My 10-year financial journey – mistakes made and lessons learnt

Last Updated on August 19, 2021 at 7:45 am

In this edition of the reader audit, we meet a 34-year-old with a family of six. He describes his mistakes over the last ten years and lessons learned from them in a candid essay.

We feel proud and blessed that readers come forward to generously share details about their financial life to help and inspire fellow DIY investors. This is the 15th such reader audit. Previous editions are linked at the bottom of this article. If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They will be published anonymously (such as this one) if you so desire.

I would like to share some of the mistakes that I have made during my financial journey over the last ten years and how reading through freefincal and AIFW have helped me overcome those mistakes plan better for the future

I would want you to visualise my journey through the last ten years and hence would divide them into small blocks of years with the details below:

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2010 to 2012: I will take 2010 as the starting point where I started my journey as a graduate hire in a software service provider. Coming from a very humble lower-middle-class background, getting a job of around 20,000 per month at that time was a big win for the family.

The job was in Bangalore, and my family stayed in Kolkata, so I could effectively support them with only 70% of my income. I was the sole earner in the family (my younger brother was studying, my father was a heart patient unable to travel for work, and my mother was a homemaker).

So, to have some regular monthly income was a great feeling within the family. But this was a short period of joy for us. My father was soon diagnosed with kidney failure and cancer in 2011. The bad news was that I did not have parental health insurance from my employer or outside (lack of knowledge). This resulted in family loans of a considerable amount. I lost my father in 2012 with my mother and younger brother as dependents (pursuing CA then).

2013 to 2015: I committed another mistake in this period by booking a flat in Kolkata. My family loans were still not repaid, and I went ahead with the process of booking a home to save some taxes. The EMI was 60% of my take home. Since my brother was getting some salary from his initial internship days, we did not feel any impact on the monthly expenses. But there were no substantial savings either. We could pay the EMI and the monthly expenses. A minimal amount was being kept aside for closing the family debt.

Not another mistake, I would say, but I took another loan around April 2014 for my post-graduation. It was an MBA from a prestigious private college, and hence the 1-year course fee was around 16 lacs. Since my brother had completed his internship and was working as a qualified CA, he could run the monthly expenses for that year along with the home loan EMI. He could also send some pocket money to me every month for that year. The EMI for education loan would start only after the course completion.

By April 2015, my portfolio has a liability of approximate 45 lacs on me (education, home loan and family debt combined). I got a campus placement of around 8.5 LPA, while my brother earned around the same amount annually.

2015 – 2017: As our salaries increased, our first goal was to clear the personal debt taken from family members. With two of us living in different cities and a considerable amount going in EMI (home and education loan), we could only save a few bucks every month. But these small savings in RDs/FDs helped close all the personal debt by the end of 2017.

By the end of March 2017, the family income was around 25 LPA (me, my brother and my wife’s salary combined). We had cleared all the personal debt, but our home and education loans were still there with a monthly EMI of around 58,000. We started our first monthly SIP with minimal knowledge for 5000.

2018 – 2020: By the middle of 2018, we could also close the education loan through our RDs and FDs. My younger brother got married this year, and we spent some good money on this event. While we all enjoyed it, we should not have taken personal loans from family members for this one. The expenses should have been planned.

Another major event that happened this year and turned us upside down was the loss of our elder sister. We lost our sister while she was 35. She had two daughters of 12 and 13 years to look after. We thought of taking up the responsibility for the two girls and brought them along with us. We felt that it was in the children’s best interest to come with us rather than stay with my brother-in-law. He agreed to that too.

So, end of 2018, we had the home loan and some personal loans (from family members) pending. Our family size increased. We were seven people in total (Our mother, me and my wife, my brother and his wife, and the two girls) staying in two different cities. A monthly SIP for 18,000 was in place for the family’s future needs.

By the end of 2019, we had repaid all the personal debt. The only thing left was a home loan (an EMI of around 23000 per month). At this point, my brother and I decided to separate the expenses and plan for our futures and families separately.

My family now had five members (my mother, me and my wife, and my nieces), and we had a bank balance of around two lacs at that point. No monthly investments were made then. My brother has always supported me with 50% of the education fees for the nieces. I was staying in rent in a different city while my brother stayed in the flat we owned. Each of us paid 50 % of the EMI.

This was the time when I got serious about personal finance. I started exploring the internet and found freefincal and AIFW on Facebook. The pinned post helped me to plan for the health and term insurance to begin with. Slowly I accumulated the emergency fund too. I then put my goals in place – education for kids, marriage for kids, retirement, owning a home to be the major ones.

Later in 2020, my brother also planned to move to a different city for his job. We sold our home and closed the home loan. At the end of 2020, I had no loans to worry for. I had sufficient health and term insurance for myself and my family. I had six months of an emergency fund with me. I wrote my goals, and there were instruments mapped to each of them to help me achieve them.

2021 and today: I was blessed with a baby daughter a few months back and have updated my goal sheet accordingly. My entire net worth is nine times my annual expense. My retirement portfolio is 4.5 times my annual expense.

My goals for child education (my nieces) are being achieved through recurring deposits while their marriage is mapped to Nifty 50 Index Funds. My retirement is mapped to EPF (40%), NPS (70%), PPF (20%) and an active mutual fund (10%).

The dream of having a home is mapped to some large cap direct equity stocks and Nifty 50 Index funds. The growth of my emergency fund is mapped to RDs along with all yearly payments to health/term insurance. The education of my youngest girl is mapped to a balanced fund both for her education and marriage.

Below is a snapshot of my expenses and savings from my monthly take home.

I am setting aside 40% of my take-home in SIPs
15% of my take-home in RDs
3% of my take-home in PPF
2% of my take-home in NPS – Self
My monthly expenses are 30% of my take home
I am left with 10% of my take-home for buying direct equity / extra unknown expenses every month.

Any increment or bonus would be distributed across these goals to reduce the timeline.

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.

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