In this edition of the reader story, we meet 31-year old GB. When family responsibilities were suddenly thrust on him, as a 24-year old, he realised his family had a five lakh debt to clear. He cleared it, arranged his sister’s marriage and his own marriage with proper planning and no debt.
He is now on the way towards financial independence with a corpus currently worth six years in retirement. That is, if he stops working now, he can generate inflation-protected income from his corpus for the next six years. When we have enough money to do the same for the rest of our life, we become financially free. Look for the resource used by GB to quantify this below.
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.
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Please note: We welcome such articles from young earners who have just started their investing journey. 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 the author.
Hi everyone, Just a small Intro about my family. I am 31 working in IT and wife 26 Non-IT and Mother 50 Homemaker. I have a younger sister who is married and settled in the same city.
I started my first job in 2012 as a fresher in TOP MNC in Bangalore. That’s a life-changing moment for myself and my family. We are from a normal middle-class family and live in our own house.
My father was down with Parkinson in the year 2014. Then the situation changed. I had to drive my family with my single income, I came to know that the Family debt was around 5 lakhs.
My First Goal was to become debt-free. I started my financial journey with 5 lakhs debt. I was looking for a salary increment or a high saving rate to reduce the debt amount. somehow I managed to pay half of the amount with my monthly savings in the savings account itself after 2 years(2016).
I switched companies and my pay scale was doubled and I was able to pay the remaining amount within 1 year (2017). It took around 3 years to have a debt-free life.
My 2nd Goal was my sister’s marriage in 2018. This time I planned well from 2017 onwards. The goal was 1.5 years away. So, I was living outside of my city and got an opportunity to switch companies again and move to my native place. This time my savings rate was increased and my salary was 50% increment of my last pay scale.
Without debt, I was able to manage my sister’s marriage with my savings from my income. So far I was not aware of any products like LIC, mutual funds, stocks or any other product.
Then I started to read some blogs about investments. The one that impressed me was subramoney.com I started to read his blogs and saw all videos from freefincal and blogs and purchased the book You Can Be Rich Too: With Goal-Based Investing.
Here I am at the age of 27, starting my first investing journey in 2018 April how unlucky the same time LTCG was introduced.
My Journey from 2018 – 2019 :
Health insurance: For myself, 2 lakhs covered in office and I took 3 Lakh separate cover from outside. For my parents, I took the employer one with 4 lakhs cover including pre-existing disease for my father.
Term insurance: The time when I took insurance I had no debt so I simply went with a 1 crore cover with a simple vanilla plan.
Emergency Fund: 6 months of monthly expenses in a savings Bank account.
Short term Goal My Marriage: Target amount 6 Lakhs
As a 90s Kid don’t know when it will be so I simply kept 20% of my income in a savings account of my second bank account. another few thousand in chit which is managed within friends circle.
Retirement: Target 12 Crore
I started aggressively as I don’t have any debt and my basics covered. I started with 50% of my income with 90% equity, 10% in PF and PPF.
Used 3 funds for my retirement 1 ELSS used mainly for my tax savings and 1 small cap and 1 Multi cap.
If I Retire today: The corpus will last for 18 months. See: Check your progress to financial freedom with this formula!
2020:
Health insurance: Employer cover increased to 4 lakhs for self and 3 Lakhs health insurance outside cover and 6 lakhs for my mother alone (My father passed away due to health issue ).
Term insurance: 1 crore.
Emergency fund: 1.2 Years of monthly expenses half of the amount saving Bank account and Remaining in FD.
Short term Goal My Marriage: The target amount of 6 lakhs have reached 70% with few extra savings due to Work from home.
Retirement: Equity 88% and Debt 12% (PF and PPF)
If I Retire today: The corpus will last for 29 months.
2021 :
Health insurance: Employer 6 lakhs outside 5 lakhs for self, Mother 6 lakhs from employer and 5 Lakhs from outside.
Term insurance: 1 crore.
Emergency fund: 4 months of monthly expenses half of the amount saving Bank account and Remaining in FD. many unexpected expenses during the covid cause the emergency fund got reduced.
Short term Goal My Marriage: Finally the marriage-wait over I got married end of the year with my savings enough without any debt I manage my Marriage expenses and lockdown restriction helped as well 🙂
Retirement: Equity 76% and Debt 24% (PF and PPF)
The increase in my salary moved my 80C limit. I reduced the amount invested in ELSS and the difference amount invested in PPF. This is the first rebalance in my portfolio.
If I Retire today: The corpus will last for 5.3 years.
2022:
Health insurance: I and my wife have a family floater of 5 lakhs coverage outside and 6 lakhs coverage in the office, Mother have 5 lakhs outside and 6 lakhs from office.
Term insurance: 1 crore.
Emergency fund: 5 months of monthly expenses in FD.
Retirement: Equity 76% and Debt 24% (PF and PPF)
If I Retire today: The corpus will last for 6.2 years.
Future Plan:
Health insurance: need to increase the cover to 10 lakhs and super top . The current all insurance premium will come to around 43K
Term Insurance: Need to increase the cover to 2 crore
Emergency fund : minimum 1 and max 1.6 years of expenses.
Reduce Equity exposure to 70 %
Need to hire a fee-only advisor.
Thanks for reading my Story will post you the next audit in 2023 Jan.
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!
- 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 aim to hold 60% equity for retirement
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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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, 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 what 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.
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