After 77 years of Independence, we now have, surprisingly, the maximum number of freedom fighters — for a different freedom though, financial independence. That’s all the Indian man discusses today. He learnt the concept of compound interest from his favourite Instagram influencer (instead of his eight standard maths textbook) and is convinced that a 15% return every year is guaranteed by the Constitution. So, he calculates a retirement corpus, from which he can religiously withdraw every month a sum that covers his expenses, while accounting for emergencies (such as buying two Coldplay tickets from the black market).
It’s a noble pursuit. Barely anyone likes a 9-5 job. Those who like their jobs, invariably work longer than 9-5, but that’s a minority. Most people want to retire early, spend more time with family, pursue their hobbies, and watch Facebook videos of dirty carpets being washed on their phones, often late at night.
r. That aside, how do you calculate the FIRE corpus you need?
A common method is applying the 4% rule. Calculate your annual expenses and divide them by 4% or multiply them by 25 to get the number you need in the bank to retire today. For example, if your annual expense is ₹12 lakh, you will need ₹3 crore to retire. Unless you are taking part in the IPL auction or you were an early employee of a food delivery startup, that figure is a bit difficult to achieve.
I have a question. Why do you want to retire early?
It may sound harsh, but most bright people have no idea what they will do after retiring. They have chased grades/high salary figures all their lives and were told as students that any time wasted outside studies would add another two digits to their All India Rank. You might say we have evolved. Isn’t travelling a hobby? Fair enough, Just the taxi ride from the Mopa airport in Goa to your hotel will require a kidney donation. In a cashflow-starved post-retirement state, it won’t seem pretty.
Even if you have some cost-efficient hobbies, you will still spend most of your day refreshing your portfolio. That’s the only hobby retired people have: checking their stock holdings every 30 minutes.
Moreover, when you are asset-rich yet cash-flow poor, you mentally live like a pauper. “This iPhone X is good only, just the screen is cracked a bit, why do I need to upgrade?” Non-essential purchases are put off for the future. You could be an ascetic, detached from the vices of hedonism, but why deny it to your family?
Unless there is a huge liquidity event, systemic investment plans (SIPs) won’t make you financially independent. Truth be told, for a lot of men, the closest you can be to financial freedom is not via your mutual funds but your wife’s promotion at her workplace.
This mad rush to have a retirement corpus comes at a cost. Some people have to save up to 50% of their salary to meet corpus goals, giving up the needs and wants of their family today for a purported carefree tomorrow.
Don’t make your daily life an intense preparation for an imaginary final exam many years later and miss out on the present, whether it is finances or fitness.
Often, the Internet scares you, because its algorithm loves outliers. Influencers are slaves of this algorithm. So, they actively indulge in pushing all outlier cases to you.
Being aware is absolutely great. But being scared all the time is not. We can never be certain about our future. This human need to predict and control our future is age-old. Men invented divine powers, astrology, etc, as insurance against this uncertainty. So that we could sleep at night. There was the thumb-rule of good deeds as insurance against a sorry future. A similar mythology is financial independence. That if you take all the pains today, your future will be secure is a myth. Saving up for a rainy day is great, but to stop working because you have accumulated enough, basis your prediction of the future, is what I have an issue with.
The only symptom that our future will be bright, seems to be, that we must be in pain in the present. This is intrinsic to our culture. Our mythology is replete with instances of people doing a tapasya, a penance for years, to get their wish granted. It also reminds me of when, in my tenth standard year, my parents told me, just work hard for two more years, and you will sit pretty for the next 50 years. Those two years never ended. There is no sitting pretty. There is no retirement.
Abhishek Asthana is a tech and media entrepreneur, and tweets as @gabbbarsingh.The views expressed are personal
