financial independence

Happy Independence Day!

by Vinaya HS on August 15, 2012

in Finance

Wishing you all a very happy Independence Day!

I still remember this moment from two-years ago. I’m extremely happy to say that since then I haven’t had a rupee in debt and I am well ahead on the road to financial independence.

If you haven’t already, now’s really a great time to start working on –

  • Freedom from financial reliance on loved ones.

  • Freedom from financial reliance on creditors.

  • Freedom from financial reliance on employment.

This honestly is the best financial advise I’ve ever come across.


The past three months have been an “SOS” call but of a very pleasing kind. When I add up the salary that I have earned over the past three months, it exceeds the annual salary that I used to make about 4+ years into my professional career. And at an average salary savings rate of 53.34%, my savings look like they’ve been suddenly injected with a healthy dose of steroids! If my savings were physically sweating it out at the gym, they’d look somewhat like this –

Cartoon image of a bank passbook with muscles.

Sketch by D. Thanks D!

That’s “Savings On Steroids.” That’s an SOS I can happily live with.

Now, you usually don’t read about this on personal finance blogs, but your career when managed properly, can seriously accelerate your run towards financial independence and help bring-out your own cry of SOS.

Getting there isn’t really easy though and I can safely say that mine has come through the early years of very hard professional work (and that’s a trait I often find missing these days from someone just out of college) and financial sacrifices. I’ve often sacrificed on compensation in exchange for exceptional work and learning experiences but I find today that the very same sacrifices are now paying exceptional financial dividends.

Frankly, I wasn’t really very good at managing my career (financially speaking) until recently, but being debt-free for quite some time now and being well on my way towards financial independence, I find that I have a lot more leverage when considering career choices, negotiating compensation, and such. Once you get to this stage though, very interesting things begin to happen when the law of cause and effect begins to compound right in front of your eyes. Your high financial leverage directly let’s you negotiate the highest possible compensation. This high compensation then directly adds more and more to your already high financial leverage each month. You seriously become one big avalanche.

This doesn’t mean that you suddenly stop working hard once you get there. You certainly have to continue working hard (lest you forget what got you here in the first place) but then you get that super-mystical power to say “NO” to pointless meetings, meetings just for the sake of meeting, conference calls, and such and this frees-up even more of your time to actually work hard, to achieve what you’re hired for, and to prove how valuable you are [and consequently let the law of cause and effect compound things in your favor further].

The hard work apart, I must not forget the root cause for all of this successexceptional upbringing by my parents. How I wish they were with me today…I hope to be at least a tiny fraction of what they were.

I know I have their unending blessings from above.

But, what do you think?

Is the willingness to work hard a missing trait these days? What’s your observation?


ERE Savings Chart — October, 2011

by Vinaya HS on November 11, 2011

in Finance


As I wrote in last month’s update, I have indeed started a “stupid mistakes” savings goal. The intent of these savings is to have some real cash saved up so that my cash flow doesn’t turn negative whenever I make one of those “I shouldn’t really have purchased this but I did” mistakes.

I’m also expecting the ERE Savings Chart to bounce back up in November, 2011. That’s something to look forward to!


ERE Savings Chart — September, 2011

by Vinaya HS on October 3, 2011

in Finance



A pretty bad September. Expenses crossing ERE Savings in the wrong direction. Exactly what an ERE Savings Chart shouldn’t look like. Maybe I ought to have a “stupid mistakes” savings goal as well?

Do you have one?


Update on 24-Sep-2011:

My apologies for the prolonged delay in announcing the winner of the book giveaway. Finally managed to draw lots and the winner is Ashutosh Tewari. Congratulations! There will be another book giveaway next month. Next up on the giveaway list is I Will Teach You To Be Rich.

Here’s the August, 2011 update:


Again, nothing out of the ordinary. I seem to have settled into a sweet spot between all my needs and wants.

I completed reading the ERE book as well. The first half is an excellent read; the second half seems to be a rush through, but pretty useful nonetheless. I’d now like to hand this knowledge source over through a book giveaway. Here’s how you can grab the ERE book. Simply leave a comment explaining why this book would be of great benefit to you today. I’ll draw lots and announce the winner mid-September.


ERE Savings Chart — July, 2011

by Vinaya HS on August 3, 2011

in Finance

Here’s the July, 2011 update:


Predictably, my ERE Savings Ratio is 43% (43.70% if you count two decimal points).


I’m a big fan of ERE. When I embarked on my journey towards financial freedom last year, I followed many of the principles outlined in ERE, just that I didn’t know there was an official term for doing what I was doing.

My ERE strategy is quite simple. Each month:

  • I contribute first and foremost to my financial freedom fund. My paychecks now pay for my paychecks later. I have a defined target that I absolutely must meet each month. This tactic has worked so well that I can’t believe how much I have saved over the past nine months.

  • I then contribute to my short-term goals. Sounds weird? Sounds counter-intuitive? Whatever happened to my medium-term goals? I want to enjoy the “now” as well — completely and without regret. My medium-terms goals (such as saving-up cash for my next car) are certainly important but come lower down the pecking order.

  • I then contribute to my medium-term goals. I just have one at the moment.

  • Finally, I either splurge whatever’s left or, if I’m in an aggressive ERE mindset, I contribute whatever’s left as a bonus into my financial freedom fund.

Here’s what my ERE-chart looks like:


Monthly ERE-savings are, on an average, 43% of my monthly income. Monthly expenses are, on an average, 26% of my monthly income. The remaining 31%, on an average, goes into everything else. I can break this down further if you’d like me to.

I want to bump-up that 43% closer to 50%! That would be serious ERE. That would require me to burn less petrol each month — consider this: 49,000 kilometers on the Swift odometer, 10 kilometers per liter of petrol, 4,900 liters of petrol, Rs 65 per liter of petrol (on an average), you do the calculations.

D won’t let me do it. She’s smitten with the Swift.


The iPhone 4 Temptation!

by Vinaya HS on June 6, 2011

in Finance

It’s irresistibly tempting.

My head spins non-stop with how-can-I afford-this thoughts.

Since the iPhone 4 launched [in India], I’ve had these financially-destructive thoughts:

  • Dip — no, make that dive — into my emergency fund. In a weird way this does count as an emergency because my present phone, a Nokia E52, has had its share of knocks and the outside panel is hanging on by a bare thread.

  • Stop contributing to my financial independence/financial freedom fund for a couple of months. It’s just a couple of months right? How bad can that be? And isn’t the whole point of earning to enjoy your today?

  • Take a bridge loan from D — at exorbitant micro-finance interest rates!

  • Raise cash by selling a bunch of stuff that I own such as my old Acer laptop, my iPod Touch, my digital camera, my wireless printer, etc.

My mind tells me to throw every personal financial rule out! In fact, when the ads came out I fell for their trick — I was so blind that I didn’t realize that one needs to pay the phone’s cost upfront and recover this cost through the 24-month bill discounts. Luckily for me, D was specially vigilant and made me re-read the ad.

Marketing at its brilliance.

And thankfully, I haven’t executed any of these destructive ideas.


The Value of Having an Alternate Skill

by Vinaya HS on May 23, 2011

in Finance

I’ve assembled from scratch each and every one of the desktop computers that I have owned. I used to obsess over and then handpick each component that goes into building a desktop computer. To this day, I keep up-to-date on what’s happening with computer hardware technology. That obsession recently proved its worth, and in doing so, proved the value of having an alternate skill.

When I was looking for a new job last year, one of the offers that was extended to me was for the role of a Technical Marketing Engineer at perhaps the best computer hardware technology company out there. All interviews revolved solely around picking my brain out on my knowledge of the nitty gritty of computer hardware technology. What I’d done professionally this far had zero linkage to what I’d be doing in this role. The salary on offer was excellent too.

Why I didn’t take up the offer is a different story altogether. But the experience really proved the value of having an alternate skill especially one that can get you a job. When you have alternate skills, you stand a much better chance when the chips are down. And these days, you simply can’t predict when the chips will come falling down. But you definitely can be prepared for that day.

I strongly believe that everyone can have a valuable alternate skill. All that is required is deliberate practice.

Consider this. Writing is another of my alternate skills. Capital Advisor has over 1,200 plus posts. Each post, on an average, takes about an hour before it’s good enough to be published. Before Capital Advisor, I’ve freelanced for over a year for a bunch of other blogs learning the ropes.

Passion. Practice. Patience. That’s the trick to building an alternate skill. That’s the trick to building multiple sources of income.

What do you think? What’s your alternate skill?


I believe there is.

The more I read-up on financial independence and financial freedom, the more I’m beginning to appreciate the subtle differences between these two terms — or rather, phases in one’s personal finance journey.

Here’s what I have learned.

Financial Independence =


plus Adequate Emergency Funds

plus Adequate Health Insurance Cover

plus Income excluding Salary and Investments >= Average Monthly Expenses

So, when you’re financially independent, you don’t owe a dime to anyone and you’ve got your risks covered, but you still need to do something, but not work as we know it, to put the bread on the table. In this phase, however, you might still be trading some of your time for money.

Now, moving on to financial freedom,

Financial Freedom =


plus Adequate Emergency Funds

plus Adequate Health Insurance Cover

plus Income from Investments >= Average Monthly Expenses

So, when you’ve achieved financial freedom, you still don’t owe a dime to anyone and you’ve still got your risks covered. However, you don’t need to do even that something to put the bread on the table. In other words, you simply don’t trade your time for money. You’re paid interest to live rather than you paying interest to live.

What’s common between these two phases is quite clear. Get rid of your debt, sock away for a rainy day, and buy as much health insurance cover as you can and you’ll be well set for the journey towards financial independence and financial freedom. And they’re not sequential. Because you can inch towards financial freedom while you strive for financial independence.

That’s what I am doing.

Do neither though and you’ll continue to trade your time for money — and that’s a bad thing!

What do you think? I’d love to hear your thoughts.


You already know that after retiring my debt — early in the second half of last year — financial independence has been my priority. It’s already been over six months into my quest for financial independence and during this time I’ve been working on building my financial independence portfolio.

Now, most of us wish to become dream of becoming financially independent as soon as possible. To get there requires prudent pruning of your expenses (so that your target corpus isn’t unnecessarily inflated) and optimal flexibility in your financial independence portfolio (so that your goal of financial independence doesn’t become a hindrance for itself). Get into the wrong financial investments and your dream of becoming financially independent as soon as possible simply keeps getting further and further away.

I’ve summarized below the types of financial investments that you ought to avoid on your journey towards financial independence.

  • Investments that perennially require a huge cash outflow — Think in terms of endowment, money-back, ULIPs, and other such life insurance policies that require you to commit huge sums of money each year for over 20- to 30-years. You can’t achieve financial independence when you have such unnecessary expenses to provide for. If you already have invested in such financial instruments, you might want to consider exiting them at the appropriate time. If you haven’t, it’s a good idea to maintain status quo.

  • Investments that lock you into making monthly contributions — Think in terms of a multi-year Recurring Deposit. If such an investment happens to be a part of your financial independence portfolio, your quest for financial independence starts becoming a self-hindrance because you now need to worry about how you’re going to ensure the availability of that cash each month. You aren’t financially independent when there are financial worries bothering you.

[Note: I'm locked into one such investment. Lesson learned.]

  • Investments that lock you in for longer than when you’ve targeted to become financially independent — For example: If you plan to become financially independent within the next 5-years, it’d be a really bad idea for you to start a new Public Provident Fund account today and include that in your financial independence portfolio.

Having embarked on this goal, I’m finding that Financial Independence is a fascinating journey (I read this blog for motivation) and there are plenty more lessons to be learned. I promise to share my learning as and when they happen.

What do you think?


Tweets on 2010-09-07

by Vinaya HS on September 7, 2010

in Finance

A reader asks,

What should one do if one has repaid all debts, owns a home, leads a simple life (no cars, clubs, or expensive holidays), is sitting on a pile of cash (most of it in fixed deposits) and has no continuous stream of income except for paycheck. Is this person very close to financial independence? Any thoughts?

Brilliant. You’ve ticked most points in this checklist.

But have you covered the other basics — health insurance and life insurance? And will the monthly after-tax interest earned from your fixed deposits be adequate to meet your monthly expenses on a continuous basis? If not, you aren’t.

What do you think?

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Tweets on 2010-08-15 — Independence Day Edition

by Vinaya HS on August 15, 2010

in Finance

Wishing all my readers a meaningful Independence Day.

On this delightful day, I’d like to share a milestone: I am debt free. I closed the only loan I had — that on my Swift. Though my original plan was to close the loan only in December, I threw whatever I could — including my free cash flow — towards closing the loan. Going forward, as D says, NO EMIs — we buy what our cash says we can.

Over the past week, I also managed to get rid of a whole bunch of physical clutter. It’s honestly liberating when you unclutter.

I now need to put a plan in place for financial independence.


Why Should You Be Financially Independent?

by Vinaya HS on June 12, 2008

in Finance

Continuing yesterday’s thoughts on financial independence, I made a list of the whys – why should you be financially independent? What does being financially independent really translate to in your daily life?

Here’s what financial independence translates to me:

  1. Having no loans or debts means I don’t have to worry every second of the day about late fees and astronomical interest charges, repossession, foreclosure, mean letters and calls from lenders, debt recovery agents at my doorstep, et al.
  2. Having a sufficient emergency fund in place means I don’t have to come into work each day worrying about whether I will also come into work the next day. It lets me do my best on the job today. Our Information Technology (IT) jobs were pretty safe up to now; now, there’s no guarantee. Really.
  3. Having independent health and life insurance means I don’t have to worry in case something were to go wrong with me or with my dependents.

If you noticed, the recurring theme in all these statements is “I don’t have to worry” i.e. “freedom from worry.” That’s what I’d like to achieve through financial independence.

What do you think? Why do you want to be financially independent?


Of late, I’ve been thinking a fair bit about financial independence. The Simple Dollar summarizes it best in defining financial independence to include:

  • Freedom from financial reliance on loved ones
  • Freedom from financial reliance on creditors
  • Freedom from financial reliance on employment

That set me into preparing the checklist below which constitutes what I define to be financial independence, given my current situation.

My financial independence checklist:

  1. I do not have any credit card debt
  2. I do not have any vehicle loans to be paid
  3. I do not have any education loans to be paid
  4. I do not have any personal loans to be paid
  5. I do not have any home loans to be paid
  6. I do not owe money to any person
  7. I have a sufficient emergency fund in place
  8. I have independent health insurance for myself
  9. I have independent health insurance for my dependents
  10. I have independent life insurance to take care of my dependents
  11. I have established a plan to achieve my goals (financially)

There’s a lot to be done before I can declare financial independence. But having such a checklist is a start and keeps you focused. Further, having such a list does not imply that one has to be stingy; you just have to be financially responsible.

So, what’s your definition? How do you plan to get there?