Here's how to retire rich with Rs 40 a day

"Take away the terms asset allocation, long term and compounding from a financial advisor's vocabulary and he is pretty much tongue-tied," remarks a friend.

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.

YIELD (%PA)

PPF

8

Sensex

18

Equity

21

Retirement Chart

Rs 40

Rs 80

Rs 120

Money saved per year

Rs 14,600

Rs 29,200

Rs 43,800

Money earned if invested over the next 30 years

Sensex

Rs 11,547,841

Rs 23,095,6810

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!

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. Think of the holidays you could have afforded with that kind of moolah!

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Gastronome's Chart

Rs 750

Rs 1,500

Rs 2,000

Money saved 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!

Gastronome's Chart

Rs 3,550

Rs 5,000

Rs 10,000

Money saved 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 of Coke or chocolate.

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 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! They 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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