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Financial Independence And Savings

Discussion in 'Education & Personal Growth' started by noire, Dec 1, 2018.

  1. noire

    noire Silver IL'ite

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    Physical health, mental health, and financial independence are very important in anyone's life. Financial independence is especially important for women. I have found that most women do not pay any attention to their finances at all. I definitely used to be in that category and had to struggle so much because of that. Now one of my goals is to achieve financial independence, i.e. even if I am not earning a monthly salary I should be able to meet all monthly expenses from my savings for an indeterminate amount of time. I'm a long way off from there, but I make every attempt to save as much as I can.

    Has anyone here achieved financial independence? What did you do to get there? Also, what are your current saving strategies?

    I had some SIPs for a few years which I have temporarily stopped because of some constraints. I will restart them as soon as I can. SIPs work for me because I can automate the debit and then forget about it. I don't intend to touch the saved amount for at least another 10-15 years, or longer if possible.

    I also try to limit my spending by noting down each item of purchase on a spreadsheet. Whichever months I neglect to do this are the months I end up spending over the budget.

    Please share your thoughts on financial independence and saving strategies.
     
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  2. kkrish

    kkrish IL Hall of Fame

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    True.
    Women need to save on their own. It will give them a sense of security.
    I am not sure what options are present in India.
    In the US there are many options, however I read that many Americans do not save enough.

    I am just joining in this conversation, though my methods may not be new.

    Here are a few things I do:

    I have set up for automatic transfer, may be that is the SIPs you are referring to. This way, for every pay period, I am paid twice a month, a set amount goes to my savings account. I consider as amount spent, and I dont miss it.

    Every time I get a $5 note (you can decide what amount) in cash I put it aside in a box. Every three to six months I deposit that amount in my savings account.

    Every week I allot $25 for lunch money ($5/day). I buy only salads in our cafetaria, which is sold by weight. My salad comes to $3-$4. I place the balance as money saved in my savings box.
    The days I take food from home the $5 goes to my box.

    I have asked my husband to remit all the rebates, cash backs that we recive with our Costo card and credit card to the savings account.

    Loose change box - we have a two central cans, one downstairs and one upstairs. Whenever we clean out our bags, pockets,all loose change go into these boxes. When the boxes are full we take them to the bank and deposit them in the savings.

    Pay yourself every month, when budgeting. This amount is just for self ... how we use it is our decision.

    ********
    One of my friends in India would get off one bus stage earlier, and walked. She said she saved quite a bit by not paying for the next stage, and got her exercise as well. I admired her for creating this win-win situation. She lives in Salem, Tamilnadu.

    Another friend, in Bangalore now, would buy the same amount of groceries each month. Every six months or so, she would have enough groceries for one more month. That month's alloted grocery money would go towards her savings account.
    ********

    Whatever money is saved, it will be a good idea to invest in high yielding accounts such as fixed deposits, etc. Learning to invest in stocks and bonds is a better option. But conservative savings also is good for those who find stocks and bonds too complicated.

    I feel investing in gold jewelry is not good. Buying gold bars or coins is a better option if one wants to invest in precious metal.

    ...
    I have provided only some savings strategies.
    As I am working, I have been contributing towards my retirement funds for many years.
     
    Last edited: Dec 1, 2018
  3. kaniths

    kaniths IL Hall of Fame

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    SIP is a good start. Somethings work differently for NRIs and Indians, generally a lot of limitations for an NRI. If you are living in India, your investment options are wide. From SIP you can diversify your portfolios to include Mutual funds (debt, bonds, equity), Stocks(equity), post office funds, NPS schemes etc and the usual FDs. You can manage online via CAMS or through net banking but first thoroughly educate yourself, seek a financial expert for advice and recommendations, and always do your research anytime. Often banks/brokers may "nudge" you to sign up for funds that have higher commission rates for them, be aware! Check the returns and make wiser choices.

    Two quick tips from our experiences:
    - Avoid ULIP.
    - Keep insurance and investments separate. Don't mix the two. If your banks try to convince you otherwise, dig more and try to know the whys for better! :wink1:

    Then there is always the real estate investments. Gold bars are good options as suggested above. :thumbsup:
     
    Last edited: Dec 2, 2018
  4. noire

    noire Silver IL'ite

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    Thank you for this very thoughtful reply @kkrish

    Yes, SIP is like the automatic transfer you mentioned. Systematic Investment Plan for investing in mutual funds.

    I will try some of the tips you have mentioned. Please convey my admiration to your friend in Salem. I'm now thinking I'll walk back from work in the evening and save on the auto cost, and get some extra exercise in.
     
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  5. noire

    noire Silver IL'ite

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    I live in India, @kaniths . There are no complications per se in investing, only the apparent complexity :). My approach is to move some money into mutual funds and forget about it. I only wish I could start saving again and save some more in equity-linked funds. I'll find a way to do that soon :)
     
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  6. Amulet

    Amulet IL Hall of Fame

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    @noire
    Thank you for this thread... I expect many will contribute to this. I have not lived in India long enough to experience a life of employment and savings in Indian savings schemes. I am like Forrest Gump*. Personally lucked out a lot by being in the right place a lot.... in time and space. However, I didn't blow my money when I had it. I put it in some stocks and in some mutual funds.

    IL member @Rihana has some good life-saving advice to girls to plan for a worse case scenario which should never happen, but does in many cases. The fundamental life-saving advice is to plan for and have financial independence.
    Here is one place I had quoted Rihana
    Minimal Communication With Husband

    Marital felicity is intertwined with financial savvy of the partners. This is so because much trouble within a marriage, east or west, is due to mismanagement of family finances, and partners not sharing fully their financial plan within a marriage and for a future together.

    Once again, thanks for a very relevant, and meaningful thread.

    *here is a video annotation of Forrest Gump's luck in financial planning:
     
    Last edited: Dec 2, 2018
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  7. noire

    noire Silver IL'ite

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    It's so true what you say about girls being like batons in a relay race. At least where I come from, any assertion of independence or even the mere idea of having an independent/different thought used to be viewed as such a terrible aberration... It has taken me years of torment and self-reflection and self-love to make peace with the fact that wanting to be independent is not a cruel and selfish thing. It is so strange how Indian families set their girls up for failure and then wring their hands when something goes wrong. So terrible and sad and twisted.

    Rihana's list is spot on. Financial independence is what makes you really independent. Why is it that parents neglect to teach their girls that?

    I like the Forrest Gump reference. I had forgotten exactly which fruit company he had invested in :). Made me smile :) :). I need to watch that movie again.
     
  8. Rihana

    Rihana Moderator Staff Member IL Hall of Fame

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    Manually noting down each item? The intent is good but implementing difficult. There should be apps or tools that help with this. And, except if we pay in cash, the method of payment should have a way to track purchases more easily. I discovered this the very hard yet easy way. Playing around with the different analysis the online credit card statement provides, I casually clicked on one category. The expense for the last 12 months on that was a big big shock.

    Financial independence can seem a daunting goal to have. It also takes time to research and identify what works for you. I've found it easier to keep reading about the habits of people who retired very young. A few tips stick in the mind and a few of those few become habit. Yesterday I happened to read about The Money Habit - Your Path To Incredibly Early Retirement The goal is split into clear sub-goals. Make money, save money, invest money, and have early retirement on the mind.

    I've found the saving part to be the appealing. We get an instant feeling of we-did-something, but saving accompanied by investing, and planning for an early retirement would be even smarter and long term. Whether or not the early retirement happens, and whether or not the early retirement is a good idea. Many people would pay the other spouse to not retire. : )
     
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  9. armummy

    armummy Platinum IL'ite

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    I don't think I achieved financial independence even now in terms of good amount of savings that is enough . the sufficient savings amount one determines for self varies from person to person, my idea is that I should not think twice about spending on anything that i want for myself or my family or my loved ones, so the number will keep changing.

    few things which helped us on being financially comfortable are , living within means, make sure not having debts except for mortgages and investments which we did in India when we started our jobs as part of tax savings .Those investments started very early so we automatically enjoy compounding effect. we did dabble in stocks but it takes lot of time and need to be on constant watch out ,if you don't want to be caught unawares of the sudden down turn. over a long term the interest on stocks is around 12% if you are a passive investor, so we slowly moved away from stocks. I love the sips for mutual funds and risk free investments. one of the most important risk free investments has to be PPF which is very beneficial if you start as soon as you start your jobs , the impact you will see only once your ppf reaches 15 years and then you keep extending for 5 years till you retire,. another interesting investment is post office MIS investements , this also is a very good in terms of returns.

    one lesson I learnt is stay clear of ULIPS , I happened to buy one and I am still carrying it but it is not a good investment.

    buy homes early in career but make sure you don't exceed the mortgage payments to more than 30% of your income ,so you are able to sustain it in worst case scenarios of job loss etc till you happen to find a new one...

    since Rihana mentioned early retirement, just wanted to post my thoughts on it, it may good for one partner to take early retirement with a certain amount saved up but I feel it is not good for both to quit, atleast one partner should have a decent income.

    the current movement in US is FIRE and I feel it is little extreme to my taste, the retired early are not truly retired , the best cases earn money by promoting the idea and the rest follow and live extremely frugally in the name of early retirement which is not my idea of living. the current FIRE might have experienced a good stock market run and a good returns on investments, once the down turn hits ,there will be loss in Capitol which will be a big hit. also they assume that they can find a job when ever they can which is also not true.

    one thing that also helps me is getting max out of stuff I buy, bags I buy lasts for years. shoes i buy last for years, equipment I buy last for years and I am not into yearly upgrades of anything.
     
    Last edited: Dec 3, 2018
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  10. Gallant

    Gallant Silver IL'ite

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    Here are some suggestions:

    1. Since banks give only a meagre simple interest rates like 0.5~1% or less, only keep emergency funds in banks. Emergency for jobloss, medical, any other urgent needs, etc.,
    2. Build the financial foundation by first protecting you and your family by having life insurance. There are lot of options in life insurance. You can accumulate cash (compound interest) in life insurance which can be used in the future for retirement, college education for your kids, etc. Life insurance is an excellent vehicle for tax savings.
    Read these books on how to accumulate money using life insurance:
    1. Money Wealth and life insurance by Jake Thompson
    2. The Power of Zero by David McKnight (This book guides you how to get 0% tax)

    3. Match only your employer contribution in retirement savings plan like 401K (tax deferred) or any other equivalent plan. If you have any other earned income, use IRA for tax deferred retirement savings. You can also have Roth IRA with your after tax money contribution and keep the account for 5 years to get qualified for tax free earnings on your distributions at your retirement.
    4. Now, with more money left, you can play with risk investments on stocks, bonds, mutual funds, etc.
     
    Last edited: Dec 3, 2018
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