Nikhil Varma, who leads bancassurance and wealth management at IDFC FIRST Bank, shared useful tips on creating a second source of income for financial independence. He explained important strategies to help people stay financially secure, especially as they prepare for retirement
At the Outlook Money 40After40 Retirement Expo in Mumbai, Nikhil Varma, head of bancassurance and wealth management at IDFC FIRST Bank, delivered an insightful talk on how to build a second income stream to achieve financial independence. In his talk, Varma shared important strategies for securing long-term financial security, particularly as people prepare for retirement.
Varma began by highlighting that our life expectancy increases by four to five years every 10 years. He said: “In the past, particularly in the 1940s and 1950s, life expectancy was much lower. Currently, it is around 73 to 74 years.” Varma pointed out that in the coming decades, it is possible for many individuals to live well into their 80s or even reach 100 years of age.
“We could easily be living until 80, 90, or even 100 years old. How will we ensure a steady income for all those years?” he asked.
Retirement Planning Still A Secondary Priority In India
India's priority today is still marriage. We still give importance to marriage. Second is of course children's security and education. Medical emergencies and improving lifestyle, he said, are other top priorities of people.
While retirement planning is also important, Varma observed that it often takes a backseat to immediate family obligations. “Retirement is still lower the priority," he said.
Impact Of Inflation And Power Of Compounding
Varma also talked about the long-term impact of inflation on personal finances. “If your current monthly expense is Rs 50,000, in 25 years, it could be more than four times that amount due to just a 6 per cent inflation rate,” he said. “That's how your money is really depreciating or getting completely eroded,” he quipped.
“Imagine if your money doubles every day for 31 days—by the end of that time, you'd have more than 100 crores. That's the magic of starting early with investing,” he added.
He also talked about the power of compounding. "Imagine if your money doubles every day for 31 days—by the end of that time, you would have more than 100 crore. That's the magic of starting early with investing," he said.
If one starts saving and investing at 25, contributing Rs 20,000 a month, they could amass a huge corpus over time, he explained. However, further adding, he said, if they start at 45, they will need to put in three times the amount to get a similar result.
How To Beat Inflation And Compound Your Money
To combat the wealth-eroding impact of inflation, Varma advised assessing current expenses and projecting future needs, while also factoring in inflation. He suggested allocating income wisely.
"About 40 per cent should be directed towards immediate needs, 30 per cent should go into generating a steady income—through options like the National Pension System (NPS) or fixed deposits—and the remaining 30 per cent should be invested for long-term growth," he said.
Varma further stressed on the need to start investing early to take full advantage of compounding. He pointed out that smaller, consistent investments over time often yield better results than making larger contributions later in life.
Diversifying your investments across various instruments can help mitigate risks and improve returns, he suggested. He highlighted the importance of spreading investments across asset classes to weather market volatility.
Varma also discussed about allocating some money towards buying insurance plans, while highlighting the rising costs of healthcare and the financial strain medical emergencies can place on families.