A late (and flawed) start, but finally on track to financial freedom

Published: December 26, 2022 at 6:00 am

In this edition of the reader story, Gayatri takes us through her personal finance journey, and how she has gradually filled the gaps in her financial planning and is on track to achieving financial freedom.

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. Now over to Gayatri.

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I have been a regular reader of freefincal for 3+ years. I want to begin by thanking you for generously sharing your perspectives and knowledge. As a pessimist myself, I completely relate to your outlook on retirement planning, which usually scares people! 

I have always been interested in how other people manage their money, and the Reader Stories series has given me fascinating glimpses I would not have otherwise gotten. Let me share my story here in the hope that it inspires or reassures someone else.

Small beginnings: I am 35 years old, married, and child-free by choice. I was born in a middle-class family and lost my father at 10. My younger brother was only 4 at the time. My mother’s strength of mind and her job as a bank clerk pulled us through those hard years. Within 3 months of my father’s death, she learned how to drive a scooter so that she did need not to rely on anybody else. With incredible financial discipline, she managed to pay off our home loan over the next 15 years, give us good schooling, and pay our college fees. 

For example, we always had plenty of books, toys, and clothes. Most were hand-me-downs from well-off relatives, but we didn’t feel any shame in using them. In turn, we passed them down to younger cousins. Even today, I love buying secondhand and freecycling items I no longer use.

There was no concept of pocket money even when we were in college. There was a box in the bedroom where my mother would leave a wad of ten rupee notes every month. We were free to take a note or two for sundry expenses, but the unsaid rule was that we tell her how much we were taking and why.

The few times we “forgot”, her cashier’s fingers knew exactly how many notes had gone from the bundle! 😄This was an early expense tracking lesson from her: “aazhiyile kalanjaalum alandhu kalaiyanam”. Throw money into the sea if you must, but count it first.

Smart choices: I completed my engineering in 2008 and got a campus placement offer. But I was sure that software was not the path for me. So I wrote the CAT and got an MBA seat in a decent Tier 2 college. There was a bit of a dilemma here: should I accept my campus job and retake the CAT aiming for a better admission next year? But as with most things in life, my mother was clear.

She pointed out that I had prepared to the best of my abilities and given it my best shot. Was I sure I could do better next time? If I wasn’t, was it wise to waste a whole year in a field I disliked? I did not like to hear this, but she was absolutely right. I made the decision to do my MBA as a fresher. The same year, I met a young man 3 years older than me who was re-taking the CAT. We hit it off and went to B-school together. 

My first side hustle: During my MBA, I began a side hustle long before the term became popular. I have always been excellent at research and writing. While browsing idly, I discovered a website on which college grads from the US put up their assignments and essays for fees of $5 to 50.

I registered on the site, passed their eligibility test, and began picking up assignments. Over the two years of my MBA, I made around 25-30K, not a bad amount as pocket money! The ethical implications of this work hit me much later. But this experience showed me that if you have skills that other people need, there is always a way to make money off it. 

In 2011, soon after graduating with jobs, we got married. Our salaries were not huge. I made Rs.35,000, and my husband made Rs.65,000 per month. But we were very fortunate in those early years of marriage for multiple reasons. First, our parents paid off a good part of our MBA fees (Tier 2 college meant that the fees were far lower than the IIMs). My husband’s family owned a tiny apartment in Bangalore, where they allowed us to live rent-free. 

So, we suddenly found ourselves with extra money and lots of freedom! You can imagine how that would have played out in a city like Bangalore. We ate out, went to plays and concerts, bought clothes, re-decorated the house… Beyond saving 1.5L for 80C every year, we didn’t invest in anything else. Looking back, I don’t think we even realised the difference between savings and investment. It was ironic that we had learned financial accounting and P&L for businesses during our MBA but absolutely nothing about personal finance.

The years of risks and hustling: By 2013, my husband grew disillusioned with his job. He started to write a political thriller on weekends as a creative outlet. When he showed me the first three chapters, I was hooked. As a voracious reader, I knew this book was really good. Without telling him, I sent it off to a literary agent, and in a week’s time, my husband got a book publishing deal. The advance for the book was 1.5L, a small sum by itself but very exciting for us. So my husband quit his job and spent the rest of the year completing the book. 

For the first time, I became the primary breadwinner in the family. At first, I didn’t mind because both of us assumed that the book would top the bestseller charts and we’d be set for life. 😄 Dear reader, nothing of the kind happened. The book came out in 2014 and was a modest success, selling most of the 2000 copies published. But it didn’t transform our lives! 

Once he completed his book, my husband had a product idea in the L&D space and chose to work on it rather than return to a job. From 2014 to 2017, he worked on his startup while I switched jobs and took on more responsibility at work. During this time, we also adopted two indie dogs. To be closer to my office and accommodate our dogs, we moved out of the family’s rent-free home to a slightly bigger apartment at a rent of 17K. 

The startup took a long time to build and scale. These were 4 years of increased expenses on my single income and we lived from paycheck to paycheck. There was no emergency fund and no savings except an ancient ULIP, my mandatory basic PF, and about 25K per year in PPF.  Not only could we save nothing, I even had to withdraw the small PF balance I had accumulated. 

Every time a freelance gig came up, I would jump at it. I made close to 1L/year from these side projects, which went towards funding animal welfare activities and our travels. In those years that tested our marriage and sanity, only our shared love of dogs and travelling kept us together.

My first finance guru: One day in 2017, the topic of mutual funds came up during a casual lunchtime conversation. This colleague of mine was from an IIM and his wife made two-digit lakhs per month at a Big 4 management consultancy. So when he spoke about investing in mutual funds, I laughed, “I don’t have lakhs like you!” Immediately, he corrected me, “You don’t need lakhs to start investing. You need to start investing to make lakhs.” Over the next three days, he took out time to explain the basics of mutual funds to me and share his own investment journey. 

One of the things he kept talking about was the power of compounding. When he showed me how much money I could have already saved if I had started with a Rs.1000 SIP in 2011, I felt sick. His philosophy was “In the long term, you will ALWAYS make money in the market.” He showed me facts and numbers and as a newbie, I was amazed.

I googled MF investment platforms and signed up on one that was started by an ex-colleague. I did what all newbies do — visited their Top 10 Best Funds list and parked some of my spare cash there. Then I began SIPs. Every month, I would invest 5-10K in different MFs. Every time a new fund would make it to the list, I’d put money in that too. #facepalm

Looking back, I know there were many things my colleague missed explaining:

  • The difference between regular and direct funds
  • The importance of goal-based investing
  • Asset allocation and rebalancing

Yet, the conversations with him made me realise that I had to think about the future and plan for decades ahead. Thanks to him, I created an emergency fund of 3 months’ expenses and began MF investing. Thanks to his (scarily optimistic ) belief that it will all work out in the long term, I did not track early returns or pull out money no matter where the market went. So yes, my strategy was flawed, but my financial education had begun. 

Pruning & Replanning: Later the same year, my husband wound down his startup and returned to full-time work. Once he took on our household expenses, I finally had a little more money to invest and immediately began funnelling every extra rupee into my SIPs. 

In mid-2018, I quit my job and became a freelance writer and communications consultant. I had built up a good portfolio and reputation in the industry, and from the first month, work began to flow in. As a solopreneur, I chose to manage my own finances and began reading up about it. That’s how I discovered freefincal. 

I think the first article I read was on regular vs direct mutual funds. Then another on asset allocation. On retirement planning. It was like a magical rabbit hole that both fascinated and alarmed me. I realised for the first time that there were big gaps in my financial planning. It made sense to hire a financial planner to go over our finances and help us plan better.

In spite of seeing freefincal’s list of SEBI-registered advisors, I chose to consult a CA highly recommended by a friend. [Note: I am not unhappy with his services, but I will certainly go with a SEBI-registered advisor if I do this again.]This CA took a look at our portfolio and pointed out some things that, thanks to freefincal, I already knew:

  • Our investment portfolio was seriously cluttered (30+ MFs at the time!)
  • We needed to set clear goals and map investments to them (had no goals, were just buying MFs with any money we could save)
  • We had ULIPs running that we should get rid of (nudged into it by parents’ LIC agents)
  • We needed better private health insurance (I had a private 3 lakh cover and my husband’s company cover was 2 lakhs.)

With the CA’s help, I did the first big cleanup of our portfolio. While it was embarrassing to see the mess I had made over the years, I was also surprised at the size of our investment corpus. The CA assured us it was a healthy sum for couples our age. I didn’t really believe him but it was good to hear anyway! [Note: As I write this, I am reminded of Pattu sir constantly urging people to save more rather than worry about returns. Sheer ignorance seems to have helped me do this. 😃]

Becoming a (wise?) DIY investor: I have always had a DIY bent of mind and since 2020, have taken full charge of our portfolio, aided by Pattu sir’s analyses & tools, Morgan Housel’s book The Psychology of Money, and Ashal Jauhariji’s wisdom on the ASAN Ideas for Wealth Facebook group. This is how our finances stand today:

  • An emergency corpus equal to 1 year’s expenses (I top this up with 10-15% of my monthly income) which rests peacefully in my SB account.
  • Private health insurance for my husband and myself (Floater of 10 lakhs + Super Top-Up of 40 lakhs)
  • No term insurance. As we are child-free and debt-free with financially independent parents, we don’t feel the need for this. We’ve agreed to re-evaluate this decision every year in case circumstances change. 
  • A retirement corpus equal to 9X of expenses in the first year of retirement. I have purchased freefincal’s Robo Advisory tool for retirement planning and find it very helpful. 
  • My husband and I invest in 3-4 funds each. Most of our equity is in index funds with 1-2 index-beating active funds. For the debt part of our portfolio, we have PF, PPF and a long term gilt fund. I review our portfolio twice a year.
  • No direct stocks, smallcases, real estate or gold investments. I have one SGB as a gift for a future nephew/niece. I don’t have the bandwidth to follow stocks, hence no plans to invest in them. I don’t understand crypto or NFTs, so giving them a wide berth. 
  • No plans to buy a house. We have lived in the same rented apartment since 2015 and the rent has increased from 17K to 25K, which seems reasonable by Bangalore standards. We have a family home in our hometown, so we know that there is somewhere for us to live when we retire.
  • We hope to achieve financial freedom by 2037 when my husband turns 53 and I turn 50. Afterwards, we both hope to teach as visiting faculty at a B-school for personal fulfilment and some income. Our lines of work give us the necessary skills and knowledge to make this a real option.
  • Other goals: Even in our worst years, we have spent ~2 lakhs every year for travelling. During the pandemic, we spent many joyful hours reminiscing about our trips and even today, I have zero regrets about spending on them. I use a money market fund to save for flexible goals (e.g. 2 weeks’ holiday in Europe sometime in the next 2 years) and RDs for planned expenses (e.g. family function in October 2023, insurance payments, etc.) 

Given my choice to work as a freelancer and the gaps in my husband’s work profile, we make only 60-70% of what our peers make. Yet, I feel content with our financial planning because it gives us the freedom to live each day the way we like. We love dogs and apart from our two, we take care of our community dogs through feeding, vaccines and medical care. We also support a local animal shelter financially.

We are incredibly lucky to have parents who are financially independent. This, coupled with our choice not to buy a house or have children, has simplified our future planning. I am grateful that my husband and I have similar views about what constitutes value for money: after the first two years of marriage, we have not allowed lifestyle creep to set in. Our monthly expenses have been more or less constant for 5+ years now. 

There might be other challenges of mental and physical health in our future but we will face them as they come.

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.

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.

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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.
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