6-3-1 On Retirement Planning, Maximizing Savings and Daily NAV Fluctuations

6 steps, 3 secrets and 1 insight to achieve financial wellness

Priya and Arjun's Retirement Awakening

Priya and Arjun, both 28, had been married for three years and were expecting their first child. One evening, as they scrolled through social media, they came across a post about retirement planning. Priya turned to Arjun and asked, "Have we even thought about our retirement?"

Arjun shrugged, "We're still young. Isn't it too early to think about that?"

Little did they know this conversation would catalyze their financial transformation. Here's how their journey unfolded:

1. They started by assessing their finances. Shocked by their meager savings, they realized the importance of early planning.

2. Over chai, they discussed their retirement dreams – a cozy home in Goa and yearly travels. This vision became their motivation.

3. They estimated their retirement expenses using online calculators, factoring in inflation. The figure was daunting, but it gave them a clear target.

4. They calculated the retirement corpus needed to fund their dreams. It seemed impossible initially but breaking it down into monthly investments made it achievable.

5. They researched various options – EPF, PPF, NPS, and mutual funds. Each had its pros and cons, and they decided on a balanced mix.

6. They set up standing instructions to transfer money to their chosen investments, treating it like a non-negotiable monthly expense.

Six months later, Priya and Arjun welcomed their daughter, Aadhya. As they looked at her, they felt a sense of pride. Not only were they preparing for her future, but they were also securing their own, ensuring they wouldn't be a burden on her in their golden years.

Their retirement journey had just begun, but they were already steps ahead of where they started. They learned that in retirement planning, the early bird truly gets the worm.

Zara's Savings Challenge

Zara, a 32-year-old IT professional in Bangalore, always felt like her salary had vanished into thin air. Despite earning well, she struggled to save. Her wedding with Rohan was six months away, and she desperately wanted to contribute to their new life together. Determined to change her financial habits, Zara embarked on a savings challenge. Here's how she unlocked the secrets to maximizing her savings:

1. The Magic of Automation:

   Zara set up a standing instruction to transfer 20% of her salary to a separate savings account on salary-day. "Out of sight, out of mind," she told herself. Within months, she was amazed at how her savings grew without her even noticing.

2. The Tax-Saving Treasure Hunt:

   While chatting with a colleague, Zara learned about ELSS (Equity Linked Savings Scheme) mutual funds. Intrigued by the dual benefit of tax savings and potential high returns, she started a SIP in ELSS. It was like hitting two targets with one arrow – saving taxes and investing for the future.

3. The 30-Day Desire Detox:

   Zara adopted a simple rule – for any non-essential purchase, she'd wait 30 days. If she still wanted it after a month, she'd buy it. This simple trick curbed her impulse shopping significantly. "It's not about depriving myself," she realized, "it's about making mindful choices."

Zara was thrilled to see her savings grow as her wedding day approached. She had not only contributed significantly to their new life together but had also developed habits that would serve them well in their financial journey as a couple.

"Who knew saving could be so empowering?" Zara thought, excited about sharing these secrets with Rohan and building their financial future together.

Vikram's NAV Dilemma

Vikram, a 35-year-old father of two, sat staring at his phone, his brow furrowed in confusion. He had started investing in mutual funds six months ago, hoping to save for his children's education. But the constant fluctuations in his fund's Net Asset Value (NAV) were making him anxious.

"Why does it change every single day?" he wondered aloud, catching the attention of his wife, Ananya.

"Why don't you call your college friend, Rahul? Isn't he a financial advisor now?" Ananya suggested.

Rahul explained the NAV mystery to Vikram the next day over a video call.

"Think of your mutual fund like a big basket of fruits," Rahul began. "The NAV is like the total value of all the fruits in the basket, divided by the number of people who own a share of the basket."

Vikram nodded, intrigued.

"Now, imagine the fruits are actually company stocks and bonds. Their prices change every day based on how well the companies are doing, what's happening in the economy, and many other factors," Rahul continued.

"So, if a company in my fund basket has good news..." Vikram started.

"Exactly!" Rahul exclaimed. "The value of that 'fruit' goes up, increasing the overall value of your basket – or the NAV of your fund."

Vikram's eyes lit up with understanding. "And bad news would make it go down?"

"You've got it," Rahul smiled. "But here's the important part, Vikram. For long-term goals like your kids' education, these daily changes aren't as important as the overall growth trend."

As they ended the call, Vikram felt a weight lift off his shoulders. He realized that the daily NAV changes were a sign of a dynamic, transparent system, not something to fear.

That evening, as Vikram watched his children doing their homework, he smiled. His mutual fund investment wasn't just numbers on a screen – it was their future, growing steadily despite the daily ups and downs.

"Money is like a sixth sense – and you can’t make use of the other five without it"

- William Somerset Maugham