As I transition from my present service, I’ve realized this is not a true retirement—it’s simply a shift in focus. In reality, most of us don’t retire; we change jobs, with real retirement happening only when our wealth can comfortably support us for life. Reflecting on past financial planning mistakes, now I am taking deliberate steps to secure my future and aim to retire in my 50s by building a balanced investment strategy.
Differentiating Needs, Wants, and Desires
One crucial step to financial freedom is knowing how to prioritize needs, wants, and desires:
- Needs: Basic requirements like housing, food, and healthcare. They come first.
- Wants: These are things that make life nicer and improve comfort and enjoyment, like buying new gadgets or dining out. While important, they can be postponed.
- Desires: Emotional luxuries, such as expensive vacations or luxury cars. Pursuing too many desires can throw off a sound financial plan.
Understanding Active and Passive Income
Active income is the money you earn through your work, such as a salary, wages, or business profits. It requires your time and effort to generate income. On the other hand, passive income is money earned with little ongoing effort, often generated from investments like rental properties, dividends from stocks, or interest from savings. Balancing both types of income is crucial for achieving financial freedom, as it allows you to build wealth while still enjoying the benefits of your active labour.
Spending During Active Income
During our active income period, it’s important to be cautious in understanding needs, wants, and desires, and to spend accordingly. Always prioritize making investments before spending on non-essentials. Even if it’s as low as ₹5,000 or even just ₹100 a day, setting aside money for investments in gold, shares, bonds, or mutual funds can significantly enhance your financial future. This disciplined approach ensures that you are building a strong financial foundation while still enjoying life.
What is True Retirement?
True retirement means having enough money to meet your needs, wants, and desires comfortably.
To achieve financial freedom, focus on earning active income from your early twenties to your forties. This is the money you make from working, like a salary or business profits. During these years, invest your active income wisely to build a financial corpus. By reaching your forties, your investments should generate enough passive income to cover all your expenses.
In true retirement, you won’t need to rely on active income anymore to support your life. Instead, your wealth creates enough income to allow you to enjoy life without constantly worrying about money. When you can comfortably meet all your needs, wants, and desires without depending on work, that’s what true retirement is all about.
Achieve True Retirement through Early Investment and Smart Insurance
One of my personal financial mistakes was not starting investments early. I believed that only high-income earners could build a significant corpus, but I’ve learned otherwise. Even small, consistent investments made at a young age can generate substantial wealth over time. For instance, someone earning a modest salary could invest ₹5,000 a month into a mutual fund or shares starting at age 25, which, with compound interest, could grow into a sizable retirement fund by their 40s. My focus now will be on long-term, secure investments, like gold, mutual funds, and shares, rather than chasing high-risk ventures or quick profits.
If I had adopted this mindset earlier, I could have potentially retired in my 40s with the freedom to live off my wealth. However, it’s never too late to start. I’m now embarking on a balanced investment journey to reach my financial goals by age 50.
But investments alone aren’t enough. Until we accumulate sufficient wealth to sustain ourselves comfortably, it’s vital to be insured. Insurance serves as a financial safety net until your investments mature enough to provide passive income for life. Getting adequate life and health insurance ensures that even in case of unforeseen circumstances, our loved ones are protected.
The Risks of Quick-Fix Investments
I’ve also learned to be cautious about scams and schemes that promise quick, high profits. These “lollipops” often look enticing but can lead to financial ruin. While it’s tempting to jump on get-rich-quick opportunities, they are often traps. Real wealth builds steadily over time, and the safest way to grow your money is through long-term, diversified investments.
Conclusion: Shifting My Job, Not Retiring
As I move forward, I see this not as retirement but as a change in direction. Real retirement will happen when my investments generate sufficient wealth to cover my needs, wants, and even desires luxuriously. This goal is achievable for anyone, even those with modest incomes, if they start early, invest wisely, and ensure they’re covered by insurance until their wealth can support them. Let my experience serve as a reminder—it’s never too late to correct course and take charge of your financial future.
