The Biggest reason Why you will not be able to save enough for your retirement ?

2014 has started, and I wish you all a Happy New Year!. We are into the 4th week of our Investors Bootcamp and I recently brought up a very important point there, which was, “What is the that one thing which stops you from saving for retirement?”.

When I dove into this topic and heard the responses from some of our Plan F participants (senior participants), I came across a simple reason, which can really destroy someone’s hopes for a comfortable retired life.

worried for retirement india
I was late to realise that I was very late

When I ask someone, “Have you starting saving some money for your retirement ?”, I hear a “NO” and the justification for it is – “I still have a lot of time, so why hurry? I am just 26 right now”.

I say – “Fair Enough, makes sense”

And then I put this question to the same person 5 years later, and the answer is – “I still have lots of time, so why hurry? I am just 31 years old”.

I still say – “Makes sense, at least for now”.

But you know what? There comes a time, where you suddenly realize that “Oh my god, its a bit late now”, because all the time you were thinking – “I will do it later” and never realize that its getting late. Remember, “Someday” is code for “Never”. When you have 30-35 years in hand for a goal like retirement, that goal is so distant that you feel it is idiotic to plan for it right away.

You feel, “let the right time come”, but you do not know what the right time is going to be. Is it when only 20 years are left? Or is it when 10 years are left? Or when only 5 years are left?

This is exactly the same situation as when you have to provide tax investment proofs to your employer. When you have 20 days in hand, you feel there is a lot of time. Then 10 days pass and you feel “It’s just few hours of work, I will do it very soon”.

This procrastination continues, and you keep convincing yourself that whatever time is left is more than ENOUGH. Then suddenly, when there is “just enough time left”, something else comes up unexpectedly – some important work surfaces, or you have to go somewhere, or you catch fever and you eventually miss the deadline. Now you are thinking, “I should have started early; I lost time, thinking there is enough time ahead”.

You wait for the “Right Time”

Unsurprisingly, you repeat this behavior when planning for your long-term goals, especially ones like retirement. We put off thinking about it because the retirement event is so distant in the future that it sounds comical to even plan for it now. So, we wait for the “right time”, but never declare that “right time” to ourselves – it’s just a concept in our head that never gets real.

Ask any 25, 30, 35 or 40 year old about their retirement, and they will say – “I still have enough time ahead”, let me think about other important things right now”. Then they turn 45 years old, things get serious and they “start” considering doing something about saving enough money. This is the first time, they realize – “I think its high time now, I should make a start towards my retirement planning”. Again 2-4 years pass, they are now touching 50 years, and then the PANIC mode kicks in, because they can see very clearly that they will run out of money in their retirement.

It suddenly becomes clear to them that time has flown and that the “right moment” to start saving money for their retirement was years ago. They have taken care of most goals in their life, but they have forgotten to protect their own retired living. All the time when they could have really taken risks and could have grown their wealth has passed. Now they just want their money to be safe and this is obviously a situation where you can only get sub-optimal returns.

At this point they have no choice but to live out a life of regret. Even if they do not wish to depend on their kids, they still have to.

30-30 rule to retirement

In my 2nd book – “How to be your own financial planner in 10 steps”, there is a full chapter on retirement. While writing that chapter, I was stuck at one place where I had to show the reader, the flaws in their default thinking about retirement planning and explain to them that they should start planning while they were young. After a lot of thinking, I came up with a rule called “30-30 rule of Retirement Planning”.

The rule states that an average person works for 30 years and then, after retirement, lives for another 30 years (just a benchmark number). Imagine you are 30 years old. You will work for next 30 years (till you are 60) and then you will live for another 30 years (till the age of 90). For the first 30 years, you will earn and consume the money. For the next 30 years you will not earn, but will still consume money.

Right now, I imagine you are earning, but it is still tough to run your life – there is no surplus money left, you are still not able to achieve so many things. If this is the situation right now when you are “making money”, what about those 30 years, when you will not earn a penny?

You earn for next 60 yrs, not just 30 yrs

I know all this sounds terrifying, but you have to realize that, at any cost, you have to earn for the next 60 years of your life (30 years of working life + 30 years of retirement).

So now lets look at your 60 years in two segments of 30 years each – the first 30 years is PHASE A (earning and consuming) and next 30 years is PHASE B (not earning, but still consuming).

Now Map each year of this Phase A with Phase B and what you earn in this year X (2014), some part of this money has to be saved for the respective X + 30 year (2014 + 30 = 2044). What you earn in year 2015 has to feed you in 2015 and 2045 (+30 years). Only if you save each year, will you be able to fund the companion future year, which will be exactly after 30 years.

Look at things like these.

30-30 rule of retirement

(Image comes from – “How to be your own Financial Planner in 10 steps” book)

So it’s very clear that if you lose the next 10 years, then the pressure of retirement saving will build up on the next 20 years of your life. If you lose 20 years of your working life and do not save anything for retirement, then the last 10 years have to shoulder that burden and you will have a punishing time ahead.

Benjamin Franklin once said – “You may delay, but time will not”. You are probably heading for disaster if you are living in this myth that you will save a lot later when the time comes. It never happens.

So sow some seeds right now for your retirement. Buy a piece of land, start planning for a second home which you will use to get rental income, start transferring at least 10% of your income each month solely for the goal of retirement, build an additional skill so that you can earn more in the future, marry a working spouse and don’t blow your money each weekend on that movie which you knew was not worth it! Start taking small steps

You have to ensure that by the time you turn 40, you should have at least a small retirement corpus – this should be your first milestone.

Are you all set to save enough for your retirement corpus? Are you sure you will not get trapped in this “right time” thing ?

Envelope budgeting system – A simple way to control your expenses

Some months back, when we were working with a Mumbai based client of ours, we noticed that one of his expenses of “Eating Out” was extremely huge. Their explanation was they were never able to control the number of times they went out. So we thought how about limiting the amount spent somehow ?

Envelope budgeting system

Today I am going to share Let me share with you all a simple and effective budgeting system which has been in use for centuries – worldwide! . It’s called the “Envelope Budgeting system”.

The common problem across families is that they keep spending money on various things from a single card or pool of money. The basic idea here, with this system is to label your different expenses, categorize them if you will,  and keep an envelope with money dedicated to that category, in it.

When you need to spend on a category, voilà, you take the CASH for its respective envelope and spend. Let me give an example. Suppose your expenses are as below.


RENT Rs 10,000
GROCERY Rs 6,000
VEG+MILK Rs 3,000
BILLS Rs 3,000
MISC Rs 1,000
Total Rs 25,000


envelope budgeting system

5 Simple points regarding Envelope Budgeting System

1. Once it’s gone, it’s gone

When you take some money out of an envelope, and spend it, it’s gone! You will be left with some remaining amount for that particular month. Now all you have to spend that month is the leftover. So spend it wisely.

If you still want only spend more than what the envelope contains, you just break the system. Better stop following it then. It’s not for you :)

2. Don’t transfer between envelopes

Just because you have some money left in some category, does not mean you can spend it on another category. This system is all about controlling your expenses in individual categories. Whatever is left in some envelope should go to your investments. It’s like a bonus leftover.

3. If you fail to follow, invest 10x the amount as penalty

It’s human to fall off the wagon. At times you will deviate from the plan and spend more money other than you allocated. In this case, you should penalize yourself for breaking the rule, by investing 10x the extra amount into some investments. For example, you have Rs 3,000 allocated to “Eating Out”  you spend Rs 5,000 in a month. Then you are using an extra Rs 2,000. You should penalize yourself by investing Rs 20,000 (10 times) in some thing to offset this crime. This will be a good spin on just desserts!.

4. Emergency expenses, but settle later

Ideally your expenses should be planned and the money should come from the envelope, but you will have to spend sometimes on your credit/debit card (read various credit card cashback offers), which is fine at times, but make sure you settle things back when you are back at home.

5. Guilt-free shopping

The thing I like about the envelope budgeting system is the “guilt free spending.” Once you have allocated the money to different categories, then you can spend up to the limit, without thinking much. That’s the best part.

TIP : Libin informed me in comments section that there is an Android app called Easy Envelope Budget Aid (EEBA) for this envelope system ! ..

Real life examples of its Effectiveness

Harpreet shares

I feel so proud to say that I follow this system.

Yes, many times I feel bound but I know what I have got by following this system. Be it getting rid of a loan (worth Rs.2 lacs), renovation of my home (worth Rs.2.5 lacs), be it car (Alto), money for Jewelry (worth Rs.1.5 lakhs), 40 k cash as gift to near & dear ones in a span of 6 years. Right now I am saving for my daughter’s school admission.

I agree that I never spent for grocery, maid salary & rent being in a joint family but still I wonder that I was able to achieve these targets when my present salary is just around 26k and when I started following this system 5 years back, it was much less.

I started this as I had no choice, but believe me I am now addicted to this system.

It’s not for everyone

A lot of people use this envelope system and are pretty successful in following it for months and years. However many people start this, but fail somewhere in middle and are not able to continue. Its all about how serious you are about controlling your expenses and being disciplined. Do you think this Envelope system will work in your case ?

How a newcomer should start his financial life – 4 steps

Today we will talk about how a newcomer or a fresh investor start his investment journey. We will see 4 steps which a newcomer can follow to start his invstments. I see a lot of new people on the blog asking things like

Hey Manish

I am totally new to this world of investing, I just joined job 3 months back and it seems like I have no idea how to start. I can see my friends who have been in job already, but they have messed up so much in their financial life. I do not want to be that way and want to do best. Can you tell me where should I invest?

In today’s world of over communication and an environment where things look complex it’s no wonder, a new person is confused. While there cant be a one strategy that fits everyone, we can still propose a generic 4 step rule, which can help most of the fresh candidates and these 4 steps becomes more important these days because most of the people mess up hugely in the first 5 yrs of their financial life and they have no idea how important starting years are in financial life. So today, here’s a look at the 4 steps, I feel will be applicable for most of the people.

How a New investor can invest

Step 1. Enjoy for the first year – Spend !

Almost everyone who starts a new job has this feeling for a long time  – “Once I start earning, I will buy things for my parents! I will buy a bike! I will roam places! . I will buy that awesomely cool mobile which I could not afford when I was a student! . I will do this! . I will do that! I will go here! I will go there!” . Everyone goes through that feeling and when I started my first job, even I had those same kind of excitement.

You know what? This is totally acceptable and a 100% correct!

The moment we enter the world, we become the part of the rat race (remember 3 Idiots?)  We get good grades, we get into best school, study hard to get into college, and then finally land at job, assuming its the end of the race. At this point, if someone tells you – “Start Investments Early!”, what would be your reaction ? I would say that as a statement, its a great thought, but to a young guy (or girl), who is yet to get comfortable with the environment, it’s a foolish statement, distant from reality and kinda crushing the emotional side for their ‘desire to spend’ .

The only thing which makes sense at this point is to let all those wishes come true! Let the guy spend!. Let him or her spend on those things which he or she ever wanted. Let them splurge! . Buy things which they dreamt about for years . Let them travel! . Buy gadgets! . Shop for clothes and phones and whatever they wish to! .

I’d say, go for it!. Let it happen for the full 1 year in the start. After a year, the person should have done most of what he or she wanted, in that time, he or she should be more settled in the first job. He/she would have got a taste of “earning money” . Now! This is the good time to talk to him about finances.

Step 2. Start a Recurring Deposit and Start learning

The next step is to get started, to get into the process… The biggest issue which I feel with newcomers is that they do not have this habit of “regular investing” . Lots of people, when they start their financial life, want amazing returns immediately! . They hear about SIP from media, they hear about stock markets and real estate markets and suddenly the only thing that plays in their mind is “high returns”.

First, they need to work on their “habit of investing.” They should first understand, what it means to save regularly, they should first get a feel of how money grows over time. A person is mostly raw  in the beginning and needs some serious understanding of basic concepts and how everything works!  The need of the hour is “habit” and “education”. For anyone new to investing and who has just started his career, should read my first book “Jagoinvestor” where I talk about few fundamental principles of personal finance. From most of the people who have read it, they told me that it was an eyeopenor for them. If you want to get a understanding of what it looks like download this sample 1st chapter of my book and read it . It also has tons of reviews from other people who have read it already.

So coming to the point, what can this new investor do at this step once he is ready to take the plunge ?

I can think about 3 things here.

a) First, open a Recurring Deposit in your bank for a big amount which you can save. It can be 10,000 , 20,000 or even 50,000 depends on how much are you saving! . This will make sure that a part of your salary is now getting invested in a Recurring Deposit on a regular basis for next few months atleast. You can see some money regularly invested and get a feel of how money grows over some months. The money will also be safe.

b) This is also a serious time to start exploring and learning about the other kind of investment options. You can learn from all kind of websites, blogs and books written on personal finance and more. Ask questions if you have any doubts on our Q&A platform (we already have 4,000 questions and 20,000 answers on it). This phase will act like the preparation for rest of your life. The clearer the concepts and fundamentals to you, better it is. At this point, you should concentrate on learning things. Your money is getting accumulated anyway in the recurring deposit and is safe. So nothing to worry about there.

c) Apart from the above points, you can also start the background documentation & processes which will be required in the future. You can apply for your PAN Card incase you dont have, start a demat account, get your KYC done for mutual funds investing. If some document is missing, apply for it, & open more bank accounts if you think you would need them. It’s like, you’re getting all your weapons ready for the future.

For those newcomers who like to learn through Video’s – we have a 37 min course called Basic Concepts of Personal Finance on our Jagoinvestor Welath Club.

Step 3. Complete Most Important and Primary Tasks First

Now, you are ready & educated, have a good understanding of everything, gotten a taste of investing money and are ready for the next step. Now in any financial journey, there are few steps which you should take right at the beginning. These are like the “first things first” tasks. I see people on this blog, who have not completed these important early tasks even after 5-10 years of their first job. There are few things like

These are mostly one time tasks. Once you complete them, They are complete ! . You might have to pay a regular premium for few products, but the main task of taking actions in those areas are complete, which most of the people struggle with. Understand that, if you delay these most important tasks, they will just get pushed for “future” and it will take ages to complete those when you actually need them.

Remember, these one time activities complete a major part of your financial life. After this, you mainly have to just review these each year from time to time, and mostly concentrate on your “investments part”.  After you have completed these tasks, your primary objective is wealth creation. A lot of people I see are still lost in these primary, first level tasks even after years and years , just because they didnt do it in start and now when its time for concentrating on their wealth creation, they are still stuck in these primary level tasks.

By this time, you will be more comfortable investing in new avenues like Equity mutual funds, Real estate, ETFs, Stocks, and other investments. To start with and to get a taste of mutual fund investing, start SIPs in a a balanced fund like HDFC Prudence or HDFC Balanced or if you are too risk averse, you can also start SIP in Montly income plans (MIP’s) or some debt mutual fund.

4. Design your financial life and explore more

In the end, after  you’ve completed the 3 steps mentioned above, you can see, how easy it would be to extend your actions. I’d say the above 3 steps will take anywhere around 2-3 years depending on what kind of person you are and your circumstances. In those 2-3 years, you must have accomplished these things

  • You must have done a good amount of spending and fulfilled most of your wishes
  • You must be educated well about financial matters and have good clarity about your future.
  • You must have completed the primary level of basic tasks which any financial life needs
  • You must have saved a respectable amount through recurring deposits and other investments.

At this moment, you can plan the next 5-10 years of your financial life. Clearly define and prioritize your financial goals in life, and start investing aggressively for your wealth creation. Even if you feel like applying for a loan to buy home or car, you should be able to handle it in a much better way after the first 3 steps. Because you know about his future premiums outgo, & your aspirations more clearly. At this step, if you feel you need some kind of external help to get a better clarity, you can also hire a financial planner for yourself and work with him to get more clarity. A small investment for your financial life can prove to be worth.

You can see that with these 4 steps, the actions one will take will be more defined and realistic, rather than the random events, that push you & which gives an unwanted shape to your financial life.


You can see that these 4 steps are just about giving more meaning and a better shape to any financial life. It focuses on slowing down and then slowly moving forward in your financial life. Any new person is very excited about his life ahead and there are great chances to mess up. These 4 steps will help a person to move forward in his financial life. Good luck!