Skip to main content

HOW TO RETIRE EARLY

     



      Everybody wants to achieve financial independence as early as possible.  Once we stopped working for others, we can live our lives fully - soul-satisfying
    Suppose one is employed and his lively-hood totally depends on salary and no other income or asset.  How can he plan for early retirement?  I will give you one formula that will empower you to retire early.  Yes, math can change your life.

    Say, S is your yearly savings and E is your yearly expenses.  First, we have to find 'savings to expenses ratio'- STE or S/E.  Suppose your savings is one lakh per year and the expenses is 6 lakhs per year,
STE = 1/6=0.166
If  savings is 20 lakh and expenses are only 10 lakh, then,
S/E =20/10=2.

     We got STE.  Let us assume that you invest your savings in a financial instrument that gives a rate of interest 'r'.  After 't' years, you will get a nest-egg or bulk money which you can invest again to get handsome monthly returns.  (Let us assume that you maintain STE properly.  As the expenses increase with years, savings should also increase).

    How many years you have to save?  What is 't'?
The great formula is :
t = log (25r+STE/STE+Br/t)/Log (1+r)
'B' is the balance amount you already have. I will give you some worked-out examples in table form below.  r is taken as 6%

STE              t- number of years
                        for retirement
0.10                      48
0.25                      33
0.50                      24
0.75                      19
1                           16
2                           9.6
3                           6.9
5                           4.5
10                         2.4

What we understand from the table.
1. If you spend 10 times what you save each year (STE=0.1), you may have to work forever (48 years), if no pension scheme.
2. Even a small improvement in your STE ratio can make a big difference.
3. Let us consider one hypothetical example.  Say, you are a bachelor.  You spend only one lakh per year.  But your income is very high.  Hence you save 10 lakh per year.  Now, your STE is 10.  The above table says you require only 2.4 years for retirement. (is it?).  After 2.4 years you will have more than 25 lakh (INR) as a nest egg.  You can invest it in a bank deposit and get a monthly return of more than 10000INR and above one lakh per year.  Now, you can retire and spend as usual.  But you have to think innovatively to cover up the inflation (rising prices).
    Retiring in two and half years may be far-fetched.  But you can safely retire in 20 to 25 years if you follow our STE rule.
    If you have good bank balance, passive income like rent, immovable and movable assets,  it will further accelerate your retirement.
    Retire early - live your dream.              

Comments

Post a Comment

Popular posts from this blog

THE EARTH, A SUPER ORGANISM

     JOIN MY COURSE: "Become a programmer in a day with python"       A man called 'love lock' (what a name) proposed a theory called Gaia theory, named after Greek Goddess.      It says, "Earth is a self-regulating organism like a human being.  The organic life in it interacts with in-organic matter and maintains atmosphere, temperature and environment".  Hence the earth is still suitable for the life to thrive.      Imagine, in a particular place, there are lot of flowers.  Some flowers are white and some are darkly coloured.  We know, white reflects light and heat while dark absorbs the same.  White flowers can thrive in hot climate.  But dark flowers requires cold climate.  The absorption and reflection balances and the environment reaches average, warm temperature at which both the flowers can co-exist.  This is the essence of "Gaia" theory.      On our earth, the oxygen constitute 20% of the atmosphere.  The oxygen level is always mai
3 comments
Read more

THE PARABOLA

          A jet of water shooting from a hose pipe will follow a parabolic path.  What is the so special about parabola.    Y= x^2 Draw a graph for the above equation.  It will result in a parabola.  This parabola is also called unit parabola.  Any equation involving square will yield a parabola. Example:  Y = 2x^2 +3x+3 (also called quadratic equation)    X= 2 and -2, both  satisfies the equation 4 = X^2.  Parabolic equations always have two solutions.     Any motion taking place freely under gravity follows parabolic path. Examples:   An object dropped from a moving train,   A bomb dropped from flying plane,  A ball kicked upwards.      If a beam of light rays fall on the parabolic shaped mirror, they will be reflected and brought to focus on a point.  This fact is made use of in Dish Antenna, Telescope mirrors, etc.      Inverted parabola shape is used in the construction of buildings and bridges.  Because the shape is able to bear more weight.      A plane
Post a Comment
Read more

DISORDER IS THE "ORDER OF THE DAY"

         Imagine a balloon full of air.  The air molecules are moving randomly inside the balloon.  Let us pierce the balloon with a pin.  The air rushes out.  Why should not the air molecules stay inside the balloon safely and ignore the little hole?  That is not the way the world works.  The molecules always "want to occupy as many states as possible".  Hence the air goes out in the open to occupy more volume.   The things always goes into disorder (entropy) and the disorder increases with time.  The above statement is what we call "second law of thermodynamics".      Consider a cup of coffee on the table. Suppose the heat from entire room flows to your cup of coffee, the coffee will boil and the rest of the room will freeze.  Freezing means bringing things to order and arrangement.  It violates the second law.  Hence it will never happen.  Hence heat must flow from high temperature to low temperature and not the other way.        The air molecules in y
Post a Comment
Read more