It is so common to find articles saying “stop having coffee at Starbucks” and you will get your retirement plan in place. Clearly shows that some Indian bloggers are being influenced too much by Americans. First of all there are not enough Starbucks in India to suggest such an article, AND most of the Indians I know are very sensible and don’t have simple mundane expensive stuff everyday. And Indians do consider Starbucks expensive. It is not “just 5 $ for a cup” kinda attitude that Americans are supposed to be taking.

Even worse I am now seeing articles saying “kids are expensive, so that will hurt your retirement”. Of course it will. I see people whose retirement will hurt because of the money that they spend on the kids – if not education, it is marriage.

However in the Indian context there are a few things that you can/ should do…

1. Saying this a millionth time – PAY YOURSELF FIRST – the most important goal in anybody’s life is RETIREMENT. You have no choice about this goal. You have no clue when it will come, and how long you will live in retirement. I heard about a 115 year old in North India – luckily he has a pension. If we don’t have a pension, we need to create a “pension box” – from which to withdraw for the rest of our lives…so that HUGE box has to be created, ASAP and kept sacrosanct. So when you hear (Dad Disneyland…) or (Dad Harvard..) sigh and make sure that this box is full before you consider other boxes.
2. It is not the occassional coffee or meal in a fancy restaurant which kills you , but it is the size of the house that kills you. Most of us end up buying too much of a house – and we have no clue why. Most of us don’t even entertain at home. So why do we need a big house? well we don’t know because the Jones whom we are trying to impress has not even come home in 20 years!! As recently as the 1990s it was great for a family of 4 to live in 600 sft in Mumbai. Now we need 2000 sft for 2 people. We never come down on the size of the house even after some death or kids have flown the nest. Do you have more home than you need? That is a big killer.
3. Too many cars: replacing cars very often is another reason why we have less money to invest in our retirement plans. Maybe you need to replace a car in 11 years, but you are doing it in 4 years. This can impact quite a bit. As your car gets bigger and consumes more fuel, and you travel long distances by car it can impact your retirement. A petrol Toyota Corolla being used to travel from Kandivili to Vashi every day (120 km) is not the most sensible thing to do. Shift homes or change jobs!! Kidding of course – but if you must travel long distances make sure that you choose an economical car and economical fuel. This is a big killer too.
4. Spending on Children’s marriage – I recently heard of a guy who spent a big part of his fortune on his daughter’s wedding (having splurged in a house a couple of years ago). Now he has cash flow problems in his business. This genius businessman had sucked the working capital for both his house buying – and his daughter’s wedding. In fact his business is not profitable at all – the cash flow was hiding his lack of profitability! Jokes apart, marriage or children’s education is of course important. However they both rank after YOUR retirement.

MAKE YOUR CHOICE WISELY, NOT EMOTIONALLY.