Start Small, Start Early

This article revolves around how saving early can help you unleash the power of compounding. The sooner you start, the higher corpus you can save by your targeted retirement year.

Hi,

As we have entered the Gujarati new year, I thought this is a good time to do some “Gujju talk” with you. Yes, we are talking about saving/investing here. I am sharing some of my key learnings that may help you move forward.

1> No matter what age you are in, or the monitory stage you are at. Start saving/investing. The earlier you start, the higher you save (Higher = exponentially high in the future). Start Small, start early. If you are in your 20’s, that’s even better.

2> Number one rule of saving is spending less than what you earn. Follow 70-20-10 ratio. So if you are earning 100rs, Spend 70rs in expenses, 10rs in leisure and 20rs in saving.

3> Think long-term. There is no bigger power than “the power of compounding” in the world. Let me give you an example.

Say you are saving 5K a month, that is 60K a year. You are investing this money in a growing market with a 15% ERR per annum. What do you think this money will be in the next 50 years? Here are the numbers for you.

Now imagine you are doing this every year (The same amount) for the next 50 years! Here is a number for you. Don’t doubt the numbers, they are perfect. You will end up saving ~ 50 CR. Imagine You and your wife both do this thing?

Please note that we have assumed that we will keep on investing 60K flat every year. Practically our earnings will increase and so will be the saving amount as you move forward with your career. So you can try incremental compounding and you will see the magic.

4> Don’t be greedy. Just because you feel the crypto or share market is booming, don’t go and invest all the savings there. Diversify your investments and stay at low risk. The number one rule of investment is never to lose money!

5> FD is a loss-making investment. Stay away. 5% return in the 6.5% inflation economy is the loss of 1.5% annually.

6> Stay consistent. Choose the amount that you can keep on investing with discipline.

Do share what amount you get when you pick the same numbers from the example above and try incremental compounding. If you also have a suggestion, do share it with me :)

Saving is the new cool!

Cheers!