ALL Expenses Covered By Passive Income? (Expense Management for FIRE)

Summary

The speaker shares his journey to financial independence, achieving it by 2019 through a combination of strategic investments and expense management. Starting with a modest salary, he prioritized savings and categorized expenses to fund necessities through fixed deposits and mutual funds. Real estate investments provided a growing passive income, with a current yield of about 3%. He advises those in their mid-20s or early 30s to start small, focus on stabilizing finances, and avoid high-risk investments. His approach emphasizes diversification and a long-term perspective on managing personal finances.

Takeaways

• 🎓 The speaker achieved financial independence by 2019, which is considered early compared to many Indians.
• 📈 He started his career with a salary of 5,000 rupees and experienced significant salary increases with each job change, reaching a package of over 1 CR annually in the last 3-4 years.
• 🏦 The journey towards financial independence began after a colleague noticed his low bank balance and gave him a lecture on the importance of saving.
• 💡 He implemented a strategy of categorizing expenses and allocating investments to cover different types of expenses, ensuring a stable income from fixed deposits and rental assets.
• 🏠 The speaker invested in real estate, which now provides a passive income of about 40,000 rupees per month from five properties.
• 📊 He emphasizes the importance of having a well-thought-out approach to financial planning, including diversification of investments to manage risk.
• 💰 The speaker's current monthly living expenses are approximately 1.2 lakhs, which are covered by a combination of rental income, mutual fund withdrawals, and dividends.
• 📉 Despite the lower yield from real estate compared to mutual funds, the speaker values the diversification and stability it provides in his investment portfolio.
• 👨‍👧 He advises young people to start saving early, even if it's a small amount, and to focus on stabilizing their finances rather than pursuing high-risk investments.
• 💼 The speaker's portfolio is diversified, with about 35% in fixed deposits, 18% in provident funds, 15% in mutual funds, and the rest in stocks, REITs, and other investments.
• 👉 He stresses the importance of not compromising on having a substantial corpus for financial security and the ability to enjoy life without financial worries.

Q & A

When did the individual achieve financial independence?

The individual achieved financial independence in 2019.

What was the individual's first job and salary?

The individual's first job was at Mast with a salary of 5,000 rupees.

How did the individual's career progress after Mast?

After 2 years at Mast, the individual switched to TCS for data consultancy services, where they spent almost 10-11 years. Every career jump after that resulted in a 30% to 60% increase in salary.

What triggered the individual's focus on financial independence?

The trigger was a lecture from a lady in the office who noticed the individual had only 500 rupees in their bank account, leading to a serious consideration of their financial situation.

How did the individual manage their finances after the lecture?

The individual started by categorizing their expenses and allocating their salary to cover only the necessary expenses. The rest of the money was put into fixed deposits, with the goal of using the interest for non-essential expenses.

What was the individual's strategy for achieving financial independence?

The strategy included categorizing expenses into six categories based on priority and frequency, allocating specific investments to cover different types of expenses, and ensuring a stable monthly return from fixed deposits and rental assets.

How did the individual's real estate investments contribute to their financial independence?

The individual started renting out idle flats, which led to a realization that rental income could grow faster than inflation. Today, they receive about 40,000 rupees a month from five rental properties.

What is the approximate market value of the individual's real estate properties?

The approximate market value of the properties is around 170 lakhs rupees, with individual properties valued at 50-60 lakhs, 50 lakhs, 30 lakhs, and 20 lakhs.

What is the individual's current monthly living expense and how is it funded?

The individual's current monthly living expense is about 1.2 lakhs rupees. This is funded by 40,000 rupees from real estate, 20,000 rupees from mutual funds, and an additional 15-20,000 rupees from stock dividends.

What advice does the individual have for someone in their mid-20s or early 30s starting their financial independence journey?

The individual advises starting small, even if it's with a half a percentage of savings, and focusing on stabilizing finances with low-risk investments rather than high-risk, high-reward options.

What is the individual's current asset allocation in terms of fixed deposits, provident fund, mutual funds, and stocks?

About 35% is in fixed deposits, 18% in provident fund, 15% in mutual funds, and 25% in stocks. The remaining percentage includes REITs and other investments.