Target Financial Independence in 2013

So many times I have heard this saying that money is not everything, money cannot give you happiness etc etc. For me these statements are both wrong or right. Right because money can really buy you everything, and when I say everything it means happiness included. Wrong because it may not buy your anything either. The disparity lies in the fact how you have made your money? Intelligently and ethically earned money will automatically lead to happiness but money not earned ethically will bring only doom. Five years back I had given a target to myself that by end of year 2013 I will create financial independence for myself by creating streams of income that can support my household. Year 2013 has arrived, 12 months more to go and I will not shy away from accepting this fact that I am not even close to financial independence but for sure ethical and very predictable source of income have started. You will appreciate that for a common man generating alternative source of income other than salary from job is not easy. Five years back my dependency on salary from job was 100% but today I have managed to bring down the dependency to 85%. I know this is not enough but considering my worse performance in 2012, I will say even 85% is not abhor able. My pursuit to financial independence continues and by the end of 2013, I have to at least reach the target of reducing my dependency on my job from 85% to 50%. It is a tough but achievable, I will need to think more innovatively this year.

I have few things in my mind that keep me going for my target of financial independence. I was thinking that I have managed to keep my motivation going to achieve financial independence. At least now I am sure that the ‘steam’ will not fizz. So what next, for year 2013, I and my family has decided to lets give it a massive try this year to see if we can achieve our target of 50%. This is what we have planned to execute.

Closing un-used Savings account

I am personally carrying 4 savings account, one is a priority account which has specified minimum quarterly balance of Rs 2 lakhs and other savings account with minimum balance of Rs 10,000. I have decided to close my other three accounts and merge all the funds in one bank account. Unnecessarily my funds are getting distributed just for sake of nothing. I have changed few cities in last few years and hence so many savings account. I was using each accounts for different reasons but now I will stop this foolishness. The accumulated money in one account will at least allow me start a FD which will earn me minimum interest of 8.5% per annum.

The same logic applies for my wives savings account as well. We will let our accumulated money to work harder for us. We will plan a FD and take the benefit of faster compounding.

Closing un-sued Credit Cards

I have three credit cards. I still do not remember when and why I applied for each of them. Two Citi Bank cards and other of Axis Bank card. I am mostly using one Citi bank card as it is earning me air miles that I use at the end of the year to plan a family vacation. But other two cards are only monuments in my wallet. Though I am making zero transactions from my one Citi bank and one Axis Bank card (and both these cards have annual fee of Rs 1,000) but still the average monthly bill is close to Rs 150. I need to stop this money drain. I know you the value is small but the idea is to identify “all” such money drain points, and stop it. Example that comes immediately to my mind are credit cards, multiple demat account charges, multiple online trading account, two seperate DTH connections.

Switching my loan to low cost bank

Presently I am paying EMI of Rs 50,000 per month for my new home. The interest rate that is charged is 10.5% per annum. If I shift my loan to SBI the interest rate that will be charged will be 10%. Till today I had been laze and did not bother to switch my loan to SBI, as because the percentage saving was only 0.5%. But when I calculated the savings in absolute values I was amazed to see my savings. Interest paid in 20 years @ 10.5% interest = Rs 69,00,000. Interest that will be paid in 20 years @ 10.0% interest = Rs 65,80,000. So you can see, the savings that comes out to be is almost Rs 500,000. Switching my loan from one bank to another may cost me not more than Rs 50K, so still I am saving Rs 4.5 lakhs for sure. Always remember, it is not always the value the matters, but ones approach to stop the leaking money will make one financially independent.

We have decided to sell off all extra and high energy consuming appliance

Basically we wanted to clear our house from excessive clutter of furniture’s and gadgets that is occupying both space and electricity bill. We end up deciding to throw away all unnecessary electrical equipments that are not necessary but we are still carrying them around. We found that we have one laptop chargers each for living room and bed rooms. We decided to keep only one for one laptop. When we tried this we were amazed to see the battery back-up power of out laptop. Actually it never needed 24 hours charging. I had a 500 Ltr, fridge which was for sure consuming unnecessary lot of electricity. We sold off that fridge and went for 5 start reasonably sized fridge. We had one TV for each bedroom and for living room. We jointly decided to have only one TV in living room and that’s all it takes for enjoyment. Our each rooms had two three spot lights, we decided to have only one white CFL. Remember what I told you, its your attitude towards saving money that will give you financial independence.

We decided that we will not spend a dime without budgeting

Instead of waiting for that surprising credit card bill which always looks to be 10 times beyond expectation, I decided to start allocating funds for each type of expense we generally make in a month. Let it watching movie, dinning out, evening snacks, home delivery, unplanned shopping, electricity bill arrears, emergency medical expenses etc. Planning for the worse will at least make us aware that if at all we have funds or not, or simply we are swapping our credit cards hoping that god will pay the bill. For essential items like grocery, vegetables, utility bills, petrol, cooking gas etc should also have a budgeted fund allocated for each. So at the month end you know where you have saved and where are overstretching.

I will pay myself first

When I pay to myself I use that money only for investment. I have decide to pay myself at least 25% of my monthly income but this amount I am going to pay myself first thing in the month. Before I am going to spend even one rupee in a month I will pay myself this 25%. Idea is this, I know that if I have Rs 1 or Rs 100, if left alone will ultimately get spend on useful or non-useful things for sure. So better keep aside 25% and use it for one of the most important activity of life which is investment.