When you think of accumulating a large amount of money we trouble ourselves into believing that it takes a lot of money to create money. Well it is not so. It is simpler. In fact much simpler than that.

But those are the exact three words that can help you retire with Rs 40 a day. Let me show you exactly how. Say you can set aside Rs 40 every day for your retirement. Where do you get Rs 40 a day? Why not cut down on those cigarettes? Then, let’s see what could happen.

Let’s also make some assumptions (do allow for the fact that all may not be valid). Let’s also suppose that these are valid for the next 30 years.
Instrument    Yield (%pa)      PPF    8   Sensex    18      Equity     21

Retirement Chart
Money saved per day    Rs 40       Rs 80    Rs120
Money saved per year  14,600   29,200    43,800
Money earned if invested over the next 30 years
Sensex                     Rs 11,547,841       Rs 23,095,681        Rs 34,643,522
Equity                     Rs 21,099,200      Rs 42,198,399        Rs 63,297,599
PPF                           Rs 16,53,935         Rs 33,07,870            Rs 49,61,805

Nice chunk of change, eh?! Doesn’t that make your retirement look so comfortable?

Of course, if you spend Rs 120 per day on cigarettes, you probably won’t live for 30 years! That still leaves your dependant spouse needing a retirement corpus!

Ah, now you are saying you don’t smoke? Maybe you’re a frequent restaurant-hopper? That would easily mean Rs 2,000 per week. Keep at it for 30 years and you would have said goodbye to Rs 15 crore.

Gastronome’s chart
Money spent per day                                   Rs 750                         Rs 1,500                         Rs 2,000
Money spent per year                                  Rs 39,000              Rs 78,000                    Rs 104,000
Money earned if invested over the next 30 years
Sensex                                                             Rs 30,846,972      Rs 61,693,943           Rs 82,258,591
Equity                                                              Rs 56,360,876      Rs 112,721,752        Rs 150,295,669
PPF                                                                       Rs 44,18,045           Rs 88,36,090            Rs 11,781,454
Don’t fit into the smoker or the gastronome’s category? But you have one weakness — you love shopping. Say, you spend about Rs 10,000 per month on retail therapy.
Hmm. Over 30 years, a Rs 10,000 investment in an equity fund could fetch you Rs 17 crore. I won’t even go into what you can do with that kind of money!
Money spent per day    Rs 3,500     Rs 5,000     Rs 10,000
Money spent per year    Rs 42,000    Rs 60,000    Rs 120,000
Money earned if invested over the next 30 years
Sensex              Rs 33,219,816    Rs 47,456,879    Rs 94,913,759
Equity              Rs 60,696,328    Rs 86,709,040    Rs 173,418,080
PPF                  Rs 47,57,895         Rs 67,96,993        Rs 13,593,985


Why do you think the otherwise smart, educated people fail to understand this? Allow me to tell you what I think.

Your life is a function of your habits, not common sense. It’s tough to change your habits. Consider this. Most smokers know the damage that 54,750 cigarettes can do to their health.

But that ‘one’ cigarette never seems to matter.

Ditto for that ‘just one’ cold drink or chocolate.

If you feel very deprived reading this – and think your retirement corpus can come only from sacrifices let me add there are some other things that you can do. Switching of all electrical appliances when not in use, not racing the car while waiting, using CFL lights instead of tube lights, giving your monitor a break, using a lesser horse power car,  – this is not ‘depriving’ you of anything. Just make those small changes in life and your Rs. 40 would be there available to be invested. Now I hope you are not feeling deprived!

Why do people not do this? It used to stun me till I heard “It takes a complicated mind to think of simple things”. Here is my explanation for the current state of affairs:

Most people don’t care about small numbers and wait for that big amount to come by for them to save. Funny thing is, if I tell you saving (and investing) money is very simple and needs very simple methods to make large amounts of money, most people, including you would laugh at me. But it’s just so easy. Start small. Start simple. Save big! Then invest it. You do not need complicated tools such as day trading, brokerage accounts, futures and options, etc.
When you tell them that they can make a lot of money by just being disciplined they will just not believe it!

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  1. I really wonder if there would be anybody who would be splurging 10,000 on retail therapy and not saving even 10,000. Usually investment always exceeds discretionary spending.
    Penny pinching won’t take you anywhere. So don’t worry about electricity bill from point of view of monetary cost. Do consider it for environment damage.

  2. Sanjay – Yes, there are shopoholics who spend lot more on unnecessary things than their savings. One of my friends buys a new mobile or touchpad whenever he sees a new model.
    Subra – You may need to include inflation effect also when you mention large amount AFTER 30 years. The 2 crore that one gets by investing Rs 40 per day in Equity is equivalent to today’s Rs 30 lakh. People should not think that it is sufficient (They will quote “Subra-sir has told that Rs 40 is enough” !!)

  3. wonderful to see subra take such an optimistic stand (sensex@18%, equity@21% for the next 20 years).

  4. Greetings from Max Life Insurance!

    Without wise planning,you won’t be able to enjoy your retired life completely. Start investing early and be #RetirementReady.

    Max Life Insurance

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