Early Retirement Interview: Anil from Pune is 4 years away from Financial Independence

Working in isolation on your goals can sometime be lonely and demotivating. That is why we started our blog to share our story and form a community of like-minded people with a common goal of being Financially Independent and Retiring Early.

In addition to sharing our own F.I.R.E journey we also look forward to sharing the stories of our F.I.R.E readers on this blog.

This week we have the pleasure of a guest post from Anil, whose family has achieved 77% of their Early Retirement Corpus and is 4 years away from Financial Independence. Let’s find out how Anil and his family managed to achieve this in-spite of life’s ups and downs. Most importantly how they achieved their goal along with managing international travel alternate years and other household expenses (cook, maid etc).

Thank you Anil for sharing your journey candidly with all of us at Saving Habit (SH).

Q & A 

Q1 SH: Tell us a little about yourself?

ANIL: I just turned the big 4-0 so I guess you can call me properly middle-aged. I’m a senior finance professional. Currently located in Pune and I really like it!

I’m married with a 3 year old daughter. Both my wife and I work though she’s just started working again after a 3 year break for the kid. Dad’s retired from a PSU job. Mom is a housewife. Neither my parents nor in-laws are dependents luckily.

My biggest influence is my dad. My grandfather died young and left him 3 sisters to get married and though I didn’t realize it at the time, he had to scrimp and save through most of my childhood to meet his responsibilities. When I think back about it, I realise that it left a huge impression on me – that money was never to be wasted, that it wasn’t so important to keep up with the flashy next door neighbor and that debt was always a crisis.

Q2 SH: What motivated you to work towards FIRE. Any trigger incident?

ANIL:  Nothing very specific but it was during a point in my career about 5 years ago when I was generally unhappy with work, was working crazy hours because the team was short staffed and had some personal stuff going on as well. I was having fantasies about quitting and walking away and discovered the FIRE community – specifically Mr. Money Moustache. The whole idea felt like it was talking to me.

Q3 SH: What is your target age to achieve FIRE?

ANIL: I set it at 50 when I first started but have grown increasingly convinced I can get there at 45 – partly because I did my initial calculations wrong and partly because of the effect stock market increases in the last 4 to 5 years have had on my portfolio.

Q4 SH: What is your target corpus and how are you saving up for it ?

ANIL: My target is 25X my annual expenses, but I did keep a separate allocation for my daughter’s education and marriage. Old Indian habits I guess. I’m 77% of the way there. Hurray! My portfolio mix is:

• 40% equity (in Mutual Funds)
• 40% debt
• 20% PF, PPF (which I guess you can also call debt)

The skew towards debt is due to a history of investing illiteracy which I’ll talk about in the later question. I’m targeting 60-40 the other way and I figure I’ll get there in 3 years with a combination of ongoing SIPs and STPs.

I also own a debt-free apartment in Mumbai that I’m not counting because though I don’t stay in it, theoretically, it is my primary residence. In the future, if and when I do decide to buy a place to live in when I settle permanently, I’ll use this house to fund it (and hopefully have money left over to further buff up my retirement nest egg)

Q5 SH: What is your savings rate, any specific saving strategies?

ANIL: Let me first say that I have always been a saver. I bought my first car at the age of 31; if I ate out, I preferred cheaper options; not a device fanatic etc. etc, However, I was not always an investor. To explain, I’ll divide my saving/investment life into phases:

Early career (23-27): Decent salary but living with parents so no responsibilities and only real expenses were partying with friends. I was saving close to 70% of my salary. However, I was investing like an idiot. I took all sorts of ULIPs, applied for every IPO and did my tax savings mainly in PPF but also NSC.

Responsibility (27-31): My father retired. He had originally planned to settle in Hyderabad where he owned a house but suddenly decided to continue in Mumbai when he got a post-retirement job offer. We initially planned to rent but I impulsively decided to buy when we saw a house we liked. At the time, the loan EMI was 50% of my salary. Savings…except for tax savings stopped and all my money went towards the house. At the same time, I moved cities, got married so responsibilities increased. Excluding EMIs, my savings rate was probably 10%. Including them though, I was still at around 60%.

Accumulation (32-35): This was the phase when the money really started rolling in. I got a 4 year assignment in the US with a good salary. My wife was also working for 3 of those years. We were in a small town so didn’t have heavy expenses except for travel. We were saving about 50% of our combined salaries and since they were US salaries, it was a pretty good saving. However I was still really stupid about where the money was going. I had huge numbers sitting in my savings accounts in the US and even when I bothered to start FDs the interest rates were ridiculously low: 2% or so. I had some MF SIPs going on but compared to the overall savings I had, the amounts were too low to make a difference to the return

Working towards FI/RE (36-ongoing): Once I woke up to the whole concept, I started acting. Set my goals, made a financial plan, all my savings immediately were routed towards SIPs, got rid of my ULIPs, started STPs from my FDs etc. However, this coincided with some major life expenses – I had a kid, my wife took a 3 year career break to take care of our daughter, I relocated to India and a new city with associated expenses. My saving rate dipped but I’m proud that even through the worst of it, I still maintained a 25% savings rate and if I include PF 30%+. Now that my wife’s back working, we are back above 50%

Q6 SH: Who influenced you or people you follow? 

ANIL: Mr.Money Mustache is the main one but as I got into it, I did follow a few others here and there. In India, it’s the usual suspects – Subramoney and Freefincal.

Q7 SH: How are you managing your saving rate with a young Kid?

ANIL: It’s not easy. I think the important thing is that we prioritise spending on what really matters to us. We send our kid to an expensive pre-school and daycare, we have lots of house help – maid, cook etc., we take foreign holiday alternate years but we have a cheap car, the rent from our Mumbai house covers the rent for our Pune house with a fair bit left over and we’re careful in other ways. In the end though, I’ll be honest and say that we both have high paying jobs and even with a fair bit of waste in our spending, we still manage a pretty high savings rate.

Q8 SH: You mentioned you were “ruthless” about a few things in order to reach your target?

ANIL: Between my wife and I, we had 2 lacs a year going towards ULIPs sold to us by family members. We closed them out accepting whatever loss there was. Took some gutsy decisions on moving largish FD money into MFs. Sold out all the little shares I owned from years ago wholesale without bothering to overanalyze. Essentially, I simplified my financial life. The main thing though is my ruthlessness in adhering to a budget. It is a generous enough budget and I am very careful in sticking to it on a monthly/quarterly basis.

Q9 SH: What are your plans after you achieve F.I.R.E?

ANIL: I definitely don’t want to completely kick back and relax. My goals are a little different. If I think about my career, it’s definitely been a case of the Peter Principle (for those who’re too young to know of it – the law is that everyone tends to get promoted to their level of incompetence). I was a great financial analyst so I kept getting promoted quickly and now I have reached a level where I hardly do any actual financial analysis…most of my time is spent managing people. Any job that pays what I now earn doesn’t allow me much scope to get my hands dirty. My main plan after I semi-retire is to try and find a job where I can accept a much lower pay in order to get back to doing what I enjoy with reasonable work hours.

Q10 SH: What is the one piece of advice you want to tell our readers based on your journey?

ANIL: I’m no expert and god knows I’ve made my share my mistakes on this journey but if I had to share just one piece of advice, it would be – “Start early”. Starting early made up for all the goof-ups I made over the years. Though I invested badly, the power of compounding covered up the errors and today I stand 4 years away from financial independence. I know I’ve been lucky in now having much responsibilities in those early years but I also made sacrifices – all my friends were buying cars – I used public transport to get to work; stayed with my parents; partied responsibly etc. That’s paying off now.

If anyone of you out there who has achieved or is close to achieving financial independence and wish to share your story on this blog with other readers. Please write to us on habit.of.saving@gmail.com. We love to hear from you.