Financial Freedom

Where are you and where are you going?
avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

May 2020 review:

ERE numbers:
  • Savings rate - 92% (This compensates for the negative savings in month of March. Increase in income came from sale of my employee stock option.)
  • Safe Withdrawal Rate - 2%
  • Passive income - 3%
Actions taken/Learning summary from May:
  • There has been steep recovery in price of my company's share, and I have sold good amount of shares that vested in Jan/Feb of this year. I was put back on my savings plan due to tax consequence of employee stock vesting that happened. Additional taxes were deducted from my salary even though I had not sold those shares.
  • I am still 10% down from the Feb 2020 peak in my Vanguard IRA investments. VGHCX investment has recovered, while VEIRX and VGSLX are still down from the peak. I have done Roth conversion of few VGSLX units in IRA to my RothIRA account. As VGSLX is still 30% down from the peak, I saw this as good opportunity for Roth conversion.
  • Completed reading of "The Intelligent Investor" book by Benjamin Graham. Skipped reading of Chapter 16 onward, as they were more focused on plan for Enterprising Investor. I intend to manage large chunk of my investment as "Defensive Investor", and go with passive approach of investment through Index fund. I intend to transfer my funds in sector based fund (VGHCX and VGSLX) to S&P500 based index fund by end of 2020. I will keep some of my investment (~ 10%) in IAU.
  • With some of my employee stock options sold, I now have fund to close one of my home loan. Loan closure process has been initiated with the bank. It will take 2 weeks time to complete it.
  • Lock down is slowly getting lifted in large part of India now. Small retail shops have been reopened and malls are going to open up from June 8th. BSE SENSEX has recovered half way from march loss in the hope of increase in economic activities.

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

June 2020 review:

ERE numbers:
  • Savings rate - 28% (This number is low as I used large part of income towards closing one of the home loan.)
  • Safe Withdrawal Rate - 16% (Went high due to large loan payoff amount considered under expenses. These numbers get thrown off significantly due to one time expenses like this.)
  • Passive income - 5%
Summary of actions taken/key learnings:
  • Completed the financial planning exercise with my investment advisor.
  • Figured out monthly investment goals based on mid-term (kids education) and retirement goals.
    • Investments will be made mainly in the form of Index MF through monthly SIP.
    • I am choosing to go this passive investment route, as my priorities lies somewhere else and require more of my attention. While I am going to continue investing more time learning recommended books, I feel comfortable with getting market return (beta) right now.
    • As I reach closure to my FI goal in 2027, I expect to have some of my portfolio managed actively. For now, I will just play around with little bit of fund while learning.
  • Paid-off one of the home loan fully and received original property docs from the lender. I intend to close another home loan in next 1 year time frame.
  • Covid-19 Update: After relaxation in Lockdown norms, Covid +ve cases went up exponentially all over India, especially in Bangalore. One positive case has been found in our apartment community and additional restriction on movement has been put on us by local authority. Good thing is that essential supplies (like food, medicine) are not impacted. Kids classes and our work continues online.
  • Completed reading of “Seeking Wisdom" book by Peter Bevelin. Some of the key takeaway for me were
    • We should act in a way that agrees with our nature, advantages and limitations. We reduce the likely hood of making mistakes if we deal with things that agrees with our nature, and things we understand and do well.
    • Live in the present: Focus on the present without dwelling too much on past mistakes or future worries.

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

July 2020 review:

ERE numbers:
  • Savings rate - 80% (This number is high as I received large proceeds from the sale of my company stocks. Savings rate for the year is averaging at 56% right now. Target is 60% for the year.)
  • Safe Withdrawal Rate - 3%
  • Passive income - 5%
Summary of actions taken/key learning:
  • Covid-19 Update:
    • Came to know of few COVID related deaths in close family and friend circle. They were in their 40s and 50s (not very old).
    • In our immediate family (wife, parents and kids), our approach continues to be a combination of prevention (social distancing, masks, sanitisation) and immunity building (through healthy food, herbal tea, tonics etc).
    • Family with a positive case in our apartment community has recovered fully, lock-down restrictions have been removed and people can now go for a walk while maintaining social distancing.
    • Kids classes and our work continues online. Not much issues on that front except internet speed sometimes causes loss of productivity and disruptions.
  • Currently reading “Thinking Fast and Slow” by Daniel Kahneman.
    • Learning a lot on heuristics/biases that each one of us are prone to.
    • How our brain (system1) makes decisions based on limited information (WYSIATI) and tends to ignore base rate (statistics).
    • How analytical part of our brain is lazy sometimes and lets the decision made by system1 pass without much scrutiny.
    • Insight on Prospect Theory on loss aversion is really interesting. We tend to prefer loss aversion (almost twice) more than potential gain of same amount. How we tend to prefer certainty under high stake situation and would pay premium for it.
    • Trying to make sense of these and assimilate it in my behaviors and decision making.
  • Personal project: Laptop upgrade:
    • Upgraded RAM from 4GB to 12 GB and added 240GB SSD.
    • Windows 10 booting time is close to 45 seconds now as compared to 2-3 minutes earlier.
    • It was very satisfying to take care of this upgrade myself. Parts were ordered from Amazon.

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

August 2020 review:

ERE numbers:
  • Savings rate - 41%
  • Safe Withdrawal Rate - 4%
  • Passive income - 8%
Books read/reading:
  • Completed reading "Thinking Fast and Slow" book. There was so much of insight loaded in the book that it is going to take time and couple of rereads to assimilate it.
  • Currently reading “Stock Market Cashflow” by Andy Tanner. Would like to practice the learning from this book and "Trading for living" by Alexander Elder with small amount of money.
Health:
  • Reached my target weight of 65kg; although with higher Body Fat (22%) as compared to target of 12.5%. Will need to work on that part now.
  • Gym of my apartment community has opened up and that has allowed me to take up varied exercises than limited options at home.
Work:
  • Work from home continues without any issue. Saving time on commute and more family time has been a blessing. Took some time to attend online courses on cybersecurity and ethical hacking.
  • Office and schools are not expected to open up for another month or two at least.

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

September 2020 review:

ERE numbers:
  • Savings rate - 61%
  • Safe Withdrawal Rate - 2%
  • Passive income - 8%
Books read/reading:
  • Completed reading “Stock Market Cashflow” by Andy Tanner. This book beautifully covers the 4 pillars of investing. While I have learnt about fundamental and technical analysis through other books as well, Andy covers a great deal about sovereign debt issues of a country and how it impacts country's economy. Chapters on Cash flow and Risk management are gem and he explains these aspects in a way that is very easy to understand and with lots of examples and pictures.
  • Currently reading “Happy Gut” by Dr Vincent Pedre.
Health:
  • Back on track to weekly exercise regimen that I was practicing before COVID pandemic.
  • Will be on Happy Gut C.A.R.E. protocol for the month of October as an attempt to reduce food based sensitivity/allergy.
Finance:
  • Investment for kids education is on auto pilot now, using the numbers from financial planning exercise I concluded earlier this year.
  • Yet to start stock picking based on learning from “Stock Market Cashflow” and "Trading for a living" books. Intend to get into in with little bit of speculation money kept aside for this purpose after US election.

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

October 2020 review:

ERE numbers:
  • Savings rate - 83% (This went up due to proceeds from my company ESOP that added to monthly income. For the year, I am on track for 60% savings target.)
  • Safe Withdrawal Rate - 2% (My expenses were low this month, as there were no payment due for kids education fee. For the whole year my withdrawal rate is 4% so far.)
  • Passive income (Passive Income/Gross Income) - 4% (This % went down as proceeds from my company ESOP added to monthly income.)
  • FI Ratio (Passive Income/Expense) - 30%
Books read/reading:
  • Completed reading “Happy Gut” by Dr Vincent Pedre. I followed the suggested Happy Gut C.A.R.E. protocol for the month of October to heal my Gut.
  • Currently reading “Deep Work” by Cal Newport.
Health:
  • Started my long distance run over weekend after break of almost 2 years.
  • Current health measurement (Wt- 63kg, Body Fat- 22.7%, Skeletal Muscle- 32.2%). Target goal for the year (Body Fat- 15%, Skeletal Muscle-36%).
Finance:
  • Have been too fixated on changes in my Vanguard IRA account during this volatile market condition. I keep checking it frequently; something that I would like to avoid and feel peaceful about with better asset allocation. I have moved some amount of available cash to Gold ETFs and stocks.
  • Yet to start stock picking based on learning from “Stock Market Cashflow” and "Trading for a living" books. Intend to get into in with little bit of speculation money kept aside for this purpose after US election.

ertyu
Posts: 2914
Joined: Sun Nov 13, 2016 2:31 am

Re: Financial Freedom

Post by ertyu »

Did you notice a difference in how you feel after having happified your gut according to this protocol? Would you recommend it?

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

ertyu wrote:
Sun Nov 01, 2020 12:23 pm
Did you notice a difference in how you feel after having happified your gut according to this protocol? Would you recommend it?
I am in middle of Reintroduction Phase right now. I will report the result of that in 2 weeks time.

The reason I did this protocol is to check my sensitivity to food. I do not get immediate reaction (IgE based) to food that I eat, but more of the delayed reaction (IgG based; after a day or two). So it gets difficult to really figure out what food is causing the problem. During the protocol, I avoided Egg, Dairy and Wheat. I consumed Legumes (lentils, beans) as I do not suspect them to be the problem food for me. I avoided Egg completely for a month, however was partially successful (consumed 2-3 times during the month) with avoidance of Dairy and Wheat.

During next 2 weeks, I am going to reintroduce Egg, Dairy and Wheat in that order and see how my body responds to that.

Regarding recommending it, I do not see any harm of using the protocol to get digestive system in order. It seems to be using holistic approach of avoiding foods that are common culprit of gut issues; and adding food/supplements and exercise/yoga regimen that heel it.

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

ertyu wrote:
Sun Nov 01, 2020 12:23 pm
Did you notice a difference in how you feel after having happified your gut according to this protocol? Would you recommend it?
@ertyu
Here is my experience with suspect food during reintroduction phase. Suspect food for me were "Egg", "Milk products", and "Wheat".
I reintroduced them one by one in the order mentioned above. 2 Days of eating the suspect food two times a day and then giving a gap of 2 days to observe any delayed response/food sensitivity.

With this protocol, I was able to rule out Egg and Wheat as the suspect food. I.e. I did not notice any sensitivity/discomfort to Egg and Wheat. While use of Milk product seemed to cause some issues for me, like wheezing during the night and difficulty sleeping well.

I would have loved to continue consuming some milk products like Yogurt, however will avoid milk products for now (except Ghee-Clarified butter).

zarathustra
Posts: 172
Joined: Sat Apr 14, 2012 11:15 pm
Location: VEGAS, BABY

Re: Financial Freedom

Post by zarathustra »

When you say "milk product" was it raw milk, pasteurized milk, cheese, or fermented milk like yogurt? These are very different and you may be able to tolerate fermented milk products just fine!

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

zarathustra wrote:
Wed Nov 18, 2020 9:55 am
When you say "milk product" was it raw milk, pasteurized milk, cheese, or fermented milk like yogurt? These are very different and you may be able to tolerate fermented milk products just fine!
During the two days, I used Yogurt, raw milk as part of milk shake, and Cottage cheese. I understand your point and will need to consume them separately to figure it out.

ertyu
Posts: 2914
Joined: Sun Nov 13, 2016 2:31 am

Re: Financial Freedom

Post by ertyu »

From friends with dairy sensitivity, I know they react differently to different types of cheese or yoghurt, cream or ice cream. Might be worth it testing some favorites separately - it could turn out, say, mozarella is causing issues while feta isn't, even though both are milk products.

LiberateMind
Posts: 197
Joined: Fri Oct 26, 2012 8:18 pm

Re: Financial Freedom

Post by LiberateMind »

@avainshk,

Nice to see someone from India Planning FI. One of the struggles I face in our country is getting a passive income which is linked with inflation. Do you have any insights / suggestions based on your research?

The expense ratio of index funds looks high here around .5 to 1.5 % . Are you investing in less expense ratio? ETF's have less expense ratio comparatively. What are your thoughts?

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

LiberateMind wrote:
Sat Nov 21, 2020 2:52 am
Nice to see someone from India Planning FI. One of the struggles I face in our country is getting a passive income which is linked with inflation. Do you have any insights / suggestions based on your research?
It's good to hear from you @LiberateMind. The effect of Inflation is very concerning indeed. In fact I feel that inflation numbers (CPI) shared by government does not reflect a typical household expenditure. For majority of large expenses my household incurs (kids education, medical bill); inflation is easily in range of 10% to 15%. So CPI numbers are not very helpful to me. I undertook Financial Planning exercise with a financial advisor earlier this year and was suggested to work with 6% as inflation number. I would rather use 8% or more to be on safe side for planning purpose.

I think your thought of owning inflation proof asset like rental real-estate is good one. Only challenge is that rate of return is pathetic (typically 2-3%).
Which means your networth needs to be very large for generating passive income covering all your expenses. Which means you are going to work with 2-3% SWR, if that is where all your income comes from.

In my case, I have made the mistake of owning a lot of non-productive real estate asset like land (Doodah in RichDad term); and would suggest staying away from that if your goal is generating passive income. Lately, I have been working on balancing investment across different asset classes that was overweight on Real estate so far. I primarily use Index fund route for stock market investment for increased rate of return as compared to RE. I also invest in SGB (Sovereign Gold Bond) as insurance against inflation.

I would suggest keeping a good balance between asset classes (like Real estate, Paper asset, and precious metal like Gold). Off-course all of this is only after you have built your emergency fund and have kept it aside. You need to decide for yourself what % allocation to these asset classes you are comfortable with.
LiberateMind wrote:
Sat Nov 21, 2020 2:52 am
The expense ratio of index funds looks high here around .5 to 1.5 % . Are you investing in less expense ratio? ETF's have less expense ratio comparatively. What are your thoughts?
I invest in Direct plans of Index funds. Experience ratio of these funds are 0.1%, not as high as what you have mentioned. You can take a look at following as an example.
  • HDFC Index Fund - Direct Plan - Sensex Plan
  • Nippon India Index Fund - Direct Plan - Sensex Plan

LiberateMind
Posts: 197
Joined: Fri Oct 26, 2012 8:18 pm

Re: Financial Freedom

Post by LiberateMind »

@avanishk,

Thanks for the detailed reply. I have also thought about building homes on plots for rental, but the buildings get depreciated over years and planning to do it at later stage in life when absolutely retiring. Owning apartments looks scary to me as I dont know how it would be handled if there is lack of proper maintenance or shortage of water or what happens after 30 years. What types of real estate you are investing in? Any suggestions?

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

LiberateMind wrote:
Sat Nov 21, 2020 11:39 am
What types of real estate you are investing in? Any suggestions?
@LiberateMind
I am no longer investing in real estate. I have rented out my earlier apartment that I have lived in before. That's about it. I feel that they are very capital intensive and return on investment is not much due to high real estate prices in India. Interest payment on loan are not even covered by the rental payment I receive. I am only sharing my understanding and experience here and I would prefer not to provide any financial advice/suggestions in this regard. I am no expert in this field. You would be better off making your own decision considering your own unique circumstances/goals.

LiberateMind
Posts: 197
Joined: Fri Oct 26, 2012 8:18 pm

Re: Financial Freedom

Post by LiberateMind »

avanishk wrote:
Sun Nov 22, 2020 8:05 am
I feel that they are very capital intensive and return on investment is not much due to high real estate prices in India. Interest payment on loan are not even covered by the rental payment I receive.
Thank you for sharing this. This mostly confirms my own beliefs and I can understand my reluctance much better.
avanishk wrote:
Sun Nov 22, 2020 8:05 am
I am only sharing my understanding and experience here and I would prefer not to provide any financial advice/suggestions in this regard. I am no expert in this field. You would be better off making your own decision considering your own unique circumstances/goals.
Its best to get the advice of the people who is going through the similar phases in life in our country as west has completely different set of investments than in India, that's my POV. Of course, I will make a decision based on my goals only, no worries on that. Once again thank you for the frank discussion.

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

2020 Update:
Another year has gone by with new set of challenges as well as opportunities put in front of us. I learnt a lot during the year and feel that I have become stronger mentally, financially, physically through this experience.

I have been very fortunate to be a part of this ERE community and having come across Jacob's book and his teachings. While I don't post a lot, I do go through many of your posts that inspire me tremendously and helps me stay on track.

I wish you all a very happy, healthy, fun-filled and fulfilling year ahead!!!

Financial
  • Reached savings rate of 58% against target of 60% set for 2020. This was achieved through reduced spending as income remained the same for the year. Of-course COVID helped reduce our travel spending and couple of other discretionary expenses.
  • Mid-term (children education fund) and long-term goal (financial freedom target date) are set. Systematic investment plan to reach those goals are on autopilot now. Just need to track those on quarterly and annual basis. These systematic investments are done through Index funds and couple of actively managed funds.
  • I still have a long way to go when it comes to generating cash-flow through Active Investment approach. I read couple of books during the year towards this goal like (Trading for a living, Stock market cash-flow, Intelligent Investor, and Thinking Fast and Slow). Plan for 2021 will be to apply those learning in Indian stock market to generate some cash-flow and supplement my income. I have been very inspired by some of forum members (like Lemur) to really deepen my investment skills and practice those to generate income.
  • Completed financial planning exercise with a financial planner. Overall feel good about the way my finances are setup now. Life, Health, Home and Auto insurance policies are in order with adequate cover. Account nominations are in place. DW is in sync with how things are setup and more able to manage things in my absence. Still there is a lot of scope for improvement in this area that I need to continue working on.
  • Performance of my financial investment in 401k and brokerage account has not been good for the year 2020. I was not expecting the market to recover so fast and kept large chunk of my investment in Cash, Gold and Silver ETF. My REIT investment provided negative return as well.
  • I am overall satisfied with what I have achieved on personal finance front during the year.
Health
It has been a mixed bag when it comes my health goals. Started the year with clear measurable goals, and then went off track later in the year for significantly long period. Early part of lock-down was not that bad as we had my nephew was staying with us during lock-down and we (Nephew, my son and I) made it a fun family affair to exercise everyday morning. These were primarily body weight exercises like Squat, Pushup, Plank that we were tracking every day and measuring our progress. This went on for about 3 months (March - June), when each one of us made good progress. And then we fell off track during later part of the year and squandered some of the progress made.

By end of 2020, my weight goal was closely met (reached 64kg instead of 65-68kg set for the year). However my current muscle mass (31.3%) and body fat (25.4%) are far away from the target I had set (12.5% body fat) at start of the year.

One other area of my focus was to find the source of my food allergy. I was partially successful with this goal by doing an Elimination Diet during the year. That exercise ruled out Egg and Wheat/Gluten as source of my allergy. My ability to digest dairy product is still a question mark. Sometimes I feel I am able to digest yogurt and occasional milk based pudding just fine and sometimes I feel otherwise. During 2021, I want to get a better feel for it and redo Elimination diet with that in focus.

We were able to practice much healthier eating throughout the year (less/almost-none restaurant food, more home cooked meal, and healthy meal) as result of pandemic. I learnt to cook many new dishes during the year, and intend to learn even more covering different cuisine (thai, italian) on the healthy side of spectrum.

Spiritual
While I am Hindu by religion and also enjoy many festivities and food linked to our culture, I do not practice any rites or rituals that are specific to this religion. My form of spirituality is mainly meditation and gratefulness practices that I have been learning more about and practicing lately. I went for a 10-day Vipasana meditation retreat later in the year to learn this technique and intend to continue and deepen that practice in coming years. Vipasana meditation is a technique developed based on teachings of Gautama Buddha and is really agnostic of any religion.

Family/Relationship
One of the big plus of work/study from home (due to COVID pandemic) has been the amount of time we had available to spend with family. My daily commute to work got eliminated and we could spend more time with each other. We also had my sister, nephew and nieces stay with us for 3 months during the lock-down. Time spent together during these times have definitely strengthened our relationship.

Work
I am grateful that the company I work for has come out of pandemic stronger. Being in technology space allowed us to work from home without any impact. Company's business prospered too due to more and more customer opting to run their business online. There were no layoffs and salary cuts were kept minimal and only at senior management level. Overall we were able to ride the disruption caused by COVID pandemic well. At personal level I enjoyed the flexibility and less commute time while working from home.
Last edited by avanishk on Sat Feb 20, 2021 2:01 am, edited 1 time in total.

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

2021 Goal:
Following are high level goal that are meant to guide me with decision making through out the year. They are not meant to act as SMART goal and not limited to this year. Some of them are activity goal that would continue for many years with some modification.

Big 5
1. Read 24 books (2 per month) during the year to propel my personal growth and develop skills aligned with my purpose and what brings personal fulfillment and serves others.
2. Get personal fitness and health on growth trajectory. Improve health issues through optimal nutrition, right kind of exercise and rest.
3. Be a full time dad for my kids and spend the time necessary to make them an awesome human being.
4. Live Frugal lifestyle as promoted by Jacob is his ERE book and blog. Save more than 65% of income after tax, and learn to invest it wisely to achieve financial freedom by Jan 2027.
5. Develop love and kindness towards everyone and focus on giving and serving others. Heal myself and my relationship with wife, kids and parents. Make use of quiet time and meditation towards this goal.

avanishk
Posts: 46
Joined: Tue Oct 15, 2019 5:52 am

Re: Financial Freedom

Post by avanishk »

January 2021 review:

ERE numbers:
  • Savings rate - 47% (Savings rate came down due to reduced rental income from vacant units. One time medical expenses went up as well.)
  • Safe Withdrawal Rate - 2%
  • Passive income (Passive Income/Gross Income) - 9%
  • FI Ratio (Passive Income/Expense) - 31%
Books read/reading:
  • Completed reading “End of Food Allergy” by Dr Kari and “Siddhartha” by Herman Hesse.
  • Reading list for next month is "Walden" by Thoreau and "The little book of common sense investing" by John Bogle.
Health:
  • Got Allergy test done (IgE & Skin Prick test). The test confirmed allergy with Dust mites and prawn. No allergy found with any other food, thankfully. SLIT treatment for Dust Mite allergy started. I don't eat prawn or shrimp anyways.
  • Current health measurement (Wt- 63.8kg, Body Fat- 23.6%, Skeletal Muscle- 31.8%). Target goal for the year (Body Fat- 15%, Skeletal Muscle-36%).
Finance:
  • After keeping large part if my 401k investment in Money Market Account during last year, I have started investing some of the available cash in selective stocks with long term potential (primarily in green energy sector).
  • Have also started investing in Indian stocks as part of my financial education. Have primarily picked up high dividend yielding stocks with low PE and low Debt/Equity. I am considering selling Put options to earn premium or acquire more stocks of my interest as I go.
Spiritual:
  • I have started regular practice of Vipasana meditation since start of the year. Morning meditation time right after waking up works the best for me. Evening meditation sometimes happens and sometimes not.
Work:
  • Work from home is going on well. Office is open if someone wants to work from office, however I prefer working from home and save time/gas by not commuting to work.

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