Last Updated on May 26, 2024 at 3:05 pm
In this edition of the reader story, we have an account of how a 55-year-old who retired recently securely draws an income and manages spending.
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 and 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 investing. 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 reader.
Dear reader, I have been following freefincal since 2012. The articles by pattu sir are one of the key reasons I am financially independent today. When pattu sir asked me to share my investment journey, I was not enthusiastic as it was boring.
All I did was invest systematically each month. My income was reasonably high, my existence frugal, and I was lucky not to encounter debt. Since I did not want to say ‘no’ to pattu sir, I suggested I write about how I manage my income and expenses after retirement, emphasising security.
I do not claim my method is superior. It makes me sleep better. My retirement corpus has two basic components: An income floor, which helps me handle day-to-day expenses. This is accomplished via interest payment from a Govt bond purchased via RBI Direct. This is a 40-year bond. I expect this to provide income for the rest of our lives (my wife and I).
For more details, see articles by Pattu sir.
- Creating the ideal retirement plan with income flooring!
- RBI Retail Direct for govt bonds: Who should use it and who should not
- How I used RBI Retail Direct to buy govt. bonds and create an income source (guest article by another reader)
The remaining corpus is in a mix of equity and debt mutual funds. This is to handle inflation in expenses. I also have a small emergency stash of FDs in my two bank accounts (see below).
To manage income and expenses, I have two bank accounts. We shall call them income and spending accounts.
- Income account: Operated primarily via online banking. We have an ATM card but rarely use it — the interest from the government bond hits this account. If I redeem from MFs, it is paid out here. This account is linked to a feature phone. Since this is our main income source, I wanted this to be as secure as possible. We access it only from home. We do not take the feature phone when we go out. All our investments are linked to this phone.
- Spending account: All our day-to-day expenses are reflected in this account. This is linked to G-pay/UPI (which has become essential). From time to time, we transfer some funds from the income account. The balance in this account is significantly less than the income account. So, even if we lose the smartphone or if it is hacked, the loss will be lower.
Another benefit of using two accounts is that the income account is a cash buffer. It can handle our basic expenses for close to a year in case of difficulties. This is the simple system we follow. It is certainly not foolproof, but it makes us sleep better. My wife is the second holder of all our accounts and knows how to operate all investments.
I believe “only the paranoid survive” (Andy Grove). Please let me know if you have any suggestions for making this system more secure.
Reader stories published earlier:
As regular readers may know, we publish a personal financial audit each December – this is the 2022 edition: Portfolio Audit 2022: The Annual Review of My Goal-based Investments. 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!
- Update: How I achieved investing nirvana.
- 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 I aim to hold 60% equity for retirement
- Twenty-ninth audit: My journey: From 5 lakhs in debt to building a corpus worth six years in retirement
- Thirtieth audit: My investment journey: From random purchases to a goal-based portfolio
- Thirty-first audit: My investment journey: from product-driven to process-driven
- Thirty-second audit: How a young couple is trying to balance travelling and investing
- Thirty-third audit: My journey: From Rs. 30 bank balance to financial independence
- Thirty-fourth audit: Our journey: From scratch to a net worth of 18 times annual expenses.
- Thirty-fifth audit: From a net worth of Rs. 6000 to auto-pilot goal-based investing
- Thirty-sixth audit: How I retired from corporate bondage at 46, two years ago!
- Thirty-seventh audit: How I learnt to keep it simple and build a net worth 19 times my annual expenses
- Thirty-eighth audit: How Abhineeth plans to achieve financial independence and build a house.
- Thirty-ninth audit: How Sahil plans to achieve financial independence by efficient tracking
- Fortieth audit: My Journey to a Ten Crore Portfolio
- Forty-first audit: Burdened with debt for several years, I am now aggressively investing in equity
- Forty-second audit: From Engineer to Librarian after Financial Independence and Early Retirement (FIRE)
- Forty-third audit: I lost six months’ income in F&O and ditched it for systematic investing
- Forty-fourth audit: My retirement plan to handle the harsh realities of the IT industry
- Forty-fifth audit: My investment journey: mistakes, 10 years of MF investing and recovery
- Forty-sixth audit: My MF portfolio is worth six crores despite multiple mistakes
- Forty-seventh audit: Saving, Investing, and Running Marathons: My 25-year Journey to Financial Independence
- Forty-eighth audit: Never Too Late to Start: How I Became Financially Savvy at 40
- Forty-ninth audit: My Investment Journey to a net worth 29 times my annual expenses
- Fiftieth audit: How I audit my portfolio without tracking returns
- Fifty-first audit: Financial Lessons Learned During and After a PhD
- Fifty-second audit: Investment & Financial journey of a 23 year old
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.