The Biggest Risk in Life You Might Be Ignoring

Hello everyone! Welcome to Finnings Capital’s first blog post. I’m Mohit Kapoor, Managing Partner at Finnings Capital, and today, we’re kicking off a series of blogs aimed at simplifying your investment journey. Through these posts, we’ll walk you through small calculations and real-life examples to help guide your path to financial freedom.

Before starting, I would like to extend my heartfelt thanks to the Momyhood blog for providing a platform to share insights on financial freedom. This category is dedicated to empowering individuals, especially parents, with knowledge and strategies to achieve financial freedom and secure a prosperous future for their families.

So, let’s talk about one of the most important yet often overlooked risks in life.

What’s the Biggest Risk in Life? It’s Not What You Think!

When you think of life’s biggest risk, many people would immediately point to death. After all, financial instability due to death is a major concern. But, I’m going to challenge that notion today. The biggest risk is not death– it’s living a long life.

Now, that may sound confusing at first. How could living longer be a risk? Let me explain.

Why Death Is a Big Risk

Death is undoubtedly a major risk. If the primary earning member of a household passes away, it becomes difficult for the family to manage its finances. But thanks to modern financial planning, we have tools like term insurance that help manage this risk. By choosing a policy that matches your income and expenses, you can ensure that your family’s basic needs are covered in case of an unfortunate event. This is a good way to safeguard your family against financial loss due to death.

Why Long Life Is an Even Bigger Risk

While death can be mitigated, living a long life carries a different kind of risk — inflation.

Most of you are probably familiar with the concept of the time value of money from school. Simply put, the value of money decreases over time due to inflation. For instance, what ₹50,000 can buy today may not be enough to cover the same expenses 20 years from now. The constant rise in prices over time is what makes living longer a financial challenge.

Let’s break it down further.

Understanding Inflation and Its Impact

I’m 35 years old now, and let’s assume I plan to retire around the age of 60. If my current household expenses are ₹1,00,000 per month, it’s safe to say that by the time I’m 60, this expense will have increased significantly due to inflation. India’s average inflation rate is around 6% annually. So, by the time I retire, that ₹1,00,000 will have ballooned to around ₹4,30,000 per month just to maintain the same standard of living!

Did you know that? If yes, you’re already on the right track. If not, this is a crucial realization.

Are Your Investments Beating Inflation?

Knowing this, have you started making investments that can beat inflation? If your goal is to maintain the same quality of life during retirement, your investments need to deliver returns of 12-14%. By doing so, you can accumulate a retirement corpus of around ₹5-6 crores by the time you’re 55 or 60 years old. Without this, you risk outliving your savings and facing financial difficulties in your later years.

Why You Need At Least ₹5-6 Crores

Some of you might be thinking, “I won’t need ₹1 lakh a month when I retire! My kids will be married, and my major expenses will be over.” Even if that’s true, you’ll still need a substantial amount for your basic living expenses. Even if you reduce your monthly expenses to ₹50,000, considering inflation, you’ll still need around ₹3,50,000 per month to maintain your standard of living when you’re 60. So, even in a best-case scenario, a retirement corpus of ₹4-5 crores is essential.

If you have any queries related to your financial planning or investment strategies, don’t hesitate to reach out to me. You can connect with me on Instagram or send an email to finningscapital@gmail.com, and I’ll be more than happy to assist you on your journey to financial freedom.

How to Achieve This Goal

The good news? You can build this corpus with disciplined investments. If you’re around 35 years old, like me, a disciplined Systematic Investment Plan (SIP) can work wonders. For example, if you start an SIP with ₹15,000-20,000 per month and increase this amount by 10% annually, you can easily accumulate ₹5-6 crores over the next 25 years.

Let’s break it down:

• Start with ₹15,000 per month in your SIP.
• Increase this amount by 10% every year.
• Continue this until you retire.

By following this simple yet disciplined approach, you can ensure a financially secure retirement.

Start Planning Today

If you haven’t already started, it’s time to take action. Identify 5-6 investment schemes where you can regularly invest, and make sure these schemes give you returns that beat inflation. Remember, it’s not about how much you earn but how well you manage your investments to grow over time.

For any more details or personalized financial advice, feel free to reach out to us at Finnings Capital. We’re here to help you plan your investment journey and secure your financial future.

Stay tuned for more helpful tips and insights in our upcoming blogs!

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