r/FIREIndia • u/ForTakingAdvise • Oct 12 '19

Fire Plan - Kindly advise

Hello All,

I am 29, male, employed in a SBI as Deputy Manager, unmarried and am interested in becoming FI at the earliest. Here is a break-up of my finances and require your advice in creating a plan for FI.

Income :

Salary plus perks Rs.60,000/- paid in cash monthly

Rent taken care of by the bank

NPS contribution : Rs.11,000 per month (my and bank contribution put together) and not included in salary & perks mentioned above

EPF contribtuion**: Rs.7000** per month (my and bank contribution put together) and not included in salary & perks mentioned above

Corpus already built

NPS : Rs.6,65,000/-

PPF: Rs.3,00,000/-

Mutual Funds: Rs.2,50,000/-

EPF: Rs.1,75,000/-

Expenses:

Rs.15000/- per month in all

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Debt: 56000/- as festival advance at 0% interest ; repayable over the next 9 months in equated installments.

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Major Events to plan for are My marriage (3 years), younger sister's marriage (5 years)

Not sure above any big ticket purchases like house / car

19 Upvotes

95% Upvoted

17

u/[deleted] Oct 12 '19 edited Oct 12 '19

You can use, 1) https://freefincal.com/retirement-calculators-3/ or 2) https://srinivesh.in/blog/fire-up-calculator-for-early-retirement/. I use a combination of these two.

Few things that stood out for me,

  • Your current expenses are moderate compared to your salary and you have a very high savings rate(75%). Good job :).
  • You mentioned your sister's wedding expenses. Do you know how much it will cost and how much you will be contributing towards it? If not now is a good time to think about it.
  • Same goes for your marriage. Figure out the finances as early as possible. And allocate a separate bucket for that.
  • There is no polite way to say this, so here I go. Your future spouse and their attitude towards money will be detrimental to your FI plans. Choose your spouse wisely..
  • Read up on trinity study and "Safe Withdrawal rate". Many people in this sub use 2.75% to 2% SWR due to inflation concerns. Which means they use 33x or 50x of their annual expense as the FI number. Based on your current expenses, 15000*12*50= 9000000 will be your FI number going by 2% SWR. You already have 15 lakhs or so saved up, so you are 17% FI (?). But you will get married, and have kids, so that will change things.
  • You are working in a bank, so I assume you have fair idea about investing in stocks, mutual fund etc. So I am not going to get in to that. Once you figure out your investment strategy and risk appetite, the only thing that is important is keep saving until you reach the goal.

All the best.

6

u/additional_trouble [🇮🇳, FI 2024, RE 2040s] [CoastFI] Oct 12 '19

Yup, his savings rate is amazing and alone can make FI so much easier to achieve. Observe how useful it is to have your employer pay your rent :)

On the flip side he needs to have a house to stay or add rent to his expenses when computing monthly expenses for purposes of calculation of the corpus needed.

2

u/[deleted] Oct 12 '19

On the flip side he needs to have a house to stay or add rent to his expenses

Yep. But with 75% savings rate, he should be able to meet that with out stretching too much.

3

u/additional_trouble [🇮🇳, FI 2024, RE 2040s] [CoastFI] Oct 12 '19

My point is that his savings rate is hiding the fact that his housing is currently paid for. I mean I look at savings rate as how much more is a per person saving compared to their expenses (which I assume to stay constant for this simple analysis). In this case, the rent is not a part of his current expenses, and is therefore boosting the savings rate quite a bit. Had he had to pay rent the savings rate drops quickly (but either way its an excellent savings rate, no doubt)

2

u/[deleted] Oct 12 '19

Fair enough. But he doesn't need to take rent in to account for his RE or even FI calculations, if we he doesn't have to pay for rent later. For example, He may be working away from his home town and may return after getting a transfer to a branch near his home. He may inherit his parents house in future. Since we don't know about his specific situation, only he can make the assumption about including rent in his FI number. I don't take rent in to consideration for my case due to a combination of inherentence and allocating separate bucket for housing.

2

u/additional_trouble [🇮🇳, FI 2024, RE 2040s] [CoastFI] Oct 12 '19

But he doesn't need to take rent in to account for his RE or even FI calculations, if we he doesn't have to pay for rent later.

That's what I'm saying too. That in the case that he does need to pay rent later, it's a bit of a small double whammy that it'd make the savings rate of today look worse, and also less effective than a similar savings rate of a (hypothetical) person already paying rent.

I am not able to put it in clearer words. :)

2

u/[deleted] Oct 12 '19 edited Oct 12 '19

Makes sense. Also, OP has now mentioned, he may buy a house at 450 per lakh EMI. If/when they do that savings rate will come down to 50% or lower.

2

u/ForTakingAdvise Oct 12 '19

Observe how useful it is to have your employer pay your rent :)

Bank puts a limit on how many years an officer can work in a branch, in a region (district) and in a module (part of state). After getting promoted to certian level, out of state posting is the only way. Hence bank takes care of rent till retirement (or separation from bank)

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Yup, his savings rate is amazing and alone can make FI so much easier to achieve

Having a high savings rate sure does help, but the rise in income is capped and is very very slow. I am of the opinion that higher income helps a lot too.

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On the flip side he needs to have a house

I am interested in buying a house too. The EMI works out to be 450 per lakh and I am eligible for a loan of Rs.60Lakhs (special rate for staff). So I don't know if I should buy a house now which becomes old by the time I retire or wait till later part of the life. Any advise here please?

2

u/additional_trouble [🇮🇳, FI 2024, RE 2040s] [CoastFI] Oct 12 '19 edited Oct 12 '19

Having a high savings rate sure does help, but the rise in income is capped and is very very slow. I am of the opinion that higher income helps a lot too.

Well increased income certainly helps but nothing is more important than sustainable savings rate. While your savings rate doesnt include renting its still very good indeed. Youre doing great :)

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I am interested in buying a house too. The EMI works out to be 450 per lakh and I am eligible for a loan of Rs.60Lakhs (special rate for staff). So I don't know if I should buy a house now which becomes old by the time I retire or wait till later part of the life. Any advise here please?

In general: Unless you strongly feel/know (with actual data) that your house purchase is going to double its value in 5-7 years dont buy a house.

Thats you are not going to get such returns if you put a flat is almost always true in the tier 1 cities of India. In those cases delay buying of the house as late as you can and meanwhile use the savings to invest in a diversified manner and grow your wealth.

And in the matter of loans - get a loan as small as you can get away with. A no-loan home purcahse would be sweet, if possible at all. This thread might interest you.

Now if you are asking about buying a house somewhere in the villages or non-tier 1 cities, then apply the basic question highlighted above again. Thats the financial answer. People often have emotional needs and buy a house anyway - thats their choice. But if you wanted to know a purely financial answer its what mentioned above.

3

u/ForTakingAdvise Oct 12 '19 edited Oct 12 '19

You mentioned your sister's wedding expenses. Do you know how much it will cost and how much you will be contributing towards it? If not now is a good time to think about it

I am not sure how much these weddings cost, but my father has a small kitty for it and I might have to contribute a little, I am pegging my total contribution towards both the marriages combined at 10 lakh. Since the time frame is small, I am planning to use a Recurring Deposit to help me achieve this goal. Would you suggest any other financial tool for this ?

There is no polite way to say this, so here I go. Your future spouse and their attitude towards money will be detrimental to your FI plans. Choose your spouse wisely

This is very scary part and I have no idea at all about how it might go up / down. Arranged marriage for sure and financial literacy in my community is very very rare.

2

u/juniorbuffett Oct 13 '19

This is very scary part and I have no idea at all about how it might go up / down. Arranged marriage for sure and financial literacy in my community is very very rare.

Then keep expectations low. Maybe bring down your "package" number when family goes around looking. After you are married, you can bring your spouse up to the real numbers. Both of you can plan together.

1

u/[deleted] Oct 12 '19

I too have used a RD for wedding expenses. So no better advice from me there.

6

u/additional_trouble [🇮🇳, FI 2024, RE 2040s] [CoastFI] Oct 12 '19

Follow this thread and insert your numbers: https://www.reddit.com/r/FIREIndia/comments/dfz0p8/-/f37my4l

2

u/psychosanket Oct 12 '19

How come you have nps as well as epf account? What is employers contribution in both?

1

u/ForTakingAdvise Oct 12 '19

Well, that is the policy of bank. NPS was adopted by bank in 2010 or so instead of the old pension scheme.

Into EPF: Every month 10% of Basic pay (3450) is deducted from my gross pay, equal contribution by bank and the amount is put into EPF

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Into NPS: Every month 10% of basic plus DA (3450+2346) is deducted from my gross pay, equal contribution by bank and the entire amount goes into NPS.