How to Retire a Wealthy Person

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How to Retire a Wealthy PersonWould it not be a nice feeling to imagine that even when you are not in job (retired) or not so active (if self employed professional) that you are enjoying same standard of living and comforts of life which you can afford when at the peak of your career.

Well it need not be a wishful thinking anymore. Believe you me you can retire a wealthy man if you decide to take action from this moment onward and work systematically towards your goal. There is not much difference between a few people who retire rich and wealthy on one side and on the other side many people who retire with a limited amount of corpus (mostly savings, retirement bonus etc.).

It hardly needs to be emphasized that good things don’t happen by accident. Therefore, there is a systematic planning and execution of the same to keep one’s life comfortable and without the worry of money or of the need of cutting on spending. Also please refer to Keys to achieve Financial Freedom. 

How to Retire a Wealthy Person

Here are a few simple but effective steps you need to work on:

1. Plan, Plan and Plan

You may wonder that repeat the word plan. Well there is need to plan for:

a)    Plan for savings

b)    Plan for investments and

c)    Plan for a regular income from the investments

d)    Plan to retire rich and wealthy than just be able to manage life

All the above need a target based planning approach.

Secondly, you have to plan keeping in mind:

a)    Longer life span after retirement

With better health and medical facilities and technological innovations, the average life expectancy is increasing remarkably, especially in developing countries. For example, Life expectancy in India has increased dramatically. Currently the average female life expectancy is about 69.6 years and it has risen from 67.3 years. In simpler words, one has to plan to provide for more number of post-retirement years without regular.

It also means having sufficient money in the bank and being rich enough to take care of old-age ailments.

b)    Unexpected Expenses

Life is never a straight line where every event can be predicted. There can be unforeseen major expenses such as Health & Medical Expenses, Children’s Education or other unwanted / unplanned expenses. So over and above the normal budget, you have to provide at least 20% to 30% extra to say the least.

c)    Beat the Volatility

Market dynamics are changing and they are changing fast. For example, it was common to earn 10% to 12% on fixed deposits in banks and in company deposits. Also there was no TDS (Tax deducted at source). Whereas, the maximum return one can think of is around 8% per annum and that too in hand is 10% less after 10%. Similarly, the real estate investment which were until recently considered recession proof have also been proven wrong – both in USA and India.

Thus, the surety of returns on investment (ROI) is very uncertain and it is a cause for worry.

On the other hand, the medical care, health insurance premium have gone beyond the roof.  This is not to mention of specialized medical care or the expenses for surgery.

2. Save Money Regularly

Save Money Early - Retire Wealthy

Saving money is much easier than you think! In simple terms it is spending less than what you earn. Many financial planners and investment advisers recommend a certain percentage which you should save from your salary or professional income every month. But it may not be possible to follow exactly as prescribed, because your income, needs, responsibilities and lifestyle is unique and cannot be generalized.

Some golden rules regarding saving money to retire rich and wealthy:

a) Start Saving Money Early

Ideally you should start saving from your first job itself. Resist the temptation to buy everything you have wanted to buy all these years. Go slow, don’t be impulsive and plan your purchases. The advantages of starting savings early in your career are that you may form a bigger corpus when you retire compared to a late start of savings. Of course, this may mean sacrificing some of the comforts. Let’s say you’re 24 years old and can manage to put away only $100 a month into your savings cum investment fund. Assuming that you manage to earn an average of 8 percent on your savings and investments, you’ll be at about – $463,000 approximately – by age 69. Interestingly, you only have to save and invest only $54,000 over that 45-year period! Also it is quite possible that as the progresses, you shall keep aside bigger amount every month and you may even retire with one million dollars.

If your challenge is that you spend too much money then you may refer to: How to control spending too much money

b) If you start late, make up for lost time

Maybe for some reason or the other, you could not start your savings in 20s or even in 30s, don’t give up. You can keep aside a bigger some every month for your retirement fund to catch-up. Of course, it would mean creating a budgetary plan and following it seriously. In fact, whenever you earn some unexpected income, don’t blow it up. Rather let it go to your retirement account.

3. Earn Extra Money

Let us go back to the simple mathematical equation Income – Spending = Savings. There is a clear message in this. Just cutting down on the expenditure is not the only solution to increasing your savings.

That means you have to look for ways to increase your income and be a rich person. Don’t just keep yourself glued to that job or a single income. You need to maximize your earnings potential and actually earn more money to become rich. Do not delay the process of becoming rich – rather become rich as early as possible in life.

In case you cannot find an opportunity with your existing qualifications then go grab some skills which let you earn some extra cash such as online marketing, website designing, online teaching which you can do from the comfort of your home and after hours too.

4. Find a higher paying career

Suppose you are unhappy with your present job or think that your earning potential is much more then pick up an additional qualification or hone your skill sets by taking an additional training. After equipping yourself with additional degree or skill or qualification, you may go in for a change of job and / or change of career line – where you are paid a better salary. Become rich now and plan to remain rich – always!

However, keep in mind that regardless of which option you choose, don’t go in for something very fancy or expensive which makes you get into debt trap.

5. Invest Wisely

Retire a wealthy person

In case your style is more aggressive and you consider yourself to be more ambitious then here are a few more time tested suggestions to retire with a bigger corpus of funds and a good regular income for life time:

a) Invest in Real Estate

The general rule is that everything can be produced in a factory except the land. With the every passing day, the demand for land increases, whereas the supply is either stagnant or limited. Hence over a period of time, the price per unit of land increases and so does the cost of real estate or the property.

In other words, the price you may pay for the purchase of property will increase many times over after a decade or two or three. The graph will always move upwards. But there could be seasonal variations due to many factors – economic, political, infrastructure related. Also there are bound to be some regular cycles of boom and recession. It is these cycles which you need to understand well. Recognize the recession period when you can buy a home or office or a piece of land cheap.
Logically, you should live in your first property (unless you are in some other town or are living in an accommodation provided by your employers) and subsequent properties should be rented out.

This option should give you regular extra income as well as an appreciation to your investment letting you to retire wealthy.

b) Keep shuffling your investment portfolio

When you are young, the income is usually growing and your risk taking appetite is more. But as you grow older and are nearing the retirement age, neither you have the appetite for risk taking not you are capable of taking risky investments in your investment portfolio.

Furthermore, look at your investment portfolio. As the age increases, you should be increasing the share of fixed income securities or the debt funds rather than making the investments in the equity shares. Also the investment horizon should be less compared to what it was 10 or 15 years ago.

Thus it is important to invest in the right assets – based on your need, stage and requirement of funds – current and projected. Right asset allocation is important as every asset has a different risk-return profile.

c) Diversify your investment portfolio

Apart from asset allocation, it is wise to invest in an array of financial instruments and outside of financial instruments too. Diversification is needed to maximize returns and spread risks. One has to keep in mind that the only way to beat inflation is to have the right mix of investments, which can give good returns over the long term.

d) Stay informed about your investments

Keep a tab on all your investments. Periodically, assess and evaluate how each investment is doing. Keep yourself informed of your political-social-economic-financial indicators which may affect directly or indirectly. In case you find that a particular investment in not performing well then switch to something better before it is too late!

e)  Don’t put all your eggs in one basket

Of course, you are not such a dumb investor. But sometimes, a hectic schedule or a sweet talking investment adviser or procrastination habit may land you in such a situation. So let this act as a reminder and be a smart investor instead! Research thoroughly the available investment options and the financial instruments. Also please refer to Evergreen Rules of Wealth Building

Investments done wisely and timely one hand and monitored and adjusted regularly, will not only provide you with enough retirement corpus but you can retire a rich man!

Some more important tips about retiring a rich and wealthy person

  1. Keep yourself in good health always – physical and mental
  2. All your planning should also provide for the unexpected – geographic, political, social and economical changes and associated risks.
  3. Becoming rich & wealthy and remaining so is not a matter of hobby but it is a necessity. No one will respect you after retirement if you are not rich.

Take care of all these and you are well on your way to retire a wealthy man.

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