My salary is low, is financial independence an impossible dream for me?

Published: September 16, 2022 at 6:00 am

A reader asks, “I recently read your mutual fund investment journey. I then read similar stories shared by readers about their financial independence. One common feature in all these stories is the high salaries involved. My salary is quite low (I am ashamed to disclose it). I don’t see any immediate prospects of increasing it”.

“From what I have read/seen, I have understood that financial independence gives you options. Is this an impossible dream for me? Without a high salary, is there any point in dreaming about financial independence or other things?”

We can’t sugarcoat the truth:  Yes, a high-paying job; a sought-after skillset, and an impressive CV all make a big difference to the wealth we can build over time. To be precise,

If Income minus expenses minus debt >> 0 financial independnce is highly possible

For example, a salary of Rs. 3 lakhs a month, expenses of Rs. 75,000 a month, and no debt imply an invisible surplus of at least twice the monthly expense. If this entire sum can be earmarked for financial independence, it is possible to achieve this at least a decade before normal retirement.

Sadly, expenses will always look big for those with a low income, and what they can spare for investment will also be small. Even normal retirement (say by age 60) will appear to be a distant dream.

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    The “usual” thumb rule for normal retirement is to invest at least 75% of monthly expenses (that will continue in retirement) each month. This includes mandatory EPF/NPS/Annuity contributions. See A simple thumb rule for retirement planning.

    So what is the way out? Easier said than done, but that is how it always is.

    Let us not get bogged down with talk of a corpus equal to 30X or 45X multiples of current annual expenses and redefine financial independence as being able to manage a frugal lifestyle after retirement, even if it is a few rungs lower than our current lifestyle. Then we look for ways to increase our income.

    1. Can you find a way to upskill yourself?
    2. Can you take up additional assignments, impress clients and hopefully open some doors for you?

    This means you get to sleep less with no time for leisure. Are you willing to do this? Are you willing to take on some sort of risk to change your life? It is more possible than probable, but you will have to write your own odds and form your own inspiration.

    Here is some proof:

    Also, see:

    Even if you did not do this, you could manage to achieve a reasonable degree of financial independence by age 60-65, provided

    • You “invest” and not “save” whatever you can in a disciplined manner. Your portfolio needs 50-70% equity. You must have the temperament to withstand years of loss to ensure your corpus has a reasonable chance of beating inflation.
    • You do not increase your lifestyle when your income increases.
    • You do not get into debt. Yes, forget about that dream car or even dream house. Sorry, not everyone gets to enjoy everything. When on a budget, dreams will have to be prioritized and re-shaped.
    • You are lucky. Sadly, luck always plays a role, but we must get out and knock on doors (try).

    With a “low salary”, financial independence is not an impossible dream, but it cannot be an immediate dream. It will take much longer with significantly higher sacrifice, sweat and toil.

    All this said, the sad reality is that many of us are unlikely to be financially independent in our lifetime. This does not mean we give up on it. Earlier, we discussed building wealth across generations by investing right.

    Often trying to change the social station of our family may take two to three generations. My parents did everything they could to support me for 13 years after school so that I could get a career and not a job. Their sacrifices changed the social station of our family.

    So don’t give up on your dreams. Try to increase income; Take (reasonable) risks with your career and your money; Put your head down and work/invest without expectations – change may take decades. Even if you don’t become financially independent, at least you can set up a pedestal for your children* to soar. And that ought to be just as fulfilling and no less an accomplishment.

    * If you don’t have any, you (hopefully) should have more money for yourself!

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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 nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or 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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      Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
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