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Published: December 18, 2022 at 6:00 am
In this edition of the reader story, Mr Alam provides the most detailed account of his financial journey: From a net worth of Rs. 6000 to auto-pilot goal-based investing.
About this series: I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers. Some of the previous editions are linked at the bottom of this article. You can also access the full reader story archive.
Opinions published in reader stories need not represent the views of freefincal or its editors. We must appreciate multiple solutions to the money management puzzle and empathise with diverse views. Articles are typically not checked for grammar unless necessary to convey the right meaning to preserve the tone and emotions of the writers.
If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail dot com. They can be published anonymously if you so desire.
Please note: We welcome such articles from young earners who have just started investing. See, for example, this piece by a 29-year-old: How I track financial goals without worrying about returns. We have also started a new “mutual fund success stories” series. This is the first edition: How mutual funds helped me reach financial independence. Now over to Mr Alam.
First, I thank my wife, who gave me crucial advice during my financial journey and supported me throughout my financial journey. Without her, it was not possible.
Some youtube channels and personnel who always helped me.
2013 – 2015: I graduated with a B Tech in electrical engineering from a private engineering college in Kolkata. Got my first job as a site engineer in Godrej. But I didn’t feel connected with my work and salary. My dad was an RRB bank employee. So I also want to be a govt employee and the banking job selection process was the fastest. So I decided to leave the job and prepare for IBPS.
I took coaching for Bank. In the meantime, I passed some banks’ exams and performed well in the Railway Junior Engineer (RRB JE) exam.
—- No savings till now.
—- I learned about India’s economics and the financial system throughout the preparation for banks (it was helpful in the journey, I learned quickly and took the right decision).
I joined as PO in the bank in 2016. I married my love. In the meantime, I passed the JE exam and my selection procedure was going on.
—- I funded 50% of my marriage.
—- No savings.
—- Spending was a habit due to situations like marriage and some instability in the job as I wanted to switch jobs.
2016 – 2017 (The Beginning): Joined as JE in Railway. Earning and spending on shopping, vacations, trips, household items, and some charities. In October, I had an accident, a bike accident. Then I sat with my wife and discovered that we have no money. If a big accident happens, what will be the situation, I will have to take money from my father—only ₹6000 in my account and nothing. So, I will have to save and save first, then spend.
—— In November I started an RD with my salary account holder bank. ₹10K/month on the 5th day of the month for two years. It will give a cushion for any kind of emergency.
2017: I couldn’t save much. Still, spending was an issue.
—– Opened a PPF account and kept it alive
—– RD was going.
—– thinking about investing in MF but was scared of it as I do have not much knowledge
—– sometimes watched YouTube to learn about them
—– Avg monthly saving throughout the year ₹10K/m
2018 – 2019 (The year of the beginning of learning – Product based approach)
2018: July – October: ITR returns filing was done and I came to know that I could have saved taxes by investing and claiming a tax rebate as per 80C. So I thought about how I can invest. Thought about how much I invest. So, I need to track my expenses to invest for reducing taxes.
I started to track my expenses category-wise, note them and analyze them. But never set a budget. I didn’t want to control my expenses, just to track them as I invest first and then spend. So, my investment was on track.
Now coming to tax savings. Searched on YouTube and got many videos. Got a lot of options. I have NPS as I am a central government employee. There are a lot of options.
I chose to invest in ELSS and PPF. Searched a lot on YouTube and chose ABSL TAX RELIEF 96 – Direct through their website. Started investing through SIP ₹3500/m
Why did I choose ELSS?
—– I thought of doing a LIC. But videos from the Labour law advisor kept me out of taking such endowment or money-back policies. Thanks to the channel for teaching me about the dark truth of it and learning the concept of IRR.
—–Felt ULIP is complicated. Tax saver FD is not tax efficient. NSC was on my Radar as it has tax benefits for reinvestment of Interest.
—- ELSS is best as it has capital gains tax benefits and the least lock-in period.
The Labour law adviser channel’s videos were most honest about these things. Started following the channel and Mandip. Some other channels were also there but I think this channel taught me things in an honest way at that time.
I also began to follow investyadhna channel and Parimal Ade, Gaurav Jain. And I thought a Multicap fund will be an excellent fund to start the investment journey with MF. So, I started a SIP in the SBI MAGNUM Multicap fund of ₹1500/m through the ET MONEY app. I thought it will be good to invest from a single platform as it will be easy to manage.
Watched a lot of investment-related videos online. Started reading topics related to this, following various investor personnel, started reading about inflation, what to do to beat inflation, equity investing, how many people achieved a lot of wealth through equity investing, and how many ways to invest in equity—concept about assets, liabilities.
Learning in this period
—- PPF is the safest instrument in India. Even the court can’t touch it.
—- Endowment policy is a bogus instrument. Never ever fall for it. Don’t mix insurance with investment. Insurance is for risk coverage, and investment is for future needs coverage. You just can’t get both from a single product. It’s an inefficient, useless, NetWorth-eating product with zero inflation-adjusted real return.
—- Through YouTube, I gained knowledge about how mutual funds works, their types etc.
—- Also learned that investing in MFs through a Regular plan is a bogus thing to do.
—- learned the concept of compounding and how much it is important and for that to work investment is needed as much as possible.
—- discipline is important for investing and luckily I have it as I started an RD. Will have to work on it a lot more
—- an increase in investment amount is so important. This will benefit in the long run
—- it’s better to be debt free
I and my wife were thinking about getting a flat as we were on rent. I even gathered money for a downpayment of about 50K. My father was to help me with that. Talked with the branch manager also for a home loan. But seeing the EMI amount I was sleepless thinking that I won’t be able to invest much. And investments are essential. So, I dropped the idea. Thought about applying for quarters from my employer. Later on, after saving some money I can buy a flat or land.
We both also wanted a car. and thought about a car loan. But we decided that it’s not the right time and also we don’t need it. I don’t wanna take out a loan. I will save then I will buy if I have to wait, I will wait. Thought I will start an RD for these purposes.
My RD matured. As NSC was in my Rader I invested that in NSC adding 50K of that down payment, a total of 3L. And I thought it would help me buy land (my wife wants but I don’t feel comfortable buying land) or a flat or build a home with my father’s help with or without a loan.
Why did I choose NSC? A tax saving instrument?
—– Simple, I can save tax. I can use 80CCD(1B) section to get more tax benefits showing NPS Contribution.
Opened an account in ICICI and started RD of ₹17K/m for 3 years. Thought it would help me to buy a car.
Also started another RD in SBI of ₹3K/m for emergency purposes like I started my investing journey.
What did I do this year?
—- learned to do tax planning
—- learned about mutual funds and started the journey with MF
—- avg saving/month increased to ₹27K/m (₹17K in ICICI RD, ₹5K in SBI RD, ₹3500 in ELSS, ₹1500 in Multicap fund) from last year’s ₹10K/m.
—- I had discipline in investing and thought about to be disciplined in increasing my investment each year
—- I realized that it’s important to assess your financial situation once a year. I want to maintain this discipline too.
—- I was also tracking my expenses.
2019: Again after ITR filing I realized if I need to claim tax benefits under 80CCD (1B), I need to invest more in ELSS.
Now I started to analyze MF in a different way after watching a lot of YouTube videos. I started to pick funds based on Risk Parameters (Beta, Standard deviation), Return Parameters (alpha, mean, Sharpe, Sortino), Rolling returns consistency, Fund Manager, Funds consistency, turnover ratio etc. I started to first look at the risk parameters.
—– Used Value Research for comparing funds.
Changed my investment platform too. Switched to PaytmMoney from ET MONEY and then to KUVERA ultimately in the next year
I picked Parag Parikh Flexi Cap (PPFC). Started SIP of ₹3500/m in mid-year.
Then I thought I would invest in every type of fund. Started small SIP in every type.
The aim was to invest as much as possible. I reduced the SIP amount of existing SIPs. I knew I was doing the wrong thing but I wanted to do it.
Monthly Investment
Total 32K/m from 27K/m of last year.
2020 to 2021 (The years of intensive learning – Shifting from a product-based approach to a more mature Goal Based approach )
2020: Now in 2020 corona happened. My total MF portfolio investment was ₹2.2L and it came down to ₹1.5L. But I didn’t withdraw any amount. I followed the “Never lose money” concept by Buffet Sir. Instead, I tried to pump money through some lump sums along with my SIPs. I stopped some ‘Other MFs’ SIPs. Waited for all the funds to turn green. Waited for the respective funds to fall under long term capital gain. Thanks to the bull run, I didn’t have to sell units at a loss.
I didn’t watch as many movies or something like that as I used to. This year I watched a lot of YouTube videos. Another channel I was following a lot, was CA Rachana Ranade.
I started investing in the UTI Nifty 50 index fund for large cap exposure in my portfolio. This was after watching videos about index Investing in various channels. During this time I found freefincal. But I didn’t watch much because I didn’t find things interesting. (Later I realised the contents of freefincal were so much more matured and I was not much matured then)
Revised monthly Investment
I thought about investing in direct equity. But I need to prepare myself for that. I did two courses.
Both were by CA Rachana Ranade. These courses are awesome for beginning stock market investing. Started to invest in small amounts slowly. First stock was Tata Power.
In the meantime, my wife got pregnant. After watching videos related to personal finance (I was stunned about how difficult is Retirement Planning and child education planning with respect to inflation, the first lecture of investyadhna was free), now I began to feel the need for basics.
Investyadhna launched a course for a limited period of time on 1. Personal Finance 2. Mutual Funds 3. Stock market
At the end of 2020, I purchased Personal Finance (₹760 only) first and did a lot of thinking and did my own plan. This course was a game-changer in my life. They touched all the basics of personal finance (not intensive planning with asset allocation, that’s why I called it basic) and provided some basic essential calculators.
After taking this course
I began to play with nos in those calculators. My thought process began to change. I started thinking about everything in a different way. I somewhat tagged my existing investment with goals and continued SIP in some funds and stopped further investment in some funds. I started thinking about organizing my investment and getting the basics covered to start with.
My father started building a house for me and my brother. I will have to help him financially whenever it’s needed. Termed this “Home decoration” as a goal. Dropped the idea of getting a flat for us as we are happy in Railway quarters.
Immediate goals (1yr)
Short-term goals (1-3 yrs)
Medium-term goals (4-7 yrs)
Long term goals (>10 yrs) – Need
Child Education became a top priority among long term goals as it occurred to me as a daunting task due to high inflation. Thought about using a part of matured ICICI RD for this goal in 2021 end. Besides this thought about continuing my SIP in some funds for this. I thought about managing this goal first and then thinking about others.
I thought that my investment was too messy and I am totally confused about what to do and how to do it. So I decided to meet a CFP and fixed a meeting with him in my town. I learned a lot of things during the 3 hours of conversation. But he didn’t entertain me much as he was into handling financial decisions on his own on behalf of his customers and he would earn commission by selling regular mutual funds. And I was not ready for that. I felt it absurd to let others control my money and investment strategy.
So, I decided to do things by myself. Yes, it will not be easy. Yes, I will make mistakes. Yes, I will be confused. But I made myself mentally ready for that.
Now I started tagging my assets to my goals. A rough tagging was done, which is as follows
Emergency Fund
Delivery of my child
Jewellery
Home appliances
House Decoration
Vacations
Child Education
Child’s Marriage
Retirement
Revised monthly investment
What I started new?
2021: I gave myself a break from financial planning and enjoyed my daughter’s birth. Enjoyed a lot of time with her.
My goals so far from the last financial review:
I thought about reviewing my portfolio with a fee-only advisor after getting to know that it’s the best way. I talked with some of them (they were not the ones mentioned in freefincal article, I found some contacts online). I shared my thought process with them. But they were more into imposing their thought process on me, and they will do the plan after accessing my financial position. They were not giving proper guidance so that I can do things on my own. None of my colleagues or friends thought about financial planning. So I wasn’t able to share things with anyone.
Later I fixed a 39 mins video call with a CFP for free. She was amazing. I told her about my journey, confusion, my goals and my thought process. She gave me some advice and told me that I was on the right path in many ways. I will have to organise myself. She told me that I knew what I was doing. That’s the important part and I can consult with a fee-only advisor if I need but I must try it by myself as I have time to make some mistakes and learn from them and rectify myself while doing this.
These were the positives she saw in me. I felt so confident after the 1 hr meeting. I thought yeah, I could do it. I will try my best as per my needs and wants.
Took another term insurance of 50L from TATA AIA with an accidental permanent disability rider.
My ICICI RD matured with 6.8L.
Child Education Plan
Child’s Marriage
Retirement
Vacation
Car
Recurring goal (Insurance + Charity)
Wifes Jewellery
Emergency Fund
Total ₹38K/m from previous years ₹36K/m
Now to 2022. The year with “freefincal”. (Matured Goal or Process Based approach)
I kept the above investment strategy going for 6-7 months till my staggered lump sum was done. In October this year, I started to think more seriously about all three long term goals.
When my other goals were sorted well, I began to think about mainly “Child Education Planning”. Because I was stuck in this. If I can sort this out, I can sort out retirement & marriage planning too. I knew it. But I don’t feel comfortable. So many questions are coming to my mind.
While thinking about the main 3 goals, I also realised many things about mutual funds as I spent four years with MFs.
So, many questions were arising in my mind
See, I am now more leaning towards index Investing. I felt index Investing is way better for achieving goals. I just have to expect less. Some index funds are on my radar.
But again I also have some questions in my mind regarding index Investing
Started to search on youtube about index Investing. Started watching Pattu sir’s thought process regarding Index investing. And wow! I started to get answers to all my questions on index Investing.
Began to read a lot of articles on index Investing and personal finance in freefincal. Now I realize that it’s a gem of a platform for DIY investors (I didn’t know the term before, I didn’t know that I was inching towards DIY investing). I started to get a lot of answers that were revolving around my head but not all.
So, I decided to purchase the “Goal Based investing” course hoping to get more answers. Watched all the videos and I got almost all the answers about personal finance that were bothering me.
Then I felt that it was possible to get into auto mode. I need to buy the “Robo Advisory Tool“. I bought it and almost sorted all the goals.
Then I felt that the MF goal tracker and stock portfolio Tracker is also a great tool to visualize things. I bought it and started using it.
I almost sorted everything now. I was a little confused about some little things. I wanted to use my NSC amount for my Child’s Education and Retirement Planning. But I was confused about how to do it and use it in the calculator. So I wanted to have a fruitful discussion with a fee-only advisor.
I joined the AIFW Facebook group after getting the information from freefincal. I started to follow, and it’s a great platform; members are so helpful, honest and knowledgeable. There I found Chandan Singh Padiyar Sir (you can get details from the fee-only advisor post of Pattu sir) to be one of the most active and honest guys.
Tried to arrange a meeting with him, I didn’t want a robust financial plan but to discuss my thought process about what I am doing, if I am committing a serious mistake. I don’t bother about small mistakes, I will learn from it and will rectify things as per my capabilities. So, luckily I got a chance to fix a meeting with him and he was so generous to listen to me, my problem, my confusion and guided me in a simple way which was more important. I was confident about what I am doing, but after talking to him I am more confident now.
Now I am in the driver’s seat and I know where to go, when to go, and as I have a road map I know how to go. So, my investment journey is in auto-pilot mode now.
— Emergency Fund – 6 months expenses (As I have a stable job, otherwise I would opt for 12 months)
— Health Insurance –
— Term Insurance
Short term goal:
Recurring Goal:
Short term Goal: Vacation (2-3years)
Short to medium term flexi goal: Buy a Car (4-6 years)
Monthly Saving and investing CAGR
Now
Some courses and platforms I use throughout my journey:
For stock market investing:
For mutual funds
Personal finance
Mutual Funds investment platform
For goal Based financial planning
For goal Based portfolio tracking
Net Worth tracking
Expenses & Budget
Tracking monthly Investment
In this journey
I wanted to tell my journey to someone. Who will listen to me? If I tell this to someone, he or she thinks I am only thinking about money (some people think like this). But I know it’s pretty much more than that. Now I know a community where I can share all these.
From next year I will regularly do my financial audit and write it down. Happy investing.
As regular readers may know, we publish a personal financial audit each December – this is the 2021 edition: Portfolio Audit 2021: How my goal-based investments fared this year. We asked regular readers to share how they review their investments and track financial goals.
These published audits have had a compounding effect on readers. If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They could be published anonymously if you so desire.
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