The concept of financial independence and retiring early (FIRE) is catching up fast among Indians, particularly millennials, the chief wage earners in India, who form 47% [1] share in the working-age population.

However, with the age of pre-defined pension benefit all but over, embracing FIRE requires thoughtful planning. If you are planning to do so, here are four simple steps which can help you in your journey.

  1. Start saving and investing early
  2. An early beginning is of utmost importance as it gives you more time to compound your money. An early retirement means a break on regular source of income. Hence, it’s important to save and invest right from the time you start earning.

    Suppose you are 25 and wish to retire by 50 and aim to build a corpus of Rs. 1 crore by investing systematically in a mutual fund offering an annualised return of 12%, you need to do a SIP of Rs. 5,332 per month (see figure 1). On the other hand, if you delay your investment by even 5 years, the amount jumps up to Rs. 10,108 (see figure 2).

  3. Invest in inflation-beating asset classes
  4. This is another simple and effective way to achieve your goal. Investing in inflation-beating assets like equities can help you build a sizeable retirement nest to take care of your post-retirement needs. If you aren’t comfortable investing solely into equities, you can opt for hybrid products which invest in equities and debt.

    Note that your investment portfolio requires a healthy dose of equities in case you wish to hang up your boots before. Make sure to research well to make an informed choice.

  5. Avoid discretionary expenses
  6. Avoiding discretionary or non-essential expenses can help you maximise your savings. You may not realise but small changes in your lifestyle such as avoiding eating out often, availing public transportation, limiting credit card swipes, etc., go a long way in making significant savings in the long run.

    You can do so by making a list of needs and wants. Limiting your wants can help you curb binge spending and ensure fiscal discipline.

  7. Keep liabilities low
  8. This is another simple but effective way that can lead to your goal. Liabilities in the form of loans require payment of EMIs on a regular basis. For big-ticket loans such as home loan or loan against property (LAP), the payment tenure can stretch up to 5-10 years or even more.

    While there’s nothing wrong fundamentally in availing loans, it’s important to ensure that you keep them to the minimum to make sure they don’t strain your finances. Also, it’s vital to avail a loan amount which you can repay easily.

To conclude

Financial discipline, coupled with prudent investments, from the beginning can help you achieve your goal with utmost ease. You can seek expert opinion, if needed, to make sure you are on the right track.

Click here to visit our Retirement Planning Calculator


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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