Sunday, October 20, 2024
HomeMutual FundIncreasing investments each year is essential for financial freedom

Increasing investments each year is essential for financial freedom


I have tracked the amount invested for my goals in the same Excel sheet for the last 14 years (2011 to 2024).  This sheet only tracks the amount invested and not its current market value (for this, I use a Google Sheets Tracker). These are some lessons from the journey.

Between 2010-11, my retirement planning cash flow projection was in place, and it was scary. The monthly investment was less than the calculator* said (with unrealistic fixed asset allocation!). More importantly, I had to set the annual investment increase to 10%.

* I started building retirement planning calculators in 2010, culminating in the freefincal robo advisory tool.

That is, if I invest Rs. 10,000 each month in one next, the next year it would be 10% more and so on. This was the only way to reduce the gap between the initial investment required and the initial investment made.

The catch was future investments quickly increased.  At 10% a year, the investment would double every seven years or increase by 50% every 4-5 years. If our income does not grow as fast or our expenses grow faster, we cannot increase our investments by 10% yearly.

This uncertainty is common, but we can only invest what we can. What matters is, starting early, investing as much as possible, increasing the investment as much as possible and yearly review.

If I look back at the investments made in the initial years, it seems trivially small. That is the power of non-linear growth. We shall only consider the invested amount and how it has increased year to year. The status of their market value is reported here: Portfolio Audit 2023: The annual review of my goal-based investments.

This is the average rate of increase in monthly investments for retirement. I lost the 2016 data due to a hard drive crash (for the last few years, I have worked entirely on OneDrive). I started investing in mutual funds in a small way in June 2008, but only in 2010/11 did I start proper goal-based investing.

Year Average Rate of increase in monthly  investments
2023 15%
2022 4%
2021 24%
2020 27%
2019 25%
2018 28%
2017 35%
2015 -1%
2014 22%
2013 25%
2012 19%

I recommend maintaining a 10% increase in investments yearly or 70-100% of your monthly expenses. This will get tougher with time, but we must try. Investing 2-3 times monthly expenses would be necessary for early financial independence aspirants.

In my case, it is a sheer providence that I have been able to achieve an investing annualised growth of 18% consistently (rate of increase in investments each year). My investment annualised return, that is, the rate of increase in market value, is about 17% (from June 2008 to Mar 2024) – less than my investing CAGR 🙂 And it fluctuates a lot more! See: My retirement equity MF portfolio return is 2.75% after 12 years! I tracked my investments more often than I have tracked their value. So I see this as a just reward for the effort.

Tracking investments each month for each goal has the same benefits as tracking our exercise regimen with an app or watch. It gives you a small control over the controllable and lowers your fear of the future.

Many youngsters assume paying ourselves first would be depriving ourselves of the pleasures of life. This is not true. The sole purpose of money in our lives is to get spent for our benefit. Investing is a way to ensure we can continue to spend happily in the future. So, we need to balance spending today and developing an ability to spend the same way tomorrow. How we find this balance is personal and up to the individual.

This is the template I used to track investments: Download the free monthly financial tracker. Users of the freefincal mutual fund and stock portfolio tracker can upload this sheet onto their existing Google Sheets file.

Observations and lessons

  1. You are aware of your future goals. You appreciate how much you need to invest for them, and whether or not you can invest that much, you have a target. Knowing where you stand is the first step to appreciate how far you need to travel.
  2. The amount we invest (and the time it is invested) is more important than the return we get.
  3. We cannot plan for our long-term goals without assuming investment will increase. A 10% year-on-year investment is a bit optimistic but just about manageable.
  4. Even that rate of increase would look daunting initially, but we will have to put our heads down and keep investing (with a plan + yearly reviews)
  5. There were months I could not invest, and years I could not increase the investment. Keeping track of these and making up for them later is essential.
  6. If there is one reason for my financial independent status, it is disciplined tracking and systematic increase in investments without worrying about returns.
  7. Naturally, not all of us have the same income levels and cash outflow (expenses + debt), and not all of us can invest at the same pace. Some of us may become financially independent decades later or not at all. Despite all this, try, we must fill our cups as much as we can without cribbing about opportunities others got clueless about their circumstances.
  8. We can only deal with the cards we are dealt with. Hard work and toil without expectation are known to change the deck.
    • I have seen this baffling argument: If my cup is never full, it might as well be empty. Surely, this deserves an award!
  9. Each time our salary increases, we must ensure expenses do not increase at the same pace or at least at a faster speed. That is just a fancy way of saying live with your means.
  10. A mountaineer must plan but cannot look up to see “how much more” every few minutes. Big journeys begin with small steps. The problem is, in a 1000-step journey, we expect results five steps later.
  11. If you are a young earner reading this, track your invested amount more frequently than their market value, keep expenses at bay, and increase investments by at least 5% annually. Wait a decade to see the difference!

Do share this article with your friends using the buttons below.


🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!


Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!


New Tool! => Track your mutual funds and stock investments with this Google Sheet!


We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.


Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp

Podcast: Let’s Get RICH With PATTU! Every single Indian CAN grow their wealth! 

Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let’s Get Rich with Pattu Podcast

You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.

Lets Get RICH With PATTU podcast on YouTube
Let’s Get RICH With PATTU podcast on YouTube.

🔥Now Watch Let’s Get Rich With Pattu தமிழில் (in Tamil)! 🔥


  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit ‘reply’ to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!


About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.


Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.


Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   


Our new book for kids: “Chinchu Gets a Superpower!” is now available!

Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of “Chinchu Gets a superpower”.

Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!

Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!

Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun.

Buy the book: Chinchu gets a superpower for your child!


How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!


Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!


We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.


About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)


Connect with us on social media


Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.


Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.


Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)


 



RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -
Google search engine

Most Popular

Recent Comments