We have been quite good at keeping within or budgets for quite few months prior to this but the Months of October and November saw us zooming past the budget. Thankfully we did not reach the heights of expenses as last year. Let’s dive into what changed in last two months
Clothes: I finally broke down and bought myself some clothes. As I have previously written about women’s jeans are the worst. They shred after few months of use and this time I finally decided to buy some good quality trousers which I am hoping will last me for years to come if I suddenly don’t gain a lot of weight. I also spend money on jeggings and leggings to make the other clothes I already had become wearable. That being said advent of new clothes has prompted me to purge a lot more clothes form my ever shrinking wardrobe.
Medical expenses: Last few months saw us spending a lot of money on medication and doctor visits. All of the people saying we don’t have a healthcare plan calm down. The healthcare expense is temporary and we do expect to see increased expenses in next few quarters as well. We are however trying to keep other costs down.
Eating out: we have spent a huge ton of money eating out in last two months partly because we were travelling to visit family and partly because work and general well being was too stressed leaving one or both of us exhausted. After almost 3 weeks we finally were able to prep and cook week long meals in mid-November.
We stopped publishing detailed list of expenses because it is a drag to write and I have rarely read through anyone’s expense report items. All I care about is broad heads and totals, which is what we share now on our site.
If you are interested in any particular expense or category let us know in the comments and we will detail that out for you.
The expense report is without rent and home loan EMI as that is separately accounted for in our overall yearly budget and savings. We live in perhaps one of the most expensive cities in the country which has a huge impact on our budget predominantly in eating out and doctor consultations. Our rent is also ~3 times more than the previous city.
Our aim in sharing the expense report is to hold ourselves responsible as well as show that even in a high cost of living area it is possible to reduce expenses.
Our expenses for October are as below:
Total expenses: 25884/-
Medical expenses- 4147/-
Eating out- 4060/-
Other regular Household expense- 13590/-
Expenses for November
Total Expenses: 24890/-
Medical expenses- 5204/-
Eating out- 6811/-
Other regular Household expense-11828
As you would see we have been spending quite a bit on eating out and that has been something that has been a worrying trend. We love food and once in a while it is a good break to sample other delicacies but of late we have been spending a considerable sum on eating out again. This expense if reduced to under 1000/- will help us keep our expenses way close to our actual budget. It would also offset the increased medical expenses and we will be eating healthier.
Since the medical expenses are going to be here for a while and we might need to buy few more clothes if necessary it is highly unlikely we will be able to meet our target of fewer than 14 k in expenses. Currently we are playing this by the ear but we are conscious of unnecessary expenses that have crept in and can be reduced.
We are currently aiming for 20K in monthly expenses recognizing current medical requirements. It will still take us a few months to know exactly how much we will rack up in upcoming months and if we need to make some long lasting changes to our budget. That is highly unlikely since we are very aware that people live on far less than we currently do and there is no reason why we should nto be able to make do on current expenses.
December is here and as the end of year comes we are looking at a hike in income. In past few years we have seen steep increase in income; we are by no means high earners but our income certainly allows us to save a decent sum. A decent hike of over 10% would set us up for at least 10% increase in our monthly savings if not more.
Past few months, life has won the fight between low expenses and comfortable expenses. With one of us recovering we should be set for a better looking balance sheet soon.
Both of these figures are average and being average they do not present a complete picture of either the stock market or general expenses. However we can’t go around predicting and projecting yearly inflation or returns which means that these are the figures we have. So let’s go ahead and do some calculations both at our previously mentioned figures and new figures from historical averages.
Below is a quick excel for someone who will retire with 2.5cr in 10 years and currently spends 6Lac a year.
In The first scenario where returns are merely 8% and inflation is on the lower side at 6% the said household will run out of money by 73.
In the second scenario with 11.7% returns and 8% inflation they will run out of money at 76. In grand scheme of things if you are going to run out of money it does not matter if you are out of money a year earlier.
If they add another 50L to their stash their money will suffice for another 10 years at least on either calculation.
What does that mean?
On the surface someone would think this means that the corpus is way less that the actual requirement. Well there are a few safety nets in place.
PF/pension realisation. We would benefit from EPF post 60 years and it would contribute a decent sum in our 60s which might skew the balance by quite a bit.
Reduction in expenses– We expect a reduction in our expenses as we grow older and definitely when we leave the work life. We would no longer be living in one of the most expensive places in the country and we would have more time to actually insource both eating and other small maintenance. If we have a kid in recent years we would definitely be out of kid related expenses by the time we are 60. I am definitely not supporting a ~30 year old.
Earning while out from active job. Our field allows us a huge amount of flexibility and possibility for side hustles and with our specializations we would fare quite well being advisors with limited responsibilities and a decent chunk of money even a 5-10K per month income can change the way expenses pan out and allow us to live a better life. This might be true for most of us.
Actually trying to reduce costs- We have a lot of fat in our budget for many reasons. We also have a lot more things we can do actively to reduce our expenses and keep them well below our desired amount of 14K. We slip up every now and then but I expect us to last better and achieve more once we have the time and are not facing daily time crunches of going to office and making things happen.
Talking about inflation might be an easy way to say ‘you don’t know what you are talking about’. Well neither do you because things affecting your money 10 years later haven’t happened yet. What it does mean is that both of us would be in similar scenarios a year here or there. I would just be a bit more conservative in my returns and might be withdrawing less money.
We have learnt to take these projections with a pinch of salt just like our expenses. We hope to keep our day to day expenses below 14K but we know there will be months where we will exceed that way too much be it to buy a new phone or to finally buy some clothes. Healthcare is also an expense we have learnt to take in our stride and as we get closer to our target year we hope to have a much better understanding of what our 40 year selves would require in terms of medical care. For big things we will trust health insurance to come through.
There is currently no way for us to know what health problems we will face when we are 70/80or 90. We can also safeguard against the rising medical costs to a certain extent. Will it cost 10cr for assisted living per year? Or will India by then be a single payer healthcare system. These are questions we do not wish to be scared by today.
It might sound short sighted but the reality is most of us will need some help as we grow old. There will also be people far older, sicker and poorer than us at every step of the way. Almost all of us will find a way to get through the illness; difference might be the location and type of care both of which are quite important.
There is a chance that we might not suffer from long stretched illnesses which drive our networth into ground and leave us at the mercy of others. If this is in our future and we keep on working years on years to safeguard ourselves against a disaster decades in future we might be left with quite a few regrets.
The Education Inflation
We are currently DINK but that might change in future and we understand that education is a huge investment and costs have skyrocketed in past decade or so. However, we also believe that there are ways to reduce the expense as well as take education in your own hands. Though the time we have to worry about our little one’s first education is at least 3-4 years away we are currently not averse to home schooling once one or both of us retire. That would allow us to divert the money to other endeavours the kid might be interested in and also to travel.
Our budget to most might look like we have cut it too short and would not be able to make room for any travels. We have been travelling extensively for last five years and there has been one trip which has crossed 1Lac for both of us in all that time. If we could travel slower, not worry about days off we would definitely bring the cost way down. We also have a lot of time to figure out how much taking a child along would impact the expenses and how we can cut them further.
When we started we were on a shoestring budget and it is only in past few years that we have finally let the purse strings a bit loose. We currently target to keep our travels under 10% of our CTC. This expense also includes any trips to visit family or a shorter weekend getaway. With two international trips and multiple family trips we are well below our budget.
There is no end to whatifs in life. We might both die tomorrow or go on to live healthy fulfilling lives for decades to come. Most people will call us stupid if we leave our jobs to enjoy whatever life we have left; in case we die tomorrow or maybe next year. There is a perverse fun in giving into your fears, it makes us feel smarter, rational and someone who can think clearly. We have succumbed to those fears and it is similar fear which makes us question what we are doing and aiming for every few days.
There is a definite possibility that you will die bed ridden in a a subpar care center because inflation ate all of your purchasing power. there is however an equal chance that you will live a comfortable life with enough to support you during and at the end of your existence. We would like to believe in the second scenario because life is just too long to be lived shrouded in fear.
Financial independence for us is the amazing thing which allows you to go with the flow of life. We are far from calling ourselves remotely FI but in resent months I have loved the freedom of not fretting about money or other issues around it while we concentrate on maximizing our careers. Last few months have been far too busy on the work front for us to be able to look closely into our investments or sit down and write a post. There are a few unfinished posts in different files scattered around on my system but it is high time we talk.
Last few months have been a real roller coaster for us particularly in terms of added responsibility at work, amazing vacation and us taking more steps towards a better lifestyle. The lifestyle we are aiming at is one which allows us to be forgetful about monitoring our investments. It does not mean we did not save, in fact last three months saw a good chunk of our income being saved as we try to reign in our expenses.
We had started this financial year with a goal to keep our monthly spending within 14k not including rent, home loan EMI or parental support. Below is our total monthly spending since June since we are almost at the end of September I am counting the total till 27th.
June- 19,391/- (includes 2,200 for bike tire replacement and 1,918 for Mr. S’ clothes.)
July- 15,049/- (no out of turn expense except paying ~600 to get 300/- vouchers for a retail brand through loyalty points)
August- 11,893/- (this is way too much for a month where we were vacationing for almost 10 days. Though it does include some gardening supplies)
September- 13,774/- ( We still have four days till the end of the month and I am hoping to keep it around 15k. This includes 499/- for Amazon Prime(affiliate), 255 for a headphone and 625 for a trimmer.)
We also bought a replacement for Mr. S’ phone which died in June using the offers in past one week. Amazon Prime was also a result of that well thought shopping spree. We believe at 499 a year it is a decent deal right now as it allows us to buy smaller products for no shipping and gives access to some content.
While we are on the topic of phone I would like to expand a bit on it. Mr S’ phone gave up charging in June and after sinking in some money into it we shifted to a hand me down from parents. It was over 2.5 years old and we both feel like it went out too early. My current phone was bought for 10k and is around 1.75 years old. With all the new models and technologies flooding the market right now I wonder at what rate people change their phones. When did you last buy a cell phone and what is your usual update schedule?
Apart from shopping around a bit and repairing other items we also purged a decent amount of stuff from our house. We made some 80/- bucks out of it and my tiny apartment thanks me for it. We also sold our couch to a friend leading to a decent amount of space which gives me a lot of peace.
We have been working on cooking more at home and I have been trying to process some fresh produce for us to consume along the year. I am thankful that cooking makes me as happy as it does otherwise it would suck to cook every day. Past weekend I made some cucumber relish and apple jam which turned out amazing and some nankatai which burned since our oven is apparently hotter than the recipe guy’s. We have thankfully managed to keep our grocery bill in check and have barely had to throw away any food.
We have a lot of family time planned and in next few weeks and we plan to sleep in during Diwali holidays. We are also reigning in on our travels for the remaining months as we almost touched out yearly budget with previous vacations in the year.
In terms of our savings the market saw considerable highs last few months and is running on a downhill slope for past few days. I am hoping it will last long enough for us to capitalize on it with salary coming in soon. However we are still way ahead from where we started last year and I hope the next time I update that ticker on the right I can say we crushed the 10% mark.
That’s a lot of English about us, we would like to hear a lot more about you as well. We have been sloppy in responding but are so happy to read new comments coming in every few days.
Let us know how you have been doing past few months.
Healthcare is something that has been on my mind for some time now. Today when we are young and earn a decent sum we can probably afford to get sick and pay for some damn expensive treatments. We are also insured through our job, which means till we need over 6L in expenses we will probably be fine. The insurances cover pregnancy and child delivery should we need it.
Both sets of parents are well insured and their insurances have come to our aid in past few years. There has been a hospital admission, with both cashless (mostly), and reimbursement after paying. Our families have managed to get out largely unscathed from each one of these. However if the amount had gone way above what the insurance covered we could have easily managed the difference. Would we be able to do that if we were facing a debilitating illness? Nope. Would we be able to manage the same hospitalization post FIRE? We don’t know because we really don’t know where we will be and how much healthcare will cost at the hospital we are admitted to.
Let’s deal with the second question first. We have thought a lot about how we would manage finances if we face a long drawn severe disease. Today it would mean a drain on our savings, insurance and loss of pay. It will in almost all cases mean one of us or both of us will have to work longer. The ability to earn more will dwindle as soon as we distance ourselves from work and the gap in experience increases. Add to that the emotional stress that accompanies such a disease we might not be able to come out unscathed at all.
However we are also not sure if we should be worrying about it a lot either. But it seems to be a major concern for many and is definitely not unfounded. In past one year we have had a surprising (to us) number of people, reach out through comments and healthcare has been a major concern for most if not all.
As I said before we are currently covered by a decent cover and even though I would wish universal healthcare becomes a reality, I am not holding my breath for it. If it happens good for us, otherwise we intend to take a high deductible plan with a good cover and something that would cover major number of illnesses. Since wait period for most pre-existing conditions is 3 years 6-7 years from now would be a good time for us to buy it.
Insurance for 37 year old couple with 50L cover (excluding critical illnesses) today run for around 38,695/year , assuming a 10% hike every year they should be around 75,405/year when we are 37. This is neither high deductible nor requires co-pay. These usually reduce premiums in absence of claims, or in this particular example increases your cover to 70L if you don’t claim for 5 years. In the above cases of hospitalization of family the bill never exceeded the claim limit of 2 & 5 lac. Both the hospitals are considered reputable in their city; it included surgery in one and intensive care in both cases.
We realize that we need to have a robust strategy on how to deal with any health related expenses after we retire. In a lot of ER forums many suggest working part time for a job you like to maintain health cover. That might be another option.
Critical illness cover is more important than a considerable health cover. Cancer treatment costs run upto 10-20L today and even though research is on to reduce the price of drugs treatments are definitely going to get pricey. Those treatments that would require lifelong treatment are indeed a big drain on both emotional as well as financial energy of the family. This is one of the reason why critical illness cover is something which I have been looking into.
Term insurance is another such ‘what if’ cover that we have been researching of late. For barely 2-2.5k per month it sounds logical to be insured for 20 times your current income. Term insurance plans are of vital importance during the accumulation phase of any FI dream. Any life cover might be good to have but it kind of defeats the purpose if you have already accumulated enough wealth to live for the rest of your life.
Things other than healthcare
As I have said previously we are not sure what we will do when we retire and a small part of me worries if we would be happy being home all the time. Then again maybe we’ll be a celebrity through this blog in next 9 years and never have time! Like I said there are a lot of things we are ironing out. In past few months I feel like we have a better handle on expense side of things even with a lot of eating out. I hope to add the next part on the Saving Money series and probably start a monthly expense tracker on the site (like this one here though not as fancy).
On a side note it is next to impossible to get decent stock images for healthcare with US ACA issue splashing all over my screen. We request you to avoid having the same discussion here as well.
As you know the biggest reason for us starting this blog was to share and get feedback of our plans. We are really grateful for all the comments and suggestions we have received and would love to know, what your contingency plan for healthcare is.
May marks the anniversary of the blog and I have to sadly admit we only shared a little of 20 posts in one year. As I have said ad nauseam, work has kept us pretty busy this past year and we aim to do much better. Our goal to get better covers our investment decisions, consistency, health and definitely our spending. We had stopped publishing expense reports because I thought who wants to know how much I spend on buying the essentials. We decided to start again as it allows me to write about us and also because we realized that spending was a major issue.
May was a month of realizations both financially and personally. As we polished the FY update we saw how much (more than our expectations) we had racked up. We also realized how long way we still have to go. Work kept on getting stressful and thankfully we found ways to get away from it though not always.
Past month we managed to squeeze in a quick pilgrimage with my parents and Mr. S’s parents are with us ready to go on their trip, as you read this. Spending time with our parents makes me realize again and again that one of my motives to retire early, is to give them more time when they will really need it.
Our spending was quite under control though we did eat out and finally saw a movie after June last year. We also managed to reduce our electricity consumption in April and paid just Rs.510 for it in May (not owning an AC helps a lot) . I am really hoping we are able to reduce it even further and a number in late 300s would be sweet melody. We live in probably the highest per unit rate city and seeing a reducing bill feels great.
We have been trying to reduce a lot of stuff that we have and we did sell a decent mount of both steel and plastic wares for a small amount. More than the money we got out of them, we managed to free up some space in our tiny apartment. Next action was to sell some of the big living room furniture and replace it with a futon. Futon will allow us to retain our bed when an elderly (parents mostly) visit us and we hand over the higher bed to them.
So let’s see how we actually did
How we track our spending: We started with Andromoney to keep tabs on our spending but it was tiring, even though it was accurate and gave us detailed breakups. These days however we use a simple google spreadsheet and it works fine for us except I miss those charts.
Grocery (We usually order online through Big Basket (affiliate link) or else we buy in bulk from the super mart nearby. Small purchases are from nearby market.) – 4147.42
Eating out (Includes what we paid the lunch lady in office) – 4483.96
Entertainment (includes house parties and movies)- 569.72
Utilities (includes internet, gas, electricity. We currently don’t pay for water separately)-1310
Side Gig expenses (money to run the blog and freelancing tools)-949.9
Other household stuff (DIY kitchen hanger of sorts and cleaning brushes) – 487
Bike maintenance and petrol (as you would remember we don’t own a car) – 450
Personal grooming (haircut for both and hair removal for one) – 690
Total expenses= 13,897/-
This is the first time we have not only met our target but also surpassed it. We managed to run quite a tight ship here, but we have to admit a lot of fluff could have been cut (including the enormous expense on eating out). Our biggest goal this past month was to buy fewer groceries which seems to have paid off a lot. We would usually buy a lot of variety and then rarely consume all of them before they run out.
In May we ate lot more vegetables than we usually do and a lot of that was through fried rice, burrito bowls, tacos and the likes. That meant a lot of fresh produce was eaten and a very small amount was wasted.
We did cook quite a bit at home but relied on rotis from one or the other lunch ladies. That did cut our expense down but not by a huge margin. I am hoping I start making decent enough chapatis to cut the expense down further.
We have managed to identify some sweet deals around on food we like to eat. There is one place which sells sushi on 1+1 on a weekday and another which has unlimited pizza on Fridays. Our movie tickets were also discounted using an offer on VISA cards.
Like everyone we still make excuses for everything from how we would not be spending on gifts every month or how we don’t get our hair cut every month. However we know with our expense records last year there is something or the other that crops up every few weeks. If we want to make the retirement budget reflect where we are realistically we need to have some factor of safety built in.
We are again aiming for a budget of 14K in expenses beyond rent and EMI for June. We have family visiting us right now and have eaten up a considerable amount of the budget in these 5 days. Add to that a strike which has inflated fresh produce prices immensely.
We work in a job that can get stressful and irritating not because of what is in your job description but due to the people we work with. There is indecision from higher ups, inexperience and incompetence at all levels and then there are people who expect you to hold their hands as they do their jobs. Before we go ahead let me say this, neither one of us is a saint and we are incompetent to take up quite a few tasks which are thrust upon us.
In past 6 months we have barely managed to trickle out a post a month and the reason is sheer exhaustion after work. We work 5.5 days a week and around 9 hours make it a full working day. Do we enjoy what we do? Yes quite a few parts of it are really enjoyable and rewarding as you can measure personal and professional growth clearly and it is in a public realm. There are quite a few parts of it which are simply disturbing in all senses.
Past few months we have been managing a team while it was not our place to do so and in our field being young is seldom an advantage. With huge egos and general belief that young ones don’t have any experience it becomes a task to handle ‘big people’ and meet timelines.
This is more our fault than others around us. There is a reason job description and titles are created in a workplace. The reason is so that people don’t interfere in other’s work and that they are not bogged down by unreasonable requests. Fields which require immense collaboration result in overlapping roles and expectations of you filling in for others or guiding them how to do their jobs. That however is the role of their manager and not yours, unless you are their manager. We have often times failed to understand and limit ourselves to our role and we have seen both benefits and drawbacks of doing this.
We have been appreciated multiple times but there have been many who have taken offence at someone exposing where they lack. Have you seen that Hidden figures scene where Katherine answers in a meeting what her boss is fumbling papers for. That is never fun for the boss unless she takes pride in being supported by good people.
Educating each other is a part of any job and allows any organisation to run seamlessly and for employees to actually take time off. However when your colleagues start relying on you for every single task you have managed to put yourself in a corner. Each one of us has struggled with getting work done especially if it involves working with another team.
What we learnt
Last few weeks have however taught us multiple lessons which have not just helped us increase our productivity but also reduce our stress and workload.
It is just work. Before you started working similar work was being done however inefficiently it might have been. As long as you are not the cog blocking the machine you should not be worried about job not being done. Do your part and let others catch up. Even if they don’t improve you can be assured that the end result will be achieved. It might not look exactly like what you wanted but there will something at the end.
Personal responsibility is better than collective responsibility. Do your job first before you start helping people with their. If you job is to manage others do that before you tell a junior how to insert that image in the presentation. Focusing on your own work and actually finishing it will allow you to accomplish more in the same amount of time and go back home a bit lighter.
It is not always good to help people. Let it be clear if you don’t help people around you at all you are a bad person. But if you help them so much that they can’t do anything without your help you have created a monster for yourself.
You have to learn to turn off your job mind. There are people who rely on their jobs to define them. Let’s be fair most of them don’t really worry about early retirement. It is not the worst quality but seriously a job is one of the most likely things to go away without any notice. It is therefore stupid to carry stress from a fleeting thing into your private life. That being said we have been some of the top notch stupid people in that regard and we accept it. Does it require a kid at home to force you to think about more than your job or is a hobby enough or should you start a blog? Who knows, as long as you get out of your job both physically and mentally.
We have been working on ourselves and learning how to distance ourselves from our work and actually enjoy the time we have on our hands. LivingaFi’s blog is probably one of the best boosts you will need to realize you are not alone and there is light at the end of the tunnel.
Is there any work related story that you would like to share? Or maybe what drives you to FIRE?
We have been trying consciously to reduce our consumption and expenses. Surprisingly the easiest area to cut was the kitchen. Utilities, rent and maintenance of other moving parts did also reduce. For quite a bit of time we have been thinking of detailing how we are saving money so that you our readers can help us find areas we should be looking at.
We live what we believe is an average urban Indian lifestyle though with a few tweaks. Before we move ahead and let you know what we are doing with our money let’s clarify the lifestyle definition a bit.
We live in one of the major Indian cities with an above average paying jobs (not by IT standards) at a multinational company. Our palates are best served with a wide variety of cuisines and we enjoy travelling a bit too much. We visit malls and restaurants and use taxis whenever required to ease our lives. Internet is a necessity so is a clean and well maintained living space with light and wind coming through windows and doors.
We do differ a lot from the other comfortable aspects of urban life which seems ubiquitous in every Tier I and even Tier II city. Let’s get on to what all we have cut from our lives which we think saves us a shit ton of money.
Yes you read it right we don’t own a car. Why you ask. Simply because we don’t need it. We live quite close to work and our trusty 5+ year-old motorcycle works amazing at ferrying both of us to work and back in 10 minutes. If traffic is particularly bad we spend 15 minutes on the road.
The bike requires much less space for parking and it is cheaper to park it in any mall basement compared to the smallest of cars. It also requires far cheaper maintenance and less petrol to ferry us. The truth is we spend maybe 500 on petrol every month and ~1000 on maintenance every two month.
Without a car we are much more mobile for our jobs. When we did move last year it was a pretty easy task to get the bike shifted and transferred on office money compared to colleagues who moved their cars.
When we have friends and family over or we want to go somewhere far we hire a cab. Someone else deals with traffic, we don’t have to worry about parking and most importantly we have never paid any capital to buy the aforesaid vehicle.
We do believe our requirements will change especially if we have a kid. Maybe we will buy a car but I doubt that. If we do, I have my eyes set on a used TATA NANO simply because it will get us from one place to another drinks less and costs way less.
If we do want to experience the luxury of a high-end sedan or sports vehicle well I’ll just rent it for a day and save us from sinking a considerable part of our net worth in a depreciating metal shell.
Estimated savings 3K (based on around 5k people spend on their cars a month also considering occasional taxis for family)
Live close to work.
Like we said above we live 10 minutes from work and to be true on really bad days of finding no transport we can easily walk to work in 20 minutes. It is also something we would have done had the roads been walkable and we weren’t this lazy. We do pay a pretty penny compared to those who live over 30Km from office and commute for at least an hour daily in public transport or 1.5 hours in private cars.
Call me crazy but I don’t want to spend my life sitting on the road for over 10% of my awake hours every day. Living close allows us to get up way later than we would have to do if we were living further away and that is a big bonus for me.
We believe our quality of life improves and dissatisfaction reduces with this short commute. We always know that in 10 minutes we will be in a much better and private place which keeps us far grounded than if we had to stew on latest irritating thing for hours on the road.
So how does that help us to save money?
When we are happier we tend to buy less and think much more rationally than justifying everything with ‘I live a hard life and I deserve this’.
We also spend way less on petrol and maintenance than many people do. We also don’t have to worry too much about safety on motorbike in long commute hence we comfortable get by without a car. If our vehicle breaks down of a random nail punctures the tire in the morning it costs us barely Rs.30 to take an auto and get to work.
We cook much more and eat at home than we would if we had to be commuting for hours. Unlike many families we also get by without any hired help because we have time on our hands to actually do chore. Whether we do them or not is a completely different thing. We have not eliminated eating out completely but we have drastically reduced it.
Estimated saving – around 2K (in direct saving in not owning a car is not included and can’t price peace of mind)
We don’t own a TV.
Well that would just save you a few hundred you would say. Those hundreds do add up. The truth is I hate television and it’s capability to completely suck a person’s attention. We do consume a lot of TV’s content but we both believe we have much power over what we watch with a laptop and internet than we would have with a TV. Months go by and neither one of us is aware of the latest advertisement urging people to buy or latest fluff which people seem to love. I have a long-standing issue with the content televised because it is mostly negative and I would be hard pressed to remember a good prime time show on any Hindi channel.
We have also been away from the cycle of change that televisions seem to go through in people’s houses and the initial money that is sunk into the set. If I were to buy a TV today it would cost us a significant part of our monthly rent if not a full month’s rent to get one. That does not seem like a good deal.
Having more time and not being inundated with adverts allows us to make better spending choices and just keeps our life generally happier in our opinion. If someone is visiting they are welcome to use the internet and their handheld device/laptop to stream whatever they wish to see.
Estimated savings Rs 500 (considering service provider’s bill, electricity and any other repairs required)
We don’t have an AC.
We live in a city where almost everyone owns and runs an air conditioner. To be true all through May we were debating if we should buy an AC because we weren’t sleeping well. We solved our problem with open windows and a mosquito net first and then realized living without AC was feasible. The weather has taken a turn last few days and we hope to see some showers soon. Humidity though really makes me want to buy one. We are in office during majority of the day; our flat is blessed with good wind and huge windows which don’t allow us to justify the purchase. Fans work but Air coolers don’t so we consume very few units during summers compared to our neighbors.
We are sure we will be discussing this purchase again next year, unless we end up living in an apartment which is even cooler than the current one. Neither one of us hates the sweet relief that AC provides in fact we enjoy it plenty on our travels. However, on a daily basis we let our office pay for our thermal comforts during the hottest part of the day.
Estimated savings – 3K (considering repairs and electricity consumption)
We have always been ones to reduce wastage but the truth is we had no clue on how to actually reduce our consumption. Last year we have re-learnt how to buy and consume food and related items. However we have been quite particular about our energy consumption and in past have been blessed with bills amounting to as low as 300.
First few electricity bills in this city were all above 1000 and use of Induction cooking top was the reason for it. This past month we paid 510 as our monthly bill in one of the most expensive utility rate area. We are quite conscious that this can further be reduced and are looking at how we can achieve that.
Another utility which has saved us quite a bit of money is gas and for some reason we have not consumed as much of it as many do. Maybe it is because we rarely feel like spending hours cooking things, share cooking load with our oven and never boil water for any other purpose on the gas. Even when we did not have the luxury of piped gas, our cylinders lasted anywhere from 4-6 months.
Estimated savings – Rs. 500
We stopped buying stuff.
I have written about it before but seriously if you saw how many of those tiny cute things we own you would think we are insane. Well, unless you have your own stash of useless trinkets collecting dust and taking up storage space.
If I say we haven’t bought anything in last one year that would be lying. I have practically replaced almost all of my 6-year-old plastic storage containers and replaced them with new containers. We bought a few plants to liven up our living space. Bought containers to store meals, carry and freeze them better… you get the drift. But we have not bought any trinket which would look very pretty on some corner of our house.
Not only did we stop buying stuff we also have started reducing the amount of stuff we own. We recently sold bags of stuff for a very small amount but they are now out of my house and not adding to the clutter. After purging and donating bags full of clothes last year we have again managed to suddenly purge another big bag full of clothes we don’t can’t or won’t wear. Since April we have spent a decent sum on clothes for both of us only it has come from free credit from our company and will help us reduce our tax liability. A lot of older clothes are now again in circulation since we can see them in the closet. (On a side note, ladies can you help me with a pair of jeans which doesn’t shred around the inner thigh area in a few months?)
We have managed to look decent for work and lack of expensive new clothes has never impeded our performance.
We are also constantly questioning if we need to actually own a particular item or replacing it with something will actually serve us better. We are looking for buyers for our living room furniture which after 2/6 years is not what our current lifestyle requires. If all goes to plan we will replace 3 big items for 1 and make a bit of money as well.
I cannot insist how calm and happy open spaces make both of us feel. We are quite messy people and none would credit us for keeping the house clean but we abhor clutter and filling every corner with stuff.
Estimated savings – 1K
Kitchen has been one of the biggest sources of our savings and it really deserves a post of it’s own. Above are just the major contributors to our savings and have resulted in small changes which will help us in the long run. One of these changes is being at ease and comfortable at home as well as reduced urge to buy stuff.
Total Estimated Savings – 10k
We are aware that a lot of our savings are derived majorly from our decision to live close to work and many would argue the extra 10K you pay in rent equalizes everything. Well not really, anyone commuting for 50Km per day is spending around 4L petrol in a decently efficient car. This would in today’s prices result in around 280 per day or 7000 in just gas. Added expenses, like house help would then bridge the gap between the differences in rent. I would rather sleep more than spend the same amount for false sense of savings.
Saving money is one of our favorite topic to talk about with anyone. I intend to write more about this and would like to know what do you believe is holding you back from saving more. What are the ways you are saving on your expenses and where do you think we can look for optimizing our expenses?
First salary of FY 2017-18 is in and invested. It sure isn’t very interesting when you do one transaction and all of your investments are done for the month. There is no real thrill of researching and reinventing as you go along once you narrow down on a strategy to Financial Independence.
We started last year on shaky legs still learning to walk the financial planning bit of our lives. We were clueless about direct investing in mutual funds, zero brokerage trading(affiliate link) and more importantly the real long term game.
As we put first of our saved money, into various mutual funds we learnt we might want to change our approach to what we thought would suit us better. As the year went on we realized these early years are the best time for us to experiment with the investment strategy.
Below is an account of how we decided to save our money and how it went for us.
Most investors in Indian markets would advise to put your money in something which has high growth potential and it is still possible to beat the market. Why? Because we are still growing as an economy and a lot of measures are being taken to take us from a developing to developed nation.
With the urge to beat the market there is the need to know what will let you achieve the beating. We have no clue (like most around us) and we know we are in it for the long term. We know that the market will go up in the long run however the share or sector we bet upon may completely vanish the other day. You can easily ask those who lost money of kingfisher airlines or on businesses which are redundant today.
It was surprising for me to know that SENSEX and NIFTY change every day in how they weigh the stocks in the index and which company should be a part of the index.
With the uncertainty which accompanies making specific choice and our need to keep the money alive for as long as we can, index funds become the best choice.
Lower expense ratios are just added bonus and with the (late) discovery of direct funds we are paying as less as 0.3% for majority of our funds in expenses. This might not be a valid point for many but we don’t believe in sharing the returns of our money unless we have to.
We have thought of adding a few sector specific funds to the portfolio going forward but have not been able to justify the purchase. We own a few other funds some from before we decided to take charge of our finances and others as an experiment.
I am sure you can see where we believe our money is best invested.
The Dividend Gamble
In last November we started another experiment to see how dividend stocks would work for us. We started small and we have been keeping our holdings within 10% of our net worth. The reason for this is twofold one it keeps more of our money in other long term safer holdings and secondly we accept we are no stock picking experts.
We are still at the experiment and did pump a decent sum around March. However we are probably not buying a lot more individual stocks in near future and definitely not making individual stocks a majority sector in the portfolio. Since we bought the stocks in last few months on the FY it is not fair to judge how much dividend we got out of them. That analysis I would hold back for the next FY.
The Real Estate Factor
It would be stupid to not talk about real estate as a major contributor to our net worth. We do get a monthly rent but we do not include value of the house when we talk about our net worth because we don’t own it outright and because that value is never absolute.
Currently we are landlords for the only flat we own and additional money sure doesn’t hurt. We have gone back and forth about whether we want to add more properties to our portfolio. Over multiple discussions we have gone back and forth about our decisions to buy but the answer for now is – no. This stems not just from our desire to keep our lives simpler but also because we don’t really have spare money to put into a non liquid asset.
The Home loan
As said above and in multiple posts here and here we own a flat. We also own a home loan to go along with it and it is more than what the rent covers. Last year in April we equated our home loan, using the overdraft facility offered by our loan provider. That meant we would not be paying any interest at all and our loan would eventually end earlier. At that time it felt like the best use of our money and a guaranteed way of ensuring we do not default on our loan.
Around June we had started challenging our financial beliefs with something known as maths, which told us this was not the best approach. We ran multiple scenarios which helped us determine the best ratio between offsetting the loan and investing in other heads. We have since reduced the amount we maintain in the OD account and have invested remaining.
The OD account is our emergency fund account which allows us to travel (replenished by us) dole out money when needed for family emergencies or invest in bulk. Currently we divert rent collected to this account which allows us to take money out without making a huge permanent dent in the account.
We had been following NPS for sometime but it wasn’t till late February that we seriously looked into what this instrument can do for us. We found that it is a good way to both save today as well as let our money grow without any interference from us for a good time. We have opted into the aggressive plan which invests 75% of our money into stock market using funds and remainingn is split in debt instruments. This is in line with what we intend to do with our money anyways.
Before we invested in NPS we were aiming to max our contribution for PPF. PPF in its own right is a great instrument to let your money grow but being an interest based option it does not provide the benefits that NPS does. We are currently aiming to put 50K each in NPS to get the extra tax saving we can and keep on contributing 1Lac to our PPF.
In our tax bracket we are able to reduce our tax liability 20K while investing which makes it a double benefit deal.
We are blessed with a profession which allows us to earn some on the side without flouting company policies. Even though with increased workload we have not been able to grow the revenues we have however been able to support a big chunk of our travels through it. That has allowed us to build our stash and not feel trapped into the grind completely.
As we work towards re-balancing our lives and learning how to say no to unfair requests at work we both hope to achieve better quality of life and time to increase our side gig earnings.
The Life Changes
Apart from what financial changes we made including reining in our expenses last year led us to multiple personal changes as well. We are now much more conscious of both spending and consumption. We have always known how much we spent past month but how that relates to our overall goals was never clear. This was perhaps because we had no goals we were aiming for except for finishing our mortgage.
Our life has much more clarity now and we have far more discussion about where we plan on being in next decade and decades after that. There is a certain amount of satisfaction in inching our way to the goal.
Before this we were usually looking at our expenses and the amount left from income as potential expenses. Now every penny we make is a way for us to get out of mandated working and allows us freedom to choose how we wish to spend our lives. I feel much more at rest mentally about our way forward and running multiple scenarios has led us to for the first time settle into our current job. As we said here we firmly believe saving is more of a mind game than a money game.
We are always open to better opportunities but knowing even in current job with its job security we are on our way to ensuring a far better and relaxed life than many around us. We get frustrated every now and then but know we are not in deep trouble with where we stand today.
The desire to be able to work on our own terms has reduced our desire to own more stuff. We have been actively purging our belongings and have reduced a lot of clothes, plastic ware and small knickknacks which have been gathering dust in various storage locations.
This is also the first time in years that we have a household which we run completely and it has taken us over a year to realize we can finally grow some roots. We can choose to retire from this city if we want or swap to another once we have the chance. Like I said above we know even while living in this expensive city we can get our numbers to work. Even if you are not looking to actively save or retire and would rather spend every last penny you earn, take the time to think and decide where you want to be in five or ten years from now. If you are worried about what you can afford or how much you can save in your current situation running a few numbers can help you reach answers quicker.
How do your investment breakups look? What category of investments do you believe are best for you?
This was perhaps the best thing that could have happened to us- a reality check. This post had started completely different. We felt that we did really good last year especially with our clothing and heeling purchases. Guess what that didn’t happen.
When we started working I was very much interested in getting myself a shoe collection to rival Carrie and a decent set of clothes to go along with my clothes. I did manage to deck out way better than I do today. Washing clothes was a big chore without a washing machine so before I outsourced the chore I would rather buy a few pairs than wash stuff. I had left home with a suitcase and the day and the day I shifted to our first married homes I had a huge taxi full of stuff. This was after I had thrown away quite a bit of stuff.
Once we moved to Hyderabad being married caught up to us and as we started to travel more buying clothes seemed like less of a priority. This does not mean we never bought clothes, far from it. This was around the time when online market places has risen their cheap heads and we enjoyed shopping form our bed quite a bit.
However both of us were under the impression that last year we had been good kids who did not waste a lot of cash on clothing various parts of our body. Oh how wrong we were. Once we sat down to count clothes and shoes bought we came to following total
1 pair of shoes
1 piece of ethnic wear
Total- 4 items
2 pieces of ethnic wear
1 pair of shoes
Total – 8 items
It might not sound that bad with just 12 items bought under various heads, but it is way more than I was under the impression we bought last year.
The Bottoms Problem
The worst part is both the jeans I bought just didn’t work and gave up due to my perfect (absent) thigh gap and I am in the market form some new ones. The pairs of shoes we bought are working great for both of us especially in rains. The pouring ruined my comfy leather shoes before we invested in crocs. The ethnic wear was for a close friend’s wedding and since we don’t wear or use them often older ones didn’t fit or were missing a component or two.
You know what I did above? This is something we have both been doing a lot lately and most of us can easily be accused of. I am making excuses. A lot of above are real facts and situation which needed some expense at that time but not all of them.
Fighting my own excuses
When the jeans gave away around December I was left in a lurch with just one pair of trousers to go with everything I wear to office. Around this time we were on a drive to save maximum amount we could and we were both feeling we can do better. I did not run out to buy another pair right away. Instead thanks to some health related changes and some weird coincidence I has lost a good amount of weight which meant a few older clothes started fitting again. As I write this I am wearing a top I bought way back in 2012 and hadn’t worn in last at least 2 years.
I also started to wear whatever kurta pajama fit me, to office. These usually require ironing two things instead of one in the morning and there are no pockets,so I hardly wear these.
But this time I was not making excuses and had decided to postpone any purchases off to next FY (our office subsidizes office wear for a certain amount each FY).
I now plan to go through my closet once more, purge things which have un-mendable holes or stains and things which I can’t fit into. Next step is to mend things which can be mended and then decide if I am really running low on clothes.
In last few weeks I was gifted a considerable sum as gift cards for a big chain. I can use it to buy clothes for free or I can buy stuff I think I need for my house (which is probably just want) or I can give it to someone as a gift or exchange it for cash with someone who is going to shop there anyway. To be true I was not considering any of these options a week back. Till then we were martyrs who hadn’t bought anything in one full year.
This does not mean that there are no clothing purchases in near future especially if I keep on losing the huge amount of excess weight I have on me right now.
This is not just about our clothes. This feeling of martyrdom and complacency extend to more areas of our life like eating out and cooking. I have been feeling like shit and the job has suddenly become quite tiring of late. We work half days on Saturdays which means only one day to sleep in. this means none of us is really in the cooking mood especially for something to carry to lunch. We have spent a small fortune on eating out in past few months.
I am someone who strongly believes in not killing oneself for every tiny penny and some days did drain us so much that we could barely eat takeout before we crashed. This is not true for a lot of days though, days when we have been busy watching something online or playing one game or another.
It extends beyond clothes
Eating out is one of the biggest drains on our income and has definitely affected our savings rate. We both love food and it is really difficult to not feel like you deserve a relaxed evening when you have been working your ass off for over 10 hours. It is also equally stupid to define every indulgence as I deserve it because I did that.
If we look deeper I am sure we can find other things where excuses have crept up on us. Thankfully we are not making excuses like ‘… it is expected of us to do …’. To be fair we have succumbed to multiple such lines from our parents which drive us nuts. Thankfully we are not making these excuses to ourselves.
It is such a weird thing, life catches up to you and you miss a step without realizing what has happened. Last night was another such realization. I haven’t been at the top of my health lately and it has become a constant source of stress for me. Last night however I had to cook and finish off the perishable food we have in the fridge before we leave for a vacation. Suddenly it did not feel as difficult as it had been previous weeks, once I started.
Have you ever been under a strong belief about yourself or your belongings and have been proven wrong?
In most of the big cities around the globe people live around 20-30 Km away from where they work. There are many reasons for this decision but one of the most important one is rents are higher closer to work than 20Km away. When we shifted to the new expensive city we also had to make the same decision.
We considered our options at length and came to a few conclusions:
None of us wanted to spend over 3 hours every day in traffic burning our money. We value our time and both of us get cranky when we have to spend extended hours in sun and rain doing nothing more than getting from one point to another. In a city known for its traffic jams you would have to really love sitting in a car to be able to justify 3 hours a day.
We wanted the flexibility of leaving work early to get something done at the house or not taking entire day off because something had to be fixed. In past one year since we have moved we have had multiple handymen come in at odd times, a lot of things delivered and for most of the things it has been possible for one of us to take a quick ride to home and take care of things. This is also quite handy when family is visiting.
We don’t own a car and moving 20KM+ away would require us to trade our trusty motorbike for a car. This would mean a lot more money than we would like to dish out on commute. This regular expense would be in addition to shelling out monies to get a four wheeler.
Meeting future needs. Currently there are just two of us but if we do extend our family we would need to be able to run the triangle of home work and day care. Increasing the distance simply did not make any sense. To be fair we have not raised a kid before but none of us were interested in keeping the child on road for long traffic logged hours.
Above are some of the reasons we decided to live within 10 minutes driving distance from our house. That being said we have spent over 20 minutes covering the 2.5km ride because of traffic, congestion, broken vehicle rains or marches. Now imagine how much would these factors affect longer commutes where your time increases at every single red light you have to stop at.
But there are some other factors which might have affected our decision
Even though we can easily afford our current rent, which is over 10K higher than the cheaper suburbs, it does make us question our renting choice multiple times. For many however 10K might be the difference between taking up the job or not. Commuting longer to ensure that you can actually work is a great option provided you cannot find a new job closer to where you live and you cannot find an alternate living arrangement like hostels or paying guest/roommate setting.
We are also blessed to be a dual income household (which does affect our affordability) where both partners work around the same location. This has allowed us to share commute costs as well as ensures none of us have to face longer commute. Most people work at different location than their spouse. So it might be a conscious choice to live closer to one of the spouse’s work in case the spouse is responsible for household errands, managing kids or has any other constraint where being closer to the house is better for them.
We value our time a lot but we also value our living conditions. We are usually not interested in swanky apartments (unless someone else is paying for it), but we need decent clean surroundings and good construction. Our definition of that though might be very different from someone say with kids for whom a park nearby is a requirement. Same people or those taking care of elderly parents might feel a safer environment to be a gated township/society. We are sure we will require these at some point of time, today however we are perfectly content with where we live.
We have parents and guests who live with us every once in a while. We are happy however renting a 1bhk instead of a more common choice of 2bhk or 3bhk to provide for visiting family. We are happy to let our parents use our bedroom and lay a mattress in living for a few weeks in a year that they are here. There are many who rent bigger simply because they need to have space for people to come and visit. If that is a need you would probably be better moving out to suburbs so that you can afford a bigger dwelling.
A few of above factors are the reason why we rent far cheaper than a lot of our colleagues living within the similar distance from office. Others who live over 30Km away spend hours travelling back and forth though a few of them do get the benefit of office provided transport.
Two of the houses we liked last year were 1 bhk and 2bhk for 23K and 30k respectively. Though we deeply debated the pros and cons with the later coming ahead on locality and building services our current location won in terms of price, proximity to office and being the amount of house we could maintain.
Currently our housing expenses make for over 50% of our household budget and we intend to increase the number by reducing our monthly expenses. With current 10% increase in rent we would have spent almost 4 years in the house before the rent would catch up to the other house’s starting rent.
What have been the factors you considered before you decided how far from work you live? For those who own their house this might have a lot more factors but I am sure we all have theory of what is the best option.