Update 2016: How did Royally Frugal household do?

Why are Updates necessary? You ask. When we work towards a long term goal it can be very easy to get distracted. Are you looking at retiring in 10 years by saving aggressively? You are lucky if you can retain the gusto every month and every day. This is what makes it important to set smaller goals and keep reminding ourselves that there are smaller and seemingly needless decisions which will make that goal possible.
In our line of work it is very important that a concept be agreed upon and a vision for the finished product be clearly understood. However the stages of development are equally as important. Every small decision made and detail worked out will result in the final reality you want.
As this year closes we have seen a huge change in how we operate both as a family and as individuals. Our understanding of what our future could look like has improved while our capacity to take a messy house has reduced. When we started on the financial independence ‘journey’ early this year, it was to serve a completely different purpose. Also we were making some 50% less than what we make today. A year before that we were spending 50% more every month on our daily expenses every month.
Let’s talk a bit more about what happened in past year 10 months to be exact.

Income

We started 2016 thinking that we were a few bad expenses away from eating into our meager savings. The reason, in February we had to move to a new and very expensive city for our jobs . In this city a tiny flat rents 3X more than what we were dishing out for a two bedroom apartment, back in the old city.
Even if we could swallow a 300% hike in our rent even day to day necessities cost far-far more especially eating out. This meant we had to find a way to increase our income. Our first step was to ask our current company for some more money as relocation compensation. We did get some but that was definitely not enough to save a huge chunk.

Though this cash crunch was the reason we started on our frugal journey we kept on looking for a job and Mr.S found one overseas where he could make the more than what we were making here together. That was the first time we realized how easy putting in the papers can be and how most companies try to retain you.

We ended up staying with quite a considerable bump in the take home monies. December gave us another bump with the regular raise cycle of the organisation. So we can happily report we are earning quite a bit more than we were doing last year same time.

Another income stream opened up for us with rent from our property we have been paying EMIs for last few years. The flat was empty for a year before our agent found a tenant. We put in some of our own money to furnish the flat once we had a tenant and have been using the rent to make up for it till December.
In 2017 that money will go to equate our home loan once again.


Expenses

We started tracking our expenses around March and are finally able to come to an expense trend which spans for a considerable part of the year. Past year had quite a few ups and down and we realized our expense tracking method is probably not the best one.
We managed to reign in our expenses except for last 4 months of the year. Even with these high expenditure months we overall spent far less than what we were doing in the previous city. Below is the total spent under various heads.
Rent: 2,30,000
Household expenses: 2,14,969
Parental Support: 2,10,000
EMI paid (includes interest payment): 2,51,000
Gifts and other expenses: 20,000 (we did not track this but I am assuming a high sum)
Total Expenses tracked: 9,05,969
Total expenses: 9,25,969

This is an average expense of around 90K every month which is a huge sum for sure and it hasn’t been long since we started seeing this amount in our accounts. Every time I see how much we are spending I am shocked. However once I look into the various heads it starts making better sense.
Rent: Our rent is a lot and it has gone higher as the lease period ended. We did consider shifting but this high rent is still the lowest in the area we live unless we shift over 30-40Km from office and resign ourselves to 4 hours of daily commute. The only solace I have is that this is still less than the other houses we saw a year ago, new construction and ample space for the two of us.
Household expenses: We are trying to get our expenses down to 10K a month and Frugalwoods’s UFM challenge has been a good starting point for us. The expenses you see includes our one time setup costs like bed and mattress, a cabinet and a few other knick knacks required to get the kitchen more efficient.
This year we resolved to not buy replacements till we could repair the appliance. We can say for sure that it saved us over 5K in food processor after we got the jars repaired instead of creating more trash. (How do people in India trash their appliances? I have not had to do it even once; do you sell it off to the kabadi waala or repair shops?)
EMI: we have talked about our home loan earlier and how we decided to use part of the equated money to put into our investments. Around 80% of our EMI went into principle and with the rent now coming in from the property we plan on equating the balance again by the end of the year. This equated amount is the emergency fund we have for anything form a sudden medical emergency or a great opportunity.
This March will complete four years of our loan term and we are happy to report that we should finish our loan way before the full 10 year tenure and should not be paying any interest as we start equating the loan principle with the rent.
Gifts and other expenses:
This is something none of us are happy about not because we spent it, because we did not track it. We are sure what I have assumed here is too much but there is no way to confirm how much we actually spent. This category includes gifts we bought for our family, clothes shoes and other personal items. This year onward we will keep a better track of it all and hopefully this year we will have a single head with every expenditure tracked.


As I said in the start it is easy to lose sight of your goals; we are clearly defining our goals for the coming year which should be coming out sometime soon.
If I had to be true I am a bit disappointed in us. We have not been able to rein in our spending for past 4 months. We definitely have a very real reason for most of the over budget amount but that still means we have not achieved the well-oiled machine we hope to run. This year we are working harder to make more efficient budget a norm for us.
That being said there are still times when we look at our spending habits and are surprised at how far we have managed to come within a year.
Did you manage to save and invest better past year?

The Way November Went

November was almost near October in terms of spending but a lot better in terms of comfort. The memory foam mattress we spent on in October is finally rewarding us with great sleep. Overall it was one expensive month, with a lot of changes both in how we look at things and actual changes which will affect our lives in the long term.

We spent around 27000/- this month apart from rent and mortgage. We also managed to put in a decent sum into our investments as we talked about in our previous post. This was probably the first time since we started on this quest that we timed the market.

This month’s high expenditure was in line with visiting family and being a 4 member household for a major part of the month. A lot of taxis were taken, restaurants were visited and gifts were exchanged. However we believe this is something which will happen at least once a year and will allow us to narrow down our actual annual expenses.

We cut on other expenses so that we can spend on things which matter to us like family. But to say that there were no frivolous expenses would be a lie. We could have cut corners or simply bought cheaper stuff. In most cases that would have resulted in a lengthy conversation which neither of us wanted to be a part of. After you are married for over half a decade you realize there are certain things you can simply not get through to your family. Picking your battles is the way to go!

November also marked a milestone for us and we surpassed 5% of the amount we believe we would require to retire. To be clear this is only in our actual investment not including our home equity or gains on our investments. It has been almost 6 months since we started our first investment in June and both of us believe we are on track. However we are looking at reducing our expenses even further. We plan to be a part of the Uber Frugal Month challenge started by Frugalwoods on their site and our aim is to keep out budget under 10K. However anything below our current estimate of 16K is a blessing.


Though we have been able to keep our actual household expenses with in the budget there is a clear upwards trend and in last three months. This has been a result of mandatory spending (passport renewals and health checkups) and increased household size, but we are not completely off the hook.

One of the major expenses which we could simply not justify was a midnight buffet at an inflated cost with a friend. The food was good but none of us walked out satisfied. It contributed to 6% of our monthly expense and was something which we wold want to avoid in future. Our solution is to host a few dinner parties which will cost us far-far less and we won’t have to wait till 12 in the night to get fed.


We have realized that we are spending far too much on food than required. We established this by not buying any vegetables except for coriander (technically it’s an herb) and green onions in last two weeks apart from staple trio. We have not gone hungry either; instead we have been using what we have already bought. For us one batch usually works for 2-3 meals for each one of us.

One of the things which have helped us achieve this is meal planning and prepping over the weekend. Most Indian curries reheat very well. We cook a bigger batch and pack in separate containers so that when we leave for office lunch involves picking up a box. The week we have all the food ready, cuts down our lunch costs by at least 25%. Since we still buy rotis from our lunch lady we still spend that much. Not only the cost since we know what we cook with and how we are in better control of what we eat. If you are looking at packing your own lunch then this is definitely a way to go about it. If you are ok with rice as your starch in lunch then you are in even more luck. Its way too easy to prep rice for the week, just pop it in fridge or freezer and then reheat or thaw using your office microwave.


For December we are looking to rationalize our expenses and become more efficient in our day to day jobs. We are travelling again for a week in December and are planning to throw a house party for our team on New Year ’s Eve. We believe it will be quite cost effective instead of going out as well as allow us to celebrate in safety of our house. More than that, I love cooking and none of us are averse to entertaining. This party will serve as a dry run for a few other dinner parties we would like to host instead of going out to eat ourselves.

No post about this November can ever be complete without a brief on how we coped with demonetisation. We actually fared quite well. We usually transact electronically and our credit card is our trusty companion (paid full every month). We did however stand in queues but were able to withdraw enough to provide cash for family and ourselves. But the biggest surprise was reduced crowds in the malls on weekends. We had in past spent 20 minutes in the checking out queue to get groceries but this time it was a breeze.

Our investments have fluctuated through the month as markets dipped up and down. Right now for us it is a game on waiting and watching as our money works for us. That is definitely the benefit of a long term plan.

How did your investments fare in the uncertain times of these past few weeks

Update-How have we been?

It’s a time for update. Diwali was just a few days ago and the few days of holidays we had have again reinforced our desire to retire and that too as early as we can. October was probably the busiest month in terms on our jobs and we have barely had time to think about anything except meeting the deadline. This has resulted in silence on this blog and a lot of delayed decisions personally. But that was not the only thing that happened this month; we also managed to finally fly off to a week long vacation. How we fund our recurrent trips is something we will discuss in another post, hopefully soon.

September ended on a high note for us as we prepared for our vacation and managed to keep our expenses within reason. None of us forgot about the blog but as life goes we were pulled into some highly demanding (though rewarding) work and deadlines (definitely demanding). In fact I have a lot of updates written and a few posts I need to sit down and work on.

When you are not dependent on your blog for money you can afford to let life run its course. Especially if you have an audience which realizes that people looking for FI are probably not interested in being bound to their blog. Thanks to all of you who believed us lazy souls will be back soon.

As October rolled in we were packing our bags and the excitement was high with this vacation coming at the heels of a lot of change and upheaval in our lives. Before we move to the FI bit let me say- if you have a chance to spend some time in Indonesia take it. It was perhaps one of the most comfortable trips we have taken in last few years.

November is almost halfway across as well and it has been a fun ride though a bit different from our usual months. We have house guests for a better period of the month so the expenditure is proportionate to a 4 people household than just the 2 of us.

Now back to the FI stuff- a lot has changed.

The month that was

October started with a vacation but for most people this is not really a productive month especially in India. The off days started with Dusshera and were sprinkled throughout till Diwali. It definitely did not hurt that most holidays allowed us to think of a long weekend. Usually Diwali is an expensive occasion but being the frugal people we are we rarely spend big bucks on anything. Diwali also comes with a lot of offers and discounts both online and in stores.

This allowed us to buy some essential items for our house like a bed and a good mattress. We had been researching for months and finally decided buying second hand wasn’t going to get us any major profit. Also none of us were comfortable about a second hand mattress because not many people here use mattress protector. And before this one neither did we. We also invested in a book shelf during past few months which is the only storage in our living room. For Diwali we bought following

Pack of 6 scented candles – 299

Pack of small wax diya(lamps)- 69

6 earthen diya(lamps)- 20

Pooja samagri- 100 (this is an approximation)

250 gm laddu- 50

Most of these are quite reusable and we ended up using just one of the scented candles. Still if I include all of this we spent a grand total of 538/- for the festival. It definitely saved us quite a bit more on the bed and mattress only. As people above 30 we believe we have had our share of fireworks and neither one of us was interested in lighting any so we didn’t buy them. What I am not including in this total is the cost of fruits since we buy fruit anyways as against sweets which none of us enjoys much.

Our office gifted us with gift cards and a small pack of sweets which we were more than happy to eat and share. These gift cards will help us buy some things we need.

Why are we buying things?

It might sound a bit weird that the person, who claims that freedom of not buying is awesome, is talking about buying things. Well there are multiple aspects to this.

We have purged probably a quarter of our belongings in terms of clothes, utensils and stuff which we no longer use. This started with family as we gave them and option to pick first then to a few colleagues and finally we handed a big box full of stuff to the staff at our building. They were free to take it for themselves or sell it off. This might seem stupid to some but none of these were things we could have sold ourselves or our friends and family were interested in. This made sure that we essentially emptied out one of the corners of our living room.

We never really bought stuff except for essentials like a bed and mattress (we sold our old bed when we had to move a few years back- earned money and saved transportation costs.) and a working kitchen. We were gifted the said bed by my family as a wedding gift and the lone couch we own was a gift from a friend. We did spend on buying a new to us four seater dining table and two recliners which everyone loves. We are looking to sell the couch to free up more space and also to reduce the stuff we own.

You’d remember our drive to eat better which we started a few months back. A major part of the drive is slowly phasing out our utensils both cooking and eating to healthier options. Non sticks and aluminium are moving out and being replaced by steel and cast iron. Both the replacements are quite expensive so we are using up any free money we have spare to get us some better stuff.

All of that being said we are quite conscious of the small apartment we call home as well as our preference for relatively empty and open spaces instead of those filled with things.

Big changes same investment

Apart from the changes that we are making or striving for there were two major changes which affected our investments one was the US election and the other was discontinuation of currency. Both these allowed us to buy on quite cheap prices on 9th November. Though the markets have recovered since then we are happy we bought in to the volatility.

Some would call it timing the market, well you would be correct but does it make sense to not buy at really low prices simply to be able to say I have never timed the market? Of course it doesn’t.

We also forayed into dividend stocks this quarter and we are slowly building our stock while investing in index funds alongside. In a market like India where volatility is quite high we concluded it was a good move to try alternates and create a kitty which we can leverage as required once we retire.

Our current portfolio follows the principles laid out here and we believe we will be able to tell you how this decision fared out by next financial year.

Apart from introducing dividend stocks we are continuing with our previous philosophy of investing every single penny we can since we do not need to have additional emergency fund. We are working hard to maximize our PPF accounts and anything over and above that goes into our index funds and dividend stocks.

If you are wondering why we are so intent on PPF that is because a guaranteed rate of 8% return compounded annually is way better than what the best of us can claim consistently from the market. Apart from that any returns are tax free which makes it a great instrument for fixed income.

As an experiment I have stopped tracking detailed expenses every day. We are still keeping tabs on how much we spend every day. It has been going on pretty fine and we have not spent a whole ton on things we don’t need but I miss being able to exactly tell how much we spent on groceries and how much on eating out.

Looking at things differently

As you might have realized we have made a lot of changes around here and a few big ones came from outside our circle of control. We have been looking at a lot of aspects of our lives differently and a big part of that is to make us more efficient. These changes are in various stages and we have been waiting for these results to show up consistently before we share them with you.

This blog is our way of sharing our frugal investment and retirement journey with you. We would love to hear if there is anything in particular that you would like to read about.

August-Monthly Update: the month of better health

August was a month of some big changes and a lot of realizations. I am confident that the changes we made last month will have their ripple effects on coming months for sure.

We also decided in August to stop publishing our monthly expense reports because they don’t give a clear enough picture since most of the expenses are rolling. Instead we would like to talk more about the financial and other changes during the month. Which is why instead of expense reports it will be monthly updates from now on.

It started like any other month some groceries and a few other expenses. We ended our ban on eating out in last few days of July and in August we were free from and restrictions on it. This was also the month when we hosted a few friends at our place. But the biggest change was how we deal with our health.

The Hosting

We had a few friends from work over for an afternoon and another friend the next day. I love entertaining and cooking so it was a fun day with colleagues, but not so much with the friend. We have realized in past few months that most people are not fit to be houseguests. In fact our friend list needs some pruning and boundaries need to be set. These two days ended up pretty expensive and cost us nearly 10% of our monthly expenses.

The food

We are slowly turning to organic food and we bought a huge haul of organic staples which will last us far longer than the month itself. This ended up being the biggest amount we have spent on food in a long time. In fact it was almost 3 times of what we spent in July.

We started packing our breakfast for office since June-July. This month we started to slowly wean off our paid lunch in office and started carrying part of our lunch. This will help us to keep the cost down as well as eat food we like and be able to control what actually goes into our food.

Fresh vegetables and milk featured largely in our food list this month which not just makes me happy but also healthy. We were never buying too much sugary drinks but this month we simply got rid of them.

The Health

We got our blood tests done in July and the results were not quite good. Both of us were facing vitamin deficiency. We started vitamin regimen in July and in August we reaped the benefits. Biggest one of these benefits was not feeling tired anymore and suddenly we had so much more time in the evening. All of those few precious hours after office were now usable because we were not burnt out anymore. I am sure our body internally liked the vitamins even more but this was the biggest benefit we could have asked for. We were waking up fresher and sleeping better than we had been for past few months.

Mid-august I decided to take up a new challenge and help my body feel even better. I stopped drinking caffeinated drinks, alcohol and anything with added refined sugar. Water became my new staple and office coffee (free!) went out of my daily habits. Dairy and fresh fruit or vegetable juices are allowed as well. This was probably the biggest change I have ever made to my diet in my life. Even though the challenge I started for myself is for 100 day only (23 days over) it has helped me realize how good it can be to kick coffee, tea and sugar from your daily routine.

Does this help us save money? Yes and no. Almost all of my coffee was in and by office and if I don’t consume it any more my employer benefits by a few mugs a day. Apart from that I am no more ordering a glass of some drink (alcoholic of not) when I go out which saves a lot of money. Though we had already reduced our restaurant visits, this will result in saving a few bottles of carbonated drinks we bought in a year.

Apart from this we have been consciously monitoring our food, which means I decide what we eat and he eats it. Supplements and cleansing food are high on our lists especially since we do have a few new conditions to worry about.

Neither one of us have started exercising except we are cleaning our place much more, organizing better, cooking more and overall spending much more time being active in our daily life. Has this helped? Yup, we have cleaner house, better food and happier people.

The finances

We were able to contribute around 45% of our take home to our investments this month after buying fittings and furnishings for our house we rented out last month. This was not a good thing since we got increased salary this month and we should have been able to save quite a bit more.

A considerable part of our income also goes towards our home loan EMI and the principle portion of it is a tad bit over 10% of our income. Including this we come to a bit over 55% and that is something I am still not content with. There is however a limit to the amount we can save after putting in rent and other mandatory expenses.Apart from these there is a mandatory contribution to EPF which is combined for both of us is around 6-7 % of our take home pay.

In reality I believe we can achieve a maximum 60% savings rate. These savings though are still a bit away from us since we have to recoup the amount we put into our flat as well as the bulk purchases for some food and supplements which we have recently made.

The biggest addition to our income this month was adding rental income to our portfolio. It covers the interest portion of our EMI and allows us to save a bit more. The landlord experience for us newbies has been bittersweet which you should be reading about in some time.

September has continued in the same vein as August and I hope we continue to improve our health and savings.

How was August for you and what are you expecting in September?