We made mistakes, thankfully we know better now

We have learnt and most importantly unlearn a lot of financial truths over a very recent small period of time. A lot of financial mistakes were made; rectified and right course was sought. I have written about frugal life a bit but this post is focused on financial decision and not saving percentages.

Let’s start with our financial mistakes:

No research

Both of us pride ourselves on our researching capabilities so it was very humiliating to realize what a fool we have been for last 5+ years. Seriously I have been kicking myself a lot lately. If you have ever thought, that the option before you is quite comfortable and will take away a lot of work; STOP and research it’s real cost to you. We realized if we hadn’t course corrected we would be donating pay checks at one financial service provider or the other. Paying out of our pockets simply because we did not know what options we had is not just stupidity it’s financial suicide.

Fees

Did you know that there is an option to buy mutual funds directly from the AMC which run the fund and not through DEMAT providers, distributors and advisors. It might not have been a very easy thing to do earlier but over past few weeks since we invested in our very first index fund we realized we had been paying a huge variety of fee. This is definitely not a variety I like especially since it can be resolved with nothing but a few minutes of your time. Here’s a brief view of varied fee you would typically pay for a single mutual fund transaction over and above the actual comission.

Transaction fee: varies from 100-150 Rs for lumpsum purchase and 30Rs.-1.5% for SIPs. A few providers don’t charge you anything once you rice above a certain threshold. Here’s an example from ICICI.

Service Tax: yup you pay additional tax on the fee that you are charged to buy the fund through the service provider.

Commissions/higher expense ratio

If you buy through any agent you are liable to pay a commission, but most of us believe it is a onetime commission paid when you buy or sell. Now this is where we are wrong, most DEMAT providers get trailing commissions. In short as long as you hold the fund you bought through them they are getting a commission. If you do use the personal advisor or other such facilities there might be a good reason why you would not feel bad about parting with your money.

We on the other hand were always involved in our own researches though not always the right criterion were used but we knew what we wanted to buy and for how much. W paying so many fees just feels wrong.

Not investing in Direct funds

I had no clue that there was an option to buy mutual funds under direct scheme. This means that you are buying directly from the AMC and are therefore not required to pay for a distributor’s cut. Remember we did our own research and just used the Demat account as an easy place to buy funds this option would have saved us a lot of money.

For example in the clip below from OROWealth the saving vs. regular is the difference between buying a regular vs direct mutual fund.

Direct Funds

If you are confused as to how much of a difference this would make imagine loosing 2250/- for every lac you invest every year. If your investment funds in 10s of lacs or is above 1 cr the fee becomes significant. Money lost on a fund of 7lac in a year is currently more than what we spend per month. I don’t see the point of missing out one month’s sustenance every year.

Buying wrong funds

There are so many ways of saving tax and tax saver mutual funds are one of them. I thought they are the best ever tax instrument since you get a good rebate while you buy a mutual fund. Now I know that is not the case, why you ask. Remember the fee I talked about, they are too high for the tax shield/saver funds. Also PPF is one of the better ways to save tax and diversify your investments, which I will discuss a bit later.

I am sure you would have guessed who I bought those finds through.

Listening to advisors even those who call themselves your friends

Like someone said yesterday over at MMM forum no good deed goes unpunished I trusted a friend and found out I was a fool. He might not have started off with the intention of giving me shoddy advice but that is actually what he did, and all of that for some commission. Needless to say, I won’t be taking advice from someone any time sooner. It is quite possible, that he really believed in the product he sold to me around 5 years ago. I have learnt to research the hell out of suggestions after dubious results from following the suggestions of someone who was a trusted colleague and an advisor.

The biggest mistake ever

I love shoes and am not ashamed to say so. When I started working I would buy shoes every week thankfully I could not buy them full price yet so I took advantage of sales all around us. Mr. S on the other hand would not spend a penny if he did not have to. Result was he had over a lac saved in first year of our jobs and I had barely a few thousands. I was almost always in debt, only the lender would usually be my then boyfriend now husband. This did not change till we began travelling more and more. Now every shoe I bought was a night in a faraway place I was dying to visit.

The biggest change in our money outlook happened when we were moved to the expensive city. With rent three times of what we were paying in the previous city, higher taxes on every shit and no real raise we had to do something or else we would have never been able to equate our loan*. In fact we would have been eating from our savings very shortly.

Had we taken the approach we now have to our finances and running our life we would have definitely been far closer to our goal.

*We equated our loan but rerunning our calculations made us realize there is a much better way of using the money. I will probably write a post about it soon

Early Retirement in India- How much do we need

Early retirement is a dream but it is a scary thought as well. We have read through a lot of stuff about how much you need to retire. Most of the work done is not in Indian context but we believe a lot of concepts are actually same.

We have used a few blogs and articles for our research both Indian as well as those applicable to other parts of the world. This is probably going to end up being a series since there are a lot of concepts which have contributed to our final figure.

This post talks about how we have come to the number that we have. There are a lot of detailed description of our thought process which I agree might not be required all the time.

Assumptions:

Most of our assumptions are just that, assumptions a few like groceries, and utilities are based on our actual expenses these past few months. Needless to say as the assumptions change so will the calculations.

Inflation

We assume an inflation rate of 6% in all our current calculations. Many recommend 9% inflation rate but seriously I don’t believe that is required. You can run these numbers for various inflation figures if you would like.

This calculator at Big Decisions allows you to see how various components of your monthly spending will increase. It tells us that our current expense categories will inflate at about 3.33%. We know that we currently do not have a lot of expenses that come with having a child like day care, schooling and healthcare. To cater to those expenses we are currently calculating at 6%.

Home

We currently rent in the city we live but also own a flat in another city. After we retire we will definitely be returning to the flat unless we decide to settle down in a much cheaper place or end up buying another property. So in our assumptions the rent after retirement is considered 0. Though we have included maintenance charges and also assume a property tax of 30,000 per year.

Utilities

Our electricity bill has been a bit skewed with induction eating away a substantial part of it (we assume), since we now have gas connection in place we hope to go back to our earlier energy consumption level. We don’t own a AC which helps us keep our low along with the fact that we are in office the entire day and usually use the same room during evenings and night resulting in less power consumption.

Internet is our requirement so that will remain as a fixed utility. Our apartment complex allows for water to be included in the maintenance charges so that is not a part of calculations. A cooking gas cylinder of 14.4kg lasts us around 5-6 months and costs ~ 1000/- our current cylinder is 17.4Kg and cost us 1200/- we assume it will last us 6 months so the cost is prorated. We do not use gas to heat water for bathing or any other purpose except for cooking.

Groceries

We are trying to increasingly cook our food at home. But we have accepted that we can’t always manage packing lunch. So we are currently ordering packed lunch from a lady who delivers home cooked food. When we retire this would go away and we would be cooking on our own. Currently I am trying to move to more organic way of life and from June’16 we are trying to buy more and more organic produce.

I hope to grow some of my vegetables especially the greens but since I cannot be sure of it I am still going to assume the same grocery bill as we usually have.

Child care and education

We might have a child in future and that would in pure financial terms mean extra expenses. Though we assume that we will be very frugal and teach our child the same values, we know we will be spending more. That is the reason why there is a child care cost column in the expenses.

We might in future decide to home school our child which would take away most of the costs.

Healthcare

We currently have very few if any healthcare expenses. They range from a cough syrup in a month to no expenses at all. Both of us are currently free of any life threatening or lifelong diseases. This is why we are hopeful we will not end up spending a huge amount on healthcare expenses. Still we have included the amount the tax-men allow us to deduct from our taxable income.

So what do our expenses come down to?


S.No. Expense Head Expenses Remarks
1 Utilities         2,000 Includes:
Electricity, Internet, Gas
2 Grocery         3,000
3 Eating Out         5,000 Based on our recent months we are working on reducing it
4 Child Care      10,000 Apparently education is very expensive and so are day cares!!
5 Parental Support      21,000 This may reduce if they decide to come live with us. Or may remain the same
6 Miscellaneous/ Other expenses 3000 No clue where these come up from but they do every few month in different roles.
7 Medical expenses 2500 This is the tax deductible amount that we have.
Total monthly expenses after retirement in today’s rupee      46,500

Taking money out

When we do retire at 40 we can expect a non-inflation affected expense of 46,500/- with some projections and an inflation rate of 6% this comes out to be 83,274.42/-. This puts our annual withdrawal at around 10 lac.

Now let us play with our projected expenses and also assume that we will not reduce any of these. Following calculations use an approximation of our expenses to show various scenarios. Let’s start with a case scenario where we have managed to accumulate 2Cr. by the time we plan to retire which is around 2026.

Let us assume that we will earn this income from our investments and return from our investments is an average of 8%.

This is how the table looks

Early Retirement
Withdrawal from 2Cr.

We should be free of child care sometime between 50-55 years, depending on how brilliant she turns out. If we are blessed with a highly intelligent child who gets scholarship for everything guess what, expenses would probably be far lower.

The trend post 60 is what anyone would be worried about- we are eating from our reserves instead of eating from our returns. A few factors can get us back into good graces, like a lower inflation rate and a higher return on our investments. Since we are all pessimists here we are not going to change these return values. We will allow our expenses to increase by 6% every year and we will let our return make no more than an average of 8% per annum.

Corpus required

How about we increase the corpus we have saved. Now I believe I am going to grace this earth with my presence for a long-long time, still being the humble being that I am let’s keep a cap of 99 years for the time I will need this money. Increasing the corpus required to 3.5crores we can easily live off our savings.

So even for a pessimistic outlook where the inflation keeps on increasing by 6% my returns don’t make more than 8% CAGR, none of us make any money apart from the returns and we don’t reduce our expenses ever we need 3.5crores to achieve a very reliable financial independence.

If we assume that any gain on our money will be nullified by inflation then 3.5 Cr will last me 35 years with the same amount of expenses. That means even if we retire at 40 with this amount we can live till 75 easily and then use the provident fund we have been continuously contributing to.

We are currently assuming that we will be living in the flat we already own so as to not pay rent. Our property has seen an increase of 30% over last 3 years but we don’t expect this gain to go on for a long time. We assume an average gain of 5% for the property price so our initial per sft rate of 2275 should go to 3705 psft by 2026.

If we do end up selling the house and investing the assets to rent somewhere cheaper in the same city we should have additional rental spending of 2.4 lac. Since in our super pessimistic view returns equal inflation, we should be able to easily live for over 16 years. This gets very close to the PF withdrawal timeline.

Another thing we accept is the fact that none of us can actually survive without doing one thing or another. If we end up gardening our grocery expenses should reduce and if we start teaching kids Maths and English we would be getting some income as well. If we actually go for a guest lecture in one college or another that would add to our incomes as well. Still we don’t know what we will be doing or maybe we will do nothing at all and enjoy our lazy lifestyle.

Add to this the common Indian expectation if our kid would support us in old age we just have to make do till she is around 30-35 years old. That brings us to the time when we are 70 years old and are going strong enough. We also do not expect any inheritance or windfall to happen to us in the course of our lives.

Time to summarize

Early Retirement Corpus required to sustain us and our expenses from 40 to 99:

3,50,00,000 for a scenario where average returns are 8% and inflation keeps on climbing at 6%. We also assume that our current expenses are going to remain the same.

Early Retirement Corpus required to sustain us and our expenses from 40 to 99:

2,50,00,000 for a scenario where average returns are 10% and inflation keeps on climbing at 6%. We also assume that our current expenses are going to remain the same.

 4% or 3%

We might come across as people who have a bit more courage than the rest but we are still scared ones. 4% rule makes a lot of sense on paper especially since a lot of trends and calculators show us that what we spend money on does not show the alarming rate of inflation that a lot of other items show. Also we usually buy in bulk and they tend to be a whole lot cheaper than walking around the aisles for every item you need.

We on the other hand think that a 3% withdrawal will make more sense and will provide us additional cushion in case times go rough. For our current expenses without considering a kid that comes out to be ~1.44Cr which we will require if we were to retire today. With an adjusted 10K kid expense that shoots upto 1.8Cr.

This means that as long as we withdraw 3% of the corpus and let the remaining grow, we should not run out of money. Since getting an average 3% of net return from our investments is not too much to ask for in our opinion we assume we can get out of the rat race with a little less than 2 Cr.

If we want to get to 2% withdrawal rate we will require between 2.4Cr. to 3Cr.

Tax Woes

Now let’s get to the tricky question of Taxation after retirement. Even though I am including it here for consideration we are still working out the winding lanes of tax laws.

Before we get on to how much we expect GOI will take away from us let’s talk about what we have till now discovered, as a way to save taxes starting now. We currently pay a small amount of taxes as pour loan principal and interest result in a substantial rebate. Also we don’t earn insane amounts like either. Our earnings would be considered a lower step in most corporate ladders. Our benefits stem from the fact that both of us make roughly the same amount and pay way less taxes if only one of us was making the sum both of us do together.

We are currently looking into forming a HUF (very karta oriented which I don’t like) and forming a LLP/regular partnership. We are yet to decide which way we would like to go and what our plans are for future including the time after FI. HUF seems to be the way to go for now as it would reduce our tax liabilities majorly. For following calculations we will assume that we are still being taxed as individuals and are equally dividing the income between us.

Source of income: Dividend+ PPF returns + selling some MF units or shares

Almost all of these are tax exempt as per current regulations except if we make more than 10 lac in dividends in a year. Since we will be paying taxes individually and the dividends earned would be equally divided we should be tax exempt till we get 20 lac in total dividends.

Our current holdings are mostly growth based mutual funds ( we hate paying DDT) and we will be holding each of these for well over 12 months so we do not expect to pay long term capital gains at least as per current laws. We have all the time in the world to switch to a better option in case the laws change on this.

PPF investments are EEE and looking at recent backlash that rate cuts received we can hope that it will remain the only instrument to be so. That will give us access to around 28-30L of completely tax free money when we are learning the ropes of Early Retirement

Does that mean we will have no taxes to pay?

To be honest we don’t know because tax laws keep in changing every single year and sometimes in the middle of it as well. What we do expect however is that the deductible income will keep on rising from current 2.5l per annum to 5l per annum. Even then let’s calculate how much tax we would pay if we each take out 5l per annum and all of it is taxable.

Early Retirement
Paying taxes post retirement!

This means we will have a tax liability of around 1,716 per person per month. This will definitely not put a wrench in our daily expenses but let us assume we need at least 10 l to make do. Another quick calculation shows us that we can achieve that by withdrawing around 5,35,000/- from our corpus per person.

Early Retirement
More Taxes-More Withdrawal !

We will certainly have a completely different equation depending on whether we go HUF way or not. To be true, chances are we will be free of taxes since most of our income falls into tax free status. Additionally we should be eligible for tuition fee rebate for our kid and a few health insurances.

Overall the taxes may play a big role but currently it is safe to say that we should be withdrawing tax free income after retiring early.

 

Working after early retirement

We both have varying views on it and we change our personal views every other day as well. My decisions have varied from not doing a single thing and relaxing at home to working part time or guest lecturing somewhere. In between all that has been realizing my dream of travelling the world. Depending on our family and financial situations and the global travel scenario we would probably take up the last one.

Mr. S on the other hand has toyed with the idea of working beyond financial independence, though at a job which is something he enjoys. If he keeps on bringing the money he brings in now we would be happily set for life. The problem would then be how we travel more. So let it be said that we have no clue about what we are going to do once we cross the bridge.

Thankfully we have over 3500 days and 500 weeks to come to a common strategy on how we deal with time after we/I retire. This is why I have assumed a grand total of 0 as assured income post retirement.

Another factor which needs to be considered is our freelancing income which has been more than enough to cover our travels in past few years and we hope to put it to same use over next years. We are not sure if we will simply stop freelancing or we will continue beyond 2026.

We are sure we have missed a few calculations and someone will point them out especially in terms of taxes. We also know and expect that all of this including what we earn will not match our calculation or any of the figures here. Since 10 years is still a long way to go (who knows we might win a lottery) we would be surprised if everything turns out exactly as per our calculations.

Right now we believe we can and should achieve financial independence by Feb 2026 with a minimum of 1.8Cr if we have a kid. A much more comfortable figure for us is 2.5-3Cr and we hope to also achieve it before we hit 40. Will we retire at 40 or when we reach the figures is something where your guess is as good as ours.

Right now the figure to breach is 2,50,00,000 and to achieve it you would require a regular investment of over 12-15 lac depending on the returns you get.

Is this actually right? I already have 2Cr…

Well if you do then you are a really lucky person and rich as well we on the other hand are starting from a big old 0. The question still remains whether it will be a figure that will tide us over till our old age. And the truthful answer is we are not sure but we believe that it should. I have read and reread posts like this, this and this. Most of these talk about a much higher rate of inflation and a much lower rate of returns.

It might be a case of adding factors of safety or it might be a case of us not understanding what the real market condition is.

For us, the actual expenditure to run a household has gone down in last 5 years. Most of it is by learning how much we actually need and reducing wastage. To say we live frugally will be stretching it a bit. On the other hand, a lot of our friends have grown/inflated their lifestyles exponentially yet we know of many who live in the same expensive city with half of our expenses and supporting a family.

We might update this figure in either direction as time goes on and to say we can or will retire after achieving a figure is a bit premature. What we can assure is that we will be keeping a close eye on both our expenses and investments. Right now our major focus is reducing our expenses and we know there is a lot of margin in our expenses to cut them down. I would be very happy with a recurring expense of 12k per month which will actually mean we will be spending only half of what we were when we just got married.

No Early Retirement Calculators!!!

Nope, the online calculators actually make me a bit weary and scare the shit out of me. The reason why I prefer using likes of big decision is because it does the inflation calculation. Even better is running our own excel sheet with our researched figures.

Most of the calculators and excel sheets come with their own set of assumptions formulas and guidelines. Though these are helpful it is very unnerving for me if someone recommends using 9% inflation when I strongly believe that 6% should be fine. Right now what we need is a figure we believe in however bit it is (2.5Cr. gulp!) and then formulate our strategy to achieve it. We have to believe that we can achieve financial independence first and then iron out the kinks. There is nobody stopping us from working another 5 years and still retiring at a comparatively young age of 45.

If you are in our boat this is what I would recommend you do to calculate what you need for early retirement:

  1. Know what you spend right now and on what
  2. Strike off the expenses which will not exist when you achieve early retirement.
  3. Assume rate of inflation and project the sum required when you retire.
  4. Depending on what method makes sense to you see how long the money will last you.
  5. Keep track of all your assumptions and make changes as required in you spreadsheet.

If you have a figure which you believe makes a lot of sense in your early retirement scenario put it down below.

Freedom of Not Buying Stuff and taking back space

I have a friend who orders one thing or the other every week from one of the many online stores. To be true we buy online as well and not just that we have an affiliate id (we would appreciate you use it, if you do buy something) but I digress. This friend of mine likes new clothes and headphones so he ends up buying one or another every month! At month end suddenly there is no money left and he is guessing where all his money went.

We were in the same boat; though we were not buying clothes and frippery we were still spending 25-30K per month on our day to day expenses without rent or travel. We knew it was high but in six months we had tried to reduce it, nothing happened. We were doing what most people around us were doing, though on a lower scale. We were spending less than our friends but it was still too much. If we would talk to others they would say life is more expensive now compared to even last year. We were sure we will end up spending this amount or more till the end of time till last few months happened.


The reason behind our efforts: from 25-15K a month

Shifting to a new city which is insanely expensive compared to any other city we have lived in really lit fires below our asses. If we would not save more, we were sure we would never be able to equate our loan let alone create a net worth which was even remotely enough. So in February as I was researching on the internet (where else huh!), came across Mr. Money Mustache, and then FrugalWoods and my life took a u turn. Well not exactly so, but now I had proof that people were saving crap loads of money by reducing their expense (I promise I am bright in most other cases) and that expenses can be cut. So we decided to keep our expenses to 19K and see how things would work. Well they did work though not exactly how we would like it.

Since we were setting up house we incurred a few incidental expenses but we managed to be around our budget and netted ~20K. This showed us it could be done and I believe we were still buying a lot more than we needed. Next few months ended being cheaper than we could have thought with our expenses below 19K and 15K for March and April. But it did not count since we had been travelling and we don’t include travel in our daily expenses. So May was the month to actually start counting our expenses or so we thought. May ended on a great note and we are hopeful the expenses will be going down as we go ahead.


How to reduce buying- Our rotten food

We were able to reduce the expenses by understanding a simple concept- you need to buy less than you think you need. This is not just true in terms of clothes but as we found out it is true in terms of daily groceries as well. If you want to eat mangoes you might first want to finish off all the other fruits you bought earlier and then go buy some more fruit. Otherwise you end up with a mushy rotten pantry full of fruit you forgot to eat. This was one of the problems we faced every week but we could not seem to find the problem leading to it. First we thought it was our lack of home cooking, which did contribute to the amount of fresh food we threw out every day. Eventually we set ourselves in a routine and we cooked more. Only now I had two kinds of wastes- cooked and uncooked. I am sure you will agree with me that nothing makes you feel worse than throwing out food because you did not consume it.

Then there is a big truth which most of us ignore when we are being seduced by aisles of supermarkets or beautiful baskets of local vendors- you can only eat so much. Most of the canning, freezing and preserving projects, we think of when justifying purchases rarely happen.

Now we are operating on a simple principle- finish what you have first and don’t go out buying anything till you can’t do without it. The result is we have not had to buy even fresh vegetables for two weeks since we have a good reserve of staples and a windfall of food from office party. When I walked out to the nearby local market there were a lot of things I would have normally bought but today it was just fruits which we had finished of a few days ago.

Organic Staples
Organic Staples which will last us over 3 months. Total cost- ~1150/- Total cost- ~1150/- (Also we use less than 500gm of sugar between us in a month. This free sugar would end up going to friends or family.)

With weekly expenses under 500/- (a lot of which is just milk) we have been trying to not go to the supermarket nearby more than once a week. It is now a place to buy bulk quantities of stuff we know we will need regularly and not all the shiny things they have on display.


The Freedom of it all

It is eerily freeing to know that you are not doing something wrong if you don’t buy that new thing which is a must have or have fridge full of fresh produce just in case you or someone else needs it. We have much less stuff than most people and we are not just happy without it we count it as our blessing. Less stuff means we don’t have to worry about a lot of things in case we have to move to a better place or a better opportunity.

If you have ever had to worry about where you will keep your stuff when you move out of the country or shift to a new job which does not pay upfront for moving costs you know what I mean. Last month we were considering one such opportunity and we came very close to moving. With the amount of stuff we already own it was something which made me anxious.

We don’t have a TV or some snazzy home theater, we love sleeping on mattresses laid on the floor and still over the years we have accumulated enough stuff to last us and a few other families a lifetime. Before we decided against taking the job, I was lining people who would want to buy our stuff in case we moved. It is not easy and believe me very few people are interested in buying that shiny bauble you spent 500/- on.

Right now I am satisfied with what I own, and to be fair there are times when I feel we should get a bed at least. Browsing through the mall I pick up a lot of things off the shelves, the important thing is I keep them back after really thinking if we need it.


We still buy what we NEED

Last week we bought a bath caddy to let us keep soap and shampoo respectably in our bath, we also bought a study table which we are using in our kitchen to house microwave, toaster and other things we did not have any space for. Did we really need these, yes and no. Yes because they make our life easy and we are no more looking at soapy basin or piled up cardboard box and kitchen counter with too much stuff. No because we could have easily survived without either one of these and had been doing it for past 5 months. We thought and analysed our wants and made sure we needed these.


Making things last

Thankfully we have a good history of long lasting appliances and furniture. Most of what we own in our kitchen is from our marriage years ago including our fridge, gas burner, food processor and microwave. They were bought on a deal or were gifts from relatives. They have had a few problems along the way but work great to this day with minor repairs. Same for our mattresses, couch and the bed we sold off before our last move; each one very usable and still going as strong as the day we got them home the first time.

Our dining table was bought second hand last year and we know it will last us 5+ years unless something really bad happens. Our recliners were bought for 50% off and are the first thing anyone is ready to buy whenever we think of putting them up for sale.


Giving away and taking back space

We gave away more than 50% of clothes to family and others in last few months. That has made me as happy as giving away can. I have space to breathe now, for some reason when we had more stuff even if it was packed in the wardrobe it felt like it was piling around me. With the smallest house we have lived in ever we had to downsize and now I am as thankful as I can be. I have more space in the tiny 500 sqft apartment than people have in places twice the size.

We are still not done though, there are too many clothes and other tiny things that we own but never use. Right now I am planning to either start a Buy Nothing group in my locality or find another exchange group that already exists. This post form Frugalwoods made me really think how awesome sharing can be and seriously I wouldn’t mind using stuff that my friends or acquaintances have used earlier. I have a few things that I would want to give away as well. These are definitely our wider goals than being FI. Another blog which I really recommend and have been following for years is An uncluttered Life (Marriage with Luggage).

I had never expected, not buying and giving away can ever make you feel free. I always thought that it was in possession of things that you find freedom, I am happy to know I was wrong.

Expense Report-May 2016 : The month of bad news and sudden expenses

May was a weird month, it showed us we don’t need all the money we had reserved for our day to day expenses and what more it showed us that problems rarely come alone. This month was full of us worrying about our dear ones including a few hospital visits regular update over phones. Overall it was one of the better months where we found our rhythm and I believe we made huge progress in educating ourselves what we don’t need to buy.

The Family troubles

We faced dual troubles on both sides of the family it was all health related issues spanning 3 generations on Mr. S side and a few friction issues on mine. We had resigned to a bad news (at least not-so-good news) every few days. Thankfully we made it through the month without any loss or major setback.

The unexpected expenses

While we were visiting Mr. S to be with the ailing one by one the appliances simply collapsed. Water purifier stopped letting out water and a few hours later the refrigerator stopped cooling any water we had.

The result a new fridge was bought and repair and inspection charges were paid for both the appliances. Both us and the parents believe that second hand and used stuff is a good way to go about things. Still this time we decided to invest in a new fridge which we know will probably last us upwards or 5 years. The one which died on us was used equipment bought last year as both of our families made the move. It was simply not reliable and we believe it was a bad decision on our part to have someone else look at it and finalize the deal. On the other hand our own fridge which has been running for last 5 years is as reliable as it was when we bought it and errors on too cold side instead of no cool.

This expense was pretty much expected we got a gas connection finally. Till now we had been using induction cooker and it simply did not cut it for daily cooking with our lifestyle. This was one of the bigger expenses this month.

induction expenses
Now retired induction cooker which tested my patience more than enough.

To make space for our four burner gas stove we had to finally find space for our microwave. Right now we have it sitting on top of a cardboard box but we knew it would not last. Cut to an ingenious solution which we believe will solve the storage problem we have once and for all. I’ll get back with a pic of our arrangement once we have the table delivered and set up. Combined with the gas connection above this probably cost us a quarter of our total expenditure.

The case of not buying

We realized this month that we don’t need a lot of stuff, not even perishables. We would easily rake up 1000/- every time we stepped in a grocery store. now we are at loss of things to buy. One of the reasons this has happened is because we decided to not buy anything till it is required or we finish our existing stock. Case in point: vegetables and fruits, which we would end up throwing in trash since they would wilt or simply for gross. No doubt a lot of it was wasted because we simply went out instead of cooking it was also mainly because we would buy too much. Today we struggle to get to a total where our parking would be free. This has been a boon, but we are still struggling with how less we actually need. Hopefully we will be able to take advantage of this and reduce our monthly expenses.

Eating out

This was the biggest expense we had this month. I did not cook with all of the drama going around us and we ended up spending 200-300 every day for lunch. Thankfully we did not go out for dinner as much. We have finally decided to accept our shortcomings and pay a tiffin service to feed both of us at a fraction of the cost. I do plan on writing in detail about our choice in near future.

So how much did we actually spend without rent – 22289/-

Here’s the breakup of our expenses

Eating out- 8,159 (35%)

Gas connection-3140 (14%)*

Grocery – 2995.35 (13%)

Furniture- 2856 (12%)

Social activities – 1138 (5%)

Electricity bill- 1007.92 (4%)

Business expenses – 845.68 (3%)

Internet – 700 (3%)

Bike maintenance- 470 (2%)

Hair Cut and others – 510 (2%)

Taxi- 398 (2%)**

Parking- 80 (0%)

Total Expenses without onetime costs= 15905.95

The above figure makes it clear that we spent over half of our monthly expenses on eating out which is simply shameful. Part of this was fueled by overwhelming work and personal circumstances resulting in two very tired people. We raked up the amount during lunch and are definitely not proud of it. We have decided on a few remedial actions (makes us sound some big deals huh!) the results of which we will know by the end of June.

 

* This was a really welcome break from hours spent in front of induction waiting for one thing to cook so that I can get on with another. Boiling milk had never been so frustrating and don’t even ask me about rotis.

** This was a part of our travel expenses and is a onetime thing. I entered the detail and did not want to redo the calcs.

Feature photo credit: Expenses via photopin (license)