How Abhisek funded his marriage & is on track to financial freedom

Published: January 26, 2021 at 9:03 am

In the sixth edition of personal finance audits by readers, we meet Abhisek; learn how he achieved his first goal – fund his marriage 100% and use that as education and inspiration to move towards financial independence.

As regular readers may be aware, we publish a personal financial audit each December – this is the 2020 edition: How my retirement portfolio performed in 2020. This time, we asked regular readers to share how they review their investments and track financial goals.

Introduction: Hi dear readers, I am Abhisek. I am 28 years of age. I am an Electrical Engineer working since 2014. My interests lie in personal finance, portfolio management analysis, studying economics, maintaining a healthy diet and lifestyle and occasionally writing poems and even drawing.

I started with the typical salary a Tier-3 college graduate gets, but I have managed to get decent hikes over the years. I also made a job change last year in December, giving a significant jump to my income. Since the very start, I focussed to maintaining a high savings rate, increasing it from 65% in my first year of the job to 80% in 2019. 

This was a very eventful year!


  1. The COVID pandemic forced us all to stay indoors, and I was no exception to this. I had a very novel imagination of what WFH might look like. However, the reality was nothing like it. It had its own set of challenges which took several months for me to adapt to them.
  2. On the personal front, I got married in January this year. I could manage to find a spouse who shares my values very well. Both value money, have frugal spending habits and most importantly, try to find happiness in experiences instead of materials. 

Marriage was my first financial goal, which I could successfully achieve. It gives me immense pride and joy to have contributed 100% of my marriage costs. Having said all this, let’s dive into the audit. Let’s cover the basics first.

Emergency Fund

Emergency Fund = 13.11 months of current expenses. I plan to keep it at 18 months equivalent of monthly expenses. Each year, depending on my expenses, I will plan for the corresponding contribution to this fund. I prefer to keep it in products which are extremely liquid and free from market behaviours.

Products:

  • Multiple FDs spread across HDFC Bank and ICICI Bank: 11 months of expenses
  • PPFAS liquid Fund (direct plan): 2 months of expenses

The initial lump sum was put in Bank FDs. Further monthly contributions were made into the liquid fund.

Why PPFAS liquid fund?

As of today, the portfolio is strictly restricted to SOV rated bonds and RBI T-Bills maturing within 91 days, with the cash portion kept in Bank FDs. Such a safe portfolio, where I am protected from extreme market movements assures me. I am OK with it as long as the portfolio remains like this.

Life Insurance

  • As my wife and I both are earning, both of us have gotten individual pure term plans.
  • My cover: ITerm from AegonLife. Bought in 2014. Sum assured 80 lacs
  • My wife’s cover: ITerm from AegonLife. Bought in 2018. Sum assured: 1 Crore

How did we arrive at the value?

I got it as soon as I started my job. I had no clue how to calculate this amount back then. I also didn’t have any specific liability. So, I got the highest possible cover which I was eligible for. 😀

Again, when I met my wife, I convinced her to get one as well. As we didn’t have any liabilities, we still wanted to get one term plan ASAP to avoid higher premiums in case of delay; we fixed at the amount of 1 Crore.

Silly it may sound, but this is how we did it. I feel it works for my current situation nicely.

Why AegonLife? The lowest sum assured among Life Insurers with decent feedback regarding their claim settlements. Personally, I would be happiest if I never get the opportunity to make a claim. I would be pleased to see my premiums “Go down the drain”.

Health Insurance

We are currently covered by our employers and can manage a hospitalisation of up to 15 lacs through them. However, I would like to get personal health insurance, additionally. I haven’t thought much about this. I will consider this seriously next year and get one which suits my needs.

Why get personal health insurance?

  1. To cater to hospitalisation cost more than the employer-provided insurance. 
  2. In case of a switch to another employer where health insurance is worse/absent

Financial Goals

  1. Retirement by 50 years of age.
  2. Marriage in 2020: Met this year in January
  3. Buying a house in 2023

Retirement

  • Years to retirement: 22 years
  • Years in retirement planned for 40 years ( Till the age of 90 )

Following rates are considered to calculate the retirement corpus. I have learnt to plan on the conservative side. I understand that due to such conservative estimates, my contributions have to be high. I am willing to put in that effort for as long as I can manage it.

If things turn out better, that would be awesome. I can enjoy financial freedom even sooner. 🙂

Salary hike6.00%
Inflation8.00%
Rate of return post-retirement6.00%
rate of return pre-retirement8.00%
investment increment per year5.00%

My current retirement corpus is 8.43 times my current annual expenses. 

At its peak, it is projected as 63.92 times the final year’s expenses.

Asset portfolio:

Equity58.96%
Gold15.07%
Gilt LT0.00%
EPF + PPF12.55%
Cash equivalent13.42%
Total100.00%
  • Total Equity:- Mutual Funds: Direct equity :: 22.14% : 77.86% Direct equity is a combination of my Employer’s employee stock purchase programme vested in the USA and domestic equity investment via a DEMAT account.
  • EPF : PPF :: 72.11% : 27.89%  I started investing for my retirement as soon as I started my job back in 2014. I did not have any number in my mind. I tried to save as much as possible.

I started with regular plans of mutual funds via agents. However, one fine day, I stumbled upon a site called “Freefincal.com”, which opened up a thesaurus of personal finance knowledge. I have been following the site daily since 2015 Feb. I don’t think I can thank Pattu Sir enough for all the mentorship he has provided to me over the years.

The historical trend in my equity investing: Net Investment in total equity (Not the market value of my corpus)

FY-2015100.0
FY-2016476.2
FY-20173345.8
FY-2018465.6
FY-20191407.2
FY-20204036.8
FY-20215569.5

NoteIn FY18, I switched from regular plans to direct plans. I also put more of my surplus into increasing my emergency fund from 6 months to 1-year equivalent expenses during FY18-19. Hence there is a dip in equity investments.

I started investing in equity shares directly from FY2018. I wanted to learn the concepts before putting a heavy portion of my savings. Hence for the initial period, the account was tiny. However, later I learnt that real knowledge comes from practice. I started to put more time into “Company analysis” and invest more capital into it. I also took the COVID crash opportunity to pile up on several companies from my wishlist. This year, I have invested heavily in stocks.

Net investment into direct equity

FY-2018100.0
FY-2019820.2
FY-2020730.6
FY-20213342.0

On the mutual funds’ side, I use the following funds.

  • PPFAS LTE Fund (direct) : 48.55%
  • Mirae Asset hybrid equity fund (direct): 39.3%
  • ICICI US bluechip equity fund (direct) : 11.5%

I have some a portion in ELSS funds from earlier years which I will consolidate into these funds after the lock-in. I have learnt well that returns are not a guarantee. We need to maximize our invested capital and monitor the portfolio regularly to stand the best chance to meet our goals.

While I was a bachelor, I ensured to keep my savings rate at around 80%. After my marriage, I am not sure of how long I can maintain this. Still, I have managed to have an average savings rate of 80% so far. Let’s see how far I can maintain this.

The savings rate of FY2021

Note:

  1. The month of May includes some money from April salary (I had kept it as a cash cushion due to COVID shock)
  2. Months of June and Aug include performance bonuses from my employer, leading to a higher savings rate.
  3. December month is low due to an unexpected expense, accounting for lower investable capital

Marriage

  • Planned budget: 6 lacs
  • Actual budget: 8.5 lacs. (Family sentiments and marriage season based inflation in prices)

I started saving for this goal in 2015 as a short-term 4-year goal ( I assumed 4 years to stabilise my career). As it was a short term goal, I restricted myself to instruments which were not market-linked. 

Products:

I saved in RDs every month and converted the maturity amount into FD. As my tax bracket was very low, I used to get all the TDS as a refund. So, I never bothered to minimize taxes on this goal.

I also put the money left at the end of the month into short term debt funds (within 1 year avg maturity). Once I got more than 50,000 in them, I redeemed the amount and made an FD.

By 2019 August, I had 5.5 lacs saved in it, and I got to know that the amount would be around 8-9 lacs. This increase was primarily due to the variable price of gold, and marriage season-related inflation in costs.

To meet the deficit, I reduced my other investments for the next 6 months and took some money out of my emergency fund to meet the expense.

This goal was achieved in January 2020. It gives me immense pleasure to meet my complete marriage expenses out of my own savings. The joy of saving hard for a life goal and then finally achieving can only be felt. I do not have the ability to express it effectively at all.

Buying a house

I started this goal this year. This is a short term goal for me as I plan to buy one in 2023. Currently, I am saving for the down-payment of a home loan. The target is to take a loan of not more than 70% (preferably 60%) of the cost of the house purchase. Due to the short tenure of the goal, I am using safe debt instruments as the product.

Target by the end of 2022: Save 30% of the planned purchase cost for down-payment

Current corpus as of Dec 2020: 7.54% of the planned purchase cost

Based on current investment and an assumed return of 3% p.a, I project to reach the goal by Dec 2022.

Products : 

  • PPFAS liquid fund.

This is a relatively flexible goal for us as we are not yet sure of our location, jobs, etc. We decided to have dedicated savings for the goal and enter when we get a good deal suiting our needs with so many variables.

Summary

  • Current FI situation: 8.43 years. ⇒ Retirement corpus already exceeds FY2021 target. 
  • Current Emergency fund: 13.11 months of expenses ⇒ On track to be 15 months of expenses by 2022 December ( Inflation adjusted at 8% p.a.)
  • Marriage goal was successfully reached this year ⇒ Great satisfaction for present and greater inspiration for the future.
  • Buying a house: Relatively flexible goal. Planning to continue as per the plan mentioned above

I am happy on my personal finance front this year. I was able to meet an important financial goal, lay a stable foundation with such a healthy savings rate, and most importantly, I could take advantage of the COVID crash to the best of my ability.

I learnt a lot about asset allocation, equity investing, and emotional intelligence this year. I hope to continue such good work next year as well.

I hope I was able to inspire the readers with my humble effort. Happy Investing to all of you and a great year ahead!

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