The 2016 Personal Finance Audit: Returns do not matter!

Published: December 25, 2016 at 10:32 am

Last Updated on September 27, 2023 at 3:52 pm

Each December, I conduct a personal financial audit. I take stock of my financial goals and other aspects of personal finance relevant to me. For the last three years, I have been sharing the gist of such audits at freefincal.

The idea behind doing is this to put some context into the several goal based investing posts that I do, not to brag or show. I think the DIY investing community should share generic information on strategies for mutual benefit. And I have always benefited from reader feedback.

This may help interested readers to conduct one themselves:  how to conduct a personal financial audit 

Past audits are here: 2015 audit; 2014 audit; 2013 audit.


Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

I have three long-term goals: Retirement; My son’s education and marriage. Few years ago, audits were something I looked forward to. Since I created an automated mutual fund tracker and integrated goal planning into it, I can audit the goals each time I use it. So the charm has lost a bit 🙂

Also, I have gradually moved away from a focus on returns (next equity return for each goal). Although I use it to review my mutual fund portfolio, I am not too worried about it anymore.

Hence the title of the post: returns do not matter. We can analyse our needs by just looking at the value of the corpus. At the end of that day, that is all that matters, not the XIRR (rate of return). And it way easier to interpret than the XIRR.

Retirement

Asset allocation: ~ 60% Equity mutual funds and ~ 35-37% NPS (mandatory) and rest in PPF.

Net Equity XIRR: About 13% ish. Did not update after this post: The rise and fall of my retirement corpus

Normal retirement is at 65. So more than two decades away.

Achieved financial independence notionally and theoretically.

Notionally, because the corpus is locked in NPS. This is the reason I keep saying: Stay away from Corporate NPS, if You Wish to Retire ASAP!

Theoretically, because my asset allocation is still in accumulation mode. At 60% equity, a severe market crash will vaporise the independence. Naturally, I can protect it but since I like my job, see no need to quit.

Retirement corpus audits require only one number: how long can I be financially independent if I retire today. This has nothing to do with returns obtained so far.

Of course, it depends on post-retirement inflation and return to be obtained relative to that. But that is an estimate and anything between 6-8% should be okay.

Since I am in accumulation mode, the above number will oscillate anywhere betweem 25-30 years. So up to age 65-70. Perhaps that is not enough. Perhaps one should plan until age 90!

Yes, if I want to quit all forms of work. For me, the key aspect is that I do not have to invest anymore for retirement. Just need to manage the accumulated corpus reasonably well.  Of course, this assumes that I am not straddled by the perils of unexpected recurring expenses. Will have to play that by the ear.

I never started investing with the aim of early retirement. Just thought I should have a comfortable retirement corpus if I wanted to buy a house (long story!). Soon that desire went away and one fine morning when I checked the numbers, they looked okay. So coffee-can like!

You can download the free E-book: How to retire early in India if you wish to plan for your financial independence. It has links to all relevant calculators.

Son’s Education

He is now about 7. So I will need the money in about 11 years. This year I rebalanced his portfolio and shifted from equity to debt. It is still currently at 60% equity and I will start reducing this in 2017.

In this case again, the returns do not matter. What is the corpus worth today? If my son were to enter college, what kind of education can I afford without a  loan?

The answer is: I am comfortable.

Of course the goal here is to be comfortable enough to ask this question: What if our children never had to work! Still not there yet.

Son’s Marriage

I could no longer invest for this goal (and it is important: Should I invest for my child’s marriage?) when my mom fell sick. So I have left it at 100% equity and not looked at it much. Hope I dont need it earlier that I think I do!

The Real Challenge

The real challenge is increasing the investment by about 10% each year. Due to compounding this now looks quite big! Until I receive my pay commission hike, I cannot do this.

Life and Health Insurance

Term plan from LIC (~ 7Y) old; Mediclaim from United.

Tax Planning

The mandatory NPS takes care of this.

Expenses

In my humble opinion, tracking expenses is a waste of time. Read more: How tracking investments instead of expenses changed my life!

I hope 2017 is another dull year personally and financially. No news is good news! And the best way to handle investment volatility is to not look!

Wish you all a merry Christmas! Do consider buying my new book with Subra(money.com). Leave a review at Amazon if you can spare a few minutes.

You Can Be Rich Too

you-can-be-rich-too

My new book with PV Subramanyam, published by CNBC TV 18

The book comes with 9 online calculator modules to create your own financial plan.

It also has detailed selection guides for equity and debt mutual funds.
Amazon Weekend discount: 33% off for ₹267 (Amazon Prime members) and ₹307 for others
Kindle (₹ 244.30)

Infibeam ₹ 280 with Coupon BS10

Googe Play Books App Store (₹ 244.30)

Read a Sample Chapter and Buy Now!

What Readers Say

  • Simple and powerful This book empowers the reader with the concepts in easy to understand & simple form. Those who have been reading blogs of both authors would know that they are not only good with finance domain but also have a knack of simplifying the methods of investing for their readers. This book by them is a gem of financial knowledge for people who are starting to invest or want to get better at it. The presentation and the thought process with calculators is extremely powerful.The book should be read & calculators used simultaneously to understand the concepts well. The calculators when used with real inputs will show you where you are & where you need to reach for each of your goals. Don’t ignore these numbers.Learnings from Chapters 7 to 11 will help you avoid going off path & saving your money from financially hazardous products. With discipline & right approach suggested here you wouldn’t need a financial advisor to build wealth.
  • This is perfect book on personal finance. Very nicely explained about taxation about debt mutual fund. Topics like early investing and asset allocation are very well explained. – Mahesh Deshmukh
  • Highly Recommended For anyone who wishes to take control of his/her finance this book is a must read. Very simply put, even an amateur in finance will be able to understand and implement. The author genuinely attempts to inculcate the habit of investing among the people who have the ability to invest but refrain from doing it, either due to lack of time , interest or understanding!. The message from the book is ” Investment done without setting a goal/ objective is like leaving for a trip without knowing the destination, not everytime the end result will be promising. Hence, it’s important to invest in a planned & disciplined manner.” A read is highly recommended ????
  • A must book for everyone who wants to take control of personal finance. Nice explanation of how a debt mutual fund works. Bonds trading and indexation benefits in high inflation years were something new I learnt. After reading this book you will be able to easily choose any funds, because you will know what that fund does or how that fund works  

Read all reviews here: Amazon Reviews

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)