Take a guy in 1970. Let's say this guy is very well educated, works in the best career of the times, is an ideal saver, is not extravagant and has a disciplined financial plan. Let's say this guy keeps a bulk of his money in safe fixed deposits or bonds. This guy, upon retirement circa 2000, would not have enough savings to last him even 10 years at today's expense levels. And as for ability to buy a home, the very notion is laughable! Inflation and the cost of living has exploded so much in the last decade that I fear for my future. What if this hypothetical guy of the 1970s is me, 40 years out? Will I live in penury in my sunset years?
What is the solution to this conundrum? I can think of 2 ways -
1) Hock yourself to the max in debt and buy a house as soon as you can. Keep slaving and paying back this debt over 20-30 years. If real estate today seems expensive, it will seem very cheap tomorrow.
2) Allocate substantially large amounts of savings to equity. This is risky in the short term, but very safe in the long term. In fact, this is the only protection against inflation - on 2 counts. One is that purchasing power is maintained and secondly, there is lower taxation on capital gains.
Net net, the solution is to harness the power of compounding, live frugally today and ever after! This, to me, is a depressing thought. Just when you think life will get easier, you realize that it is uphill for some more distance!
2 comments:
The uphill never ends...it just gets steeper :)
over various phases of life, i have across the feeling of "ab to life ban gayi"...say after an iit entrance or after a nice crack at a job u wish...but it doesnt take much time before u realize something missing or that theres something more that you could do...
so buddy it helps sometimes to just forget the slope uphill and savour the breeze...
the best way is to quit your job now take that plunge..which you have postponed till now. build your business....
looks scary but for a talented guy like you..it will work out find.
if not a billion $ company..i am sure u can manage 100 crores atleast. but if course first 2-5 years u will have to live ultra frugally and maybe face a lot of heart breaks and lack of support from family n friends.
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