How To Achieve 8.7 Crores In 15 Years?

Summary

In this insightful discussion, a financial expert provides advice to individuals navigating their careers, investments, and financial planning. The focus is on achieving financial security through strategic investments, including mutual funds, bonds, and insurance. Key recommendations include the importance of SIPs over lump sum investments, building emergency funds, and securing adequate health insurance for family members. The expert also encourages embracing a balanced lifestyle once financial independence is achieved, prioritizing health, relationships, and personal growth. With practical steps and thoughtful reflections, the session helps individuals plan for long-term wealth and life satisfaction.

Takeaways

• 😀 Focus on growing your income: The fastest way to build wealth is by increasing your income, which often outpaces any other form of investment.
• 😀 Emergency funds are essential: It's recommended to have 6 months' worth of expenses saved up in secure, low-risk assets like FDs or small finance bank deposits.
• 😀 Invest regularly through SIPs: Avoid lump sum investments, as timing the market is difficult for most people. SIPs provide a disciplined way to invest over time.
• 😀 Insurance coverage is crucial: Ensure both life and health insurance for yourself and your family. A term insurance cover of at least ₹3 CR is advised.
• 😀 Start planning for your future early: Consistently saving and investing can lead to significant wealth accumulation over time (e.g., ₹8.7 CR in 15 years with ₹1 lakh/month investment).
• 😀 Manage risk with diversified investments: For risk-averse individuals, government-backed PSU bonds can provide security while yielding higher returns than fixed deposits.
• 😀 Don't neglect your mental and physical health: Beyond financial success, focus on your health and relationships to ensure a fulfilling life.
• 😀 Behavioral finance matters: People tend to spend money sitting in their bank account rather than investing it. Automating your investments can help avoid this.
• 😀 Financial independence doesn’t always mean stopping work: Once your financial goals are achieved, you may consider a career shift or taking a break to explore personal interests.
• 😀 Plan for long-term goals, not just retirement: Ensure that all aspects of your future—family support, health, and personal growth—are adequately addressed with your wealth.

Q & A

How did the individual achieve a 5x increase in income in just 2 years?

The individual took a referral from someone they met at a party and joined a company as an associate. They quickly identified problems in the company, worked hard, and increased their income, eventually doubling it. This success highlights that increasing one's income can significantly boost wealth, more so than relying solely on investments.

What is the recommended strategy for saving and investing if you’re earning a significant salary but have little to no investments?

Start by building an emergency fund that covers 6 months of living expenses. Then, invest systematically through SIPs (Systematic Investment Plans) in mutual funds, instead of lump-sum investments. This helps to avoid market timing risks and encourages consistent savings. It’s also important to consider life insurance, health insurance, and term insurance to secure your financial future.

Why is investing through SIPs preferred over lump-sum investments?

SIPs are preferred because they reduce the risk of market timing, which is difficult for most retail investors. Consistent, smaller investments over time allow you to take advantage of market fluctuations and dollar-cost averaging. Lump-sum investments often carry a higher risk of loss if invested at the wrong market cycle.

What is an emergency fund and why is it important?

An emergency fund is a set amount of money that is saved for unexpected events, such as medical emergencies or sudden job loss. It’s recommended to have an emergency fund covering at least 6 months of your monthly expenses, and it should be invested in low-risk instruments like liquid funds or fixed deposits for easy access.

How much health insurance coverage should someone around 30 years old get for themselves and their parents?

A health insurance coverage of at least 15-20 lakh INR is recommended for individuals around 30 years old, especially if their parents are over 55 years old. The healthcare needs of older parents can become more expensive, and adequate coverage will ensure financial protection in case of medical emergencies.

Why should someone get term insurance, and how much coverage is recommended?

Term insurance is crucial to financially protect your family in case of your sudden demise. A minimum coverage of 3 crore INR is recommended, especially if you have dependents. The premiums for term insurance are relatively low, and the coverage ensures your family is financially secure even in your absence.

What are PSU bonds, and why are they considered a good investment option?

PSU bonds are bonds issued by Public Sector Undertakings, which are government-backed companies. They are considered a secure investment because they have low credit risk. The bonds typically offer returns in the range of 8-9.5% annually, which is higher than fixed deposits, and the interest is paid out quarterly, which can then be invested in SIPs for growth.

What is the minimum investment amount required for purchasing PSU bonds?

The minimum investment amount for PSU bonds typically ranges from ₹1 lakh to ₹10 lakh, depending on the bond you are investing in. They are relatively accessible to retail investors with a certain amount of capital.

What should an individual do if they have already achieved their FIRE (Financial Independence, Retire Early) number?

Once you have achieved your FIRE number, it's time to shift focus from earning more money to enjoying life. Consider taking a career break or exploring new interests. Use the time to focus on health, relationships, personal development, or starting a new venture. The key is to enjoy the freedom that financial independence provides.

How can someone ensure that their financial goals are met if they’ve already reached their FIRE number?

To ensure that your financial goals are met, continue contributing to retirement plans, EPF, and PPF. These long-term savings, coupled with ongoing employer contributions, will help secure your financial future. You can also adjust your investment strategy based on life priorities, shifting from aggressive growth to more secure options.