My situation is very similar to wealthucreate. But i dont plan to “retire”. I feel without “activity” i will symbolically start “dying”. Meeting/talking to people daily, crossing paths of others, all this feels good. Being “someone” in mainstream. And yes, the monthly cashflow feels good :-) , even if i most likely will end up with lot of money by investing, thanks to you. And there is “lifestyle creep” to worry about. You cant argue with women to reduce their spending ;-). There is a big industry over there which constantly nudges you to spend, you dont stand a chance. You have written about these angles before.
    Creating “activity” all by yourself is difficult and income even more difficult, unless you have discipline, a self starter or have high enough motivation.
    Yeah you are very right, other people will only blame even if one meets with a accident. Bad human nature.

  15. It was great to read both Subra and Muthu….Both have diffrent styles and estimate and i know Mutthus respect for SUBRA !Both are prolific writers.I enjoy reading both of them .Muthu was Introduced by Subramoney replies to me …but let me admit ,Muthu too is a phenomenal original writer .We do look for your writeups as well Muthu…..Mutthu and Subra JUGALBANDI was Like Zakir Hussain and His Father ….both great Tabala Players ! I am sure regualr readers must have enjoyed ,Learned a lot out of this interaction…keep it up !!!

  16. Was trying to recollect Zakir Hussains father name…mother helped with fathers name—–” Allarkha “…Respected Allarkha and Zakir Hussains Jugalbandi. Same House ,Diffrent style ,great command and wonderful tabla…..Subra and Muthus Interaction here is like that only.Both are from Finance background ,Diffrent styles of writing and thinking and have same thing in Mind…Genuine care for their readers …. .Great Jugalbandi today in one word…WAH Ustad Wah !!!

  17. My story is no different however I picked up from near bankruptcy to bankfull. If any financial planner calculated my networth 6 years ago, he would have come up with a figure of 50 lacs as debt on housing, zero cash balance, 2 credit cards maxed out and was living literally on hand to mouth. Not forget I had a car and great job. Pure financial mismanagement led to my downfall. Any rumours of bonus/hike in coming months, I used to spend beforehand as if it had arrived.

    I consiously made an effort to learn personal financial management and even today I read a lot of blogs/newspapers/articles and so on. I consider myself lucky to live in this age of internet and we could read the wealth of information. The blogs are dynamic unlike text books and are connected well with the public.

    6 Years rolled on and is this continuous reading benefitted me?. The answer is resounding yes. Last year, I declared a passive annual income of 10 lacs in my IT returns and is expected to be up by 40% this year. I am 40 now and debt free. The key part is I can afford a retirement today if I want to. But I like my job, work and employer and don’t have much pressure. In future this could change either for better or worse. In case of worse, I don’t have to be worried because of back-up that I have build.

  18. Dear Milind- In no way I can be compared with Mr.Subra in terms of originality of thinking, writing and presentation. As much as all of you, as far as possible, I make it a point to read this blog regularly. When I post any comments which may not be sync with what Mr.Subra says, it is to share my view point and not to prove any kind of (non existent) superiority.

    I always read him even if he is curt or very candid because I benefit from him and not otherwise.

    I’m not saying this out of any humility. It is statement of fact.

    Basically I started writing once or twice a month to keep in touch with my clients. Mr.Subra writes for any one who wants to read him and in my opinion, has much lesser bias than me.

  19. Hey Muthu….There is no question of comparison.We all love ,learned a lot and get constant enlightment from our subra.I just wanted to appreciate your reading as it is a class….SUBRA is SUBRA and when i said JUgalbandi ,it only means i enjoy reading both of you …Like the Tabla fans who like Tabla of both Allarkha and zakir…do we compare who is great there ..we do not and we do not compare both of you as well .Never .Writing and putting point of view in a convincing manner which makes a change in behaviour of reader and he takes right financial decision for him ….writing in such a manner is an ART and i feel both SUBRA and you have it in you…so …CHEERS….Three salute to our subra ,as always and a rose flower of admiration to you as well Muthu

  20. Subra,

    Going back to your comment, are you suggesting one should have networth of annual expenses multiplied by remaining years of life? E.g. If my annual expenses are Rs. 5 lacs and expect to live for another 40 years, I should have networth of Rs. 2 crores. Here I am not including primary residence in it. Also, the primary residence should be paid up.

    Also, regarding your other comment that it is impossible to be financially free in 30s. I agree with you. However, I know several people on their early 40s in corporate jobs whose networth is 15-20 times their annual salary. In my mind they have achieved that level. For such people, whether they work or not, their networth will keep growing.

    I looked at portfolio of one such person. Bulk of his networth growth was coming from stock/MF investments. His annual salary savings were less than 3% of his networth.

    What’s your view of such people? Does it make sense for them to work for money?

  21. bharat shah on May 7th, 2012 at 1:36 pm

    ”i was in LB Road, and had a look at property. Saw the new building @ 14k and an old building at 8k.”
    sir, i don’t comment on the topic. but like to know your views between such a huge difference of value of new property and old building on the same road, when the construction cost ongoing rate in tier ii indian city is not more than 1500 sq.ft.(for metros , it could be maximum double.).

  22. Fully agree with you Mr. Subra ! If there is a money churning cow, one can become financial independent to meet their expenses out of their investment income. Hence it is important to start building a retirement pot at the earliest to become financial independent at the earliest. Once a retirement pot has been built, a healthy post retirement income can be achieved


  23. I enjoyed and learned from comments of subra and muthu!

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