In April 2022, we met Arka and Rupali, who are trying to balance their personal aspirations, like travelling and exploring new opportunities, with their quest for financial independence. This is a follow-up audit.
About this series: I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers. Some of the previous editions are linked at the bottom of this article. You can also access the full reader story archive.
Opinions published in reader stories need not represent the views of freefincal or its editors. We must appreciate multiple solutions to the money management puzzle and empathise with diverse views. Articles are typically not checked for grammar unless necessary to convey the right meaning to preserve the tone and emotions of the writers.
If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail dot com. They can be published anonymously if you so desire.
Please note: We welcome such articles from young earners who have just started investing. See, for example, this piece by a 29-year-old: How I track financial goals without worrying about returns. We have also started a new “mutual fund success stories” series. This is the first edition: How mutual funds helped me reach financial independence. Now over to Arka.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Thanks to the numerous audits of readers’ posts in freefincal, here I am writing my Second yearly investment audit (First audit). What I realized is, writing it gives me a lot of clarity of thoughts on how the previous year was and, more importantly, what we want to do better in next year.
Before we begin, I would like to share a small context about us (me and my wife). I am currently 35, working in an IT Consulting company in Bangalore and my wife is working as International Tax Consultant in a consulting firm.
We got married in 2020, and pandemic is the time when we started planning our financial goals seriously. Prior to that my earnings were primarily distributed for marriage corpus, education loan and family commitments. With majority savings in PF and a small part in PPF and ELSS.
Though we have started late but the goal now is to maximize investment and for that keep ourselves mobile, skilled, and flexible, to grab any opportunities coming our way (irrespective of city and country).
Basics: First things first, let’s review our basics as of March 2023
Emergency Cash : 4 months of current mandatory expenses (in case where both of us stopped earning) and 20 months of mandatory expenses (in case the higher earning person stopped earning).
The runway in the scenario of “both of us stopped working” remained same compare to last year. But due to increase in Income, the runway in the scenario of “higher earning person stopped earning” has increased from 8 months to 20 months
Health Insurance:
- 10L base + 50L Super Top Up (Self and Wife)
- 10L base + 15L Super Top up (Parents)
Both of these are taken outside office health insurance and parents are not added in office health insurance.
Term Plan
- 8 years of current annual income (self)
- 5 years of current annual income (wife)
Income distribution: Below is the monthly distribution in different buckets of investments and expenses as a percentage of monthly earnings.
Key observations
- Certain buckets percentage has decreased because of increase in earnings compared to last year while the expenses for that bucket remained same
- Insurance premium includes term and medical insurance (both us and parents)
- The extra earning is primarily channelized for investments and travel.
- Travel is one of our primary expense buckets, as both of us like to travel, hence keep a significant amount to fulfill our travel dreams. To compensate that, we minimize discretionary spending’s like shopping and eating outs throughout the year and consider this travel corpus as our extended emergency bucket. We document our travel in our website and YouTube channel. Would love it if you have a look. Last year we visited Svalbard Islands (only 800 km from North pole). You can read our experience here: https://theexploringeyes.com/plan-a-trip-to-svalbard-from-india/
- We have identified as parents are getting older, all medical expenses always will not be covered under the insurance. Hence started a bucket for Medical Expense savings. Contributing a small amount in this bucket now and will continue that till it reaches the base health insurance policy amount (a long road to go !!)
Goals: Coming to the goals we have the following ones as on date
- Retirement Goal (Considering another 20 years away). Don’t mind working till mid 50s (if possible). However, will try to achieve financial independence (FI) before that. As of now the target is to reach 35 years of expense as corpus for considering FI
- Buying a house – currently don’t have a timeline in mind. Most probably not before 7/8 years. Also depends on location of work and other variables at that time. The idea is to use the education loan fund (will be over in coming financial year) and some more amount to put in retirement bucket only and consider house purchase as a unified goal along with retirement. However, asset allocation needs to be worked on here
- Currently don’t have any kids and will plan as and when the situation changes
Investments: Since before we started planning in April 2020, the majority amount was in PF and some small component was in PPF and ELSS. The idea was to first build emergency fund and then maximizing equity investments for retirement as a goal.
- For emergency fund, 60% is in savings account (including FD) and 40% is in ICICI – Arbitrage fund direct plan.
- For retirement, asset allocation is as below.
Since we started in April 2020, couldn’t get much benefit of the fall in Equity market as there was no opportunity fund in place. However, the aggressive investment in equity has increased the equity percentage from 44% in March 2022 to 56% in March 2022. The goal is to reach at least 60% equity by mid 2023.
One more thing to note here, though we have put maximum investment in equity this year, due to a sideways market the overall percentage of equity has not yet crossed 60.
As of now, below is the portfolio composition of mutual funds (which constitutes 44% of the retirement corpus) and direct equity (which constitutes 12% of the retirement corpus) as of March 2023.
The plan is to consolidate the ELSS investments into the last four MF once the lock-in is over.
Direct Equity investment is not yet big enough to move the needle. The expectation from direct equity is to create a stable source of dividend income over the years. Currently, dividends are getting reinvested.
Performance:
- The first and the most important parameter of the performance is the retirement corpus. As of March 2021, it was at little less than 1 year’s current expense (accumulated value of all previous year’s investments), as of March 2022, this value was close to 2 years, as of March 2023, this value just crossed 3 years mark.
- Below is the XIRR for equity MFs. Since ELSSs were invested before pandemic and stopped after August 2020, the XIRRs are high but the weightage of the ELSS in the overall portfolio is significantly less as mentioned above. The stock portfolio is at a CAGR of 4.3% roughly.
- The return is significantly reduced compared to last year, thanks to the grimy world outlook
Plan for 2023-24:
- There is only one financial goal which is – to invest the maximum possible through Equity in the retirement fund. Will revisit the asset allocation after 6 months and evaluate the need for rebalancing
- From personal goals perspective, have set up quite a few at the start of this year and tracking their progress at the end of each month. Below is the illustration (the actual numbers are masked)
- X number of days of gym/10000 steps per day in the whole year
- X number of blogs and videos on our travel website and YouTube channel
- Learn a foreign language and a local language
- Not more than X number of days of eating out
- X amount from side hustle
- Build a base for passive income
In the end, I want to thank Pattu sir for the opportunity and the amazing FB group of Asan Ideas For Wealth– my one-stop solution for finance, career related things. Even for a passive member like me, just reading posts, comments, and analyses – has been immensely fulfilling. Wish this group grows bigger and wiser !!
Reader stories published earlier:
As regular readers may know, we publish a personal financial audit each December – this is the 2020 edition: How my retirement portfolio performed in 2020. We asked regular readers to share how they review their investments and track financial goals.
- First audit: How Suhas tracks his MF investments and reviews financial goals.
- Second audit: How Avadhoot Joshi evaluates his investment portfolio.
- Third audit: How a single mom is on track to financial freedom
- Fourth audit: How Gowtham started goal-based investing & took control of his money
- Fifth audit: Why my financial independence & early retirement plans were postponed by four years
- Sixth audit: How Abhisek funded his marriage & is on track to financial freedom.
- Seventh audit: How Rohit’s early struggles defined his investment journey
- Eighth audit: Why my investments are still on track despite job loss and lower-income
- Ninth audit: How a retirement planning calculation scared me to take action
- Tenth audit: I made several investment mistakes but have turned my life around.
- Eleventh audit: My net worth doubled in the last financial year, thanks to patient investing!
- Update: How I achieved investing nirvana.
- Twelveth audit: My financial journey: from novice to goal-based investor.
- Thirteenth audit: My journey: from a negative net worth to goal-based investing.
- Fourteenth audit: From Fixed Deposits to Goal-based investing in MFs.
- Fifteenth audit: My 10-year financial journey – mistakes made and lessons learnt.
- Sixteenth audit (part 1): How I achieved financial independence without mutual funds or stocks.
- Sixteenth audit (part 2): Lessons from my financial independence journey and future investment plans.
- Seventeenth audit: How I plan to achieve financial independence and move to my native place
- Eighteenth audit: I used the current bull run to reduce my mutual funds from 14 to 4!
- Nineteenth audit: How a conservative investor created his financial plan
- Twentieth audit: I plan to achieve financial independence by 46; this is my master plan
- Twenty-first audit: I have made many investment mistakes but am on course to financial independence by 45.
- Twenty-second audit: I felt worthless six years ago but have achieved financial stability today
- Twenty-third audit: My financial journey was directionless until age 40: this is how I made up for lost time
- Twenty-fourth audit: Why I increased equity MF investments by 275% and reduced PPF contributions.
- Twenty-fifth audit: How I track financial goals without worrying about returns
- Twenty-sixth audit: I am 24 and started investing 1Y ago, but what am I investing for?
- Twenty-seventh audit: How we plan to achieve a retirement corpus 50 times our annual expenses.
- Twenty-eighth audit: I thought equity investing was a gamble, but now I aim to hold 60% equity for retirement
- Twenty-ninth audit: My journey: From 5 lakhs in debt to building a corpus worth six years in retirement
- Thirtieth audit: My investment journey: From random purchases to a goal-based portfolio
- Thirty-first audit: My investment journey: from product-driven to process-driven
- Thirty-second audit: How a young couple is trying to balance travelling and investing
- Thirty-third audit: My journey: From Rs. 30 bank balance to financial independence
- Thirty-fourth audit: Our journey: From scratch to a net worth of 18 times annual expenses.
- Thirty-fifth audit: From a net worth of Rs. 6000 to auto-pilot goal-based investing
- Thirty-sixth audit: How I retired from corporate bondage at 46, two years ago!
- Thirty-seventh audit: How I learnt to keep it simple and build a net worth 19 times my annual expenses
- Thirty-eighth audit: How Abhineeth plans to achieve financial independence and build a house.
- Thirty-ninth audit: How Sahil plans to achieve financial independence by efficient tracking
These published audits have had a compounding effect on readers. If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They could be published anonymously if you so desire.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
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.
- 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 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr 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!
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
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published 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
This 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
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)