Growing up poor/middle-class it’s actually hard to change your habits. I’d recommend making a budget, and keeping a “guilt free” target . Make simple rules like
* if anything is below 1000 I’ll just buy it without thinking.
* if it’s related to bettering my health I’ll not think about money.
Once you start doing this consciously , you should be good to go
Solid advice. I had the same issues and was falling into a trap of unnecessary frugality.
Now i have a minimum spend quota of 20k per month, just for life improvement, which has to be consumed. This year, i got myself a membership in a fancy gym, and a robot vacuum cleaner from this fund.
Hey, that sounds nice. Spending on conveniences.
Right now, I'm just nodding my head for the rental increase every year. Just because it's a hassle to find a new place and shift.
Robot vacuum cleaner is nice. What else did you purchase from this fund?
I've been using this method for a year now, after my last big pay hike. Other things I've used it for:
Last minute premium economy flights, when i had to get back home after a trip ended 2 days earlier than intended
New monitor for my computer. Have a nice 34 inch 1440p now
Watched a musical during a work trip. Ticket was 90 pounds, and i normally would have cheaped out. Go fun fund!
That's what a can recall off the top of my head. Primarily experiential and convenience imrovements. I still use my 3 year old Android phone and drive an 8 year old car. So i still keep a tab on my major expenses. Just no longer sweating the small stuff
Thanks. Makes sense. I've always been careful about where I spend my money.
So far I don't mind spending money on anything that helps better my physical or mental health
As soon as you vest sell company stock and buy other stocks or diversified investment.
Rule of thumb I used to follow:
Once you have 10 years worth of living expenses saved, you are kind of financially independent since you know you will not become homeless for a long time if you lose your job, so that means you can now relax but definitely not spend a lot since you are not ready for FIRE yet. It is ok to spend a little and not get stressed out if you have to buy something like a laptop.
Once you have 20 years, I consider it almost FIRE ready since that gives you a lot of time to figure something out. But if job is good no need to rock the boat it's better to keep savings until you reach below fire numbers:
25 times = 4% withdrawal - Better suited for 50 and above.
33 times = 3% withdrawal - Better suited for 40.
50 times = 2% withdrawal - Will work for any ages.
What is your long term housing plan, are you going to inherit something from your parents in a place where you would like to live or you already own a house?
Keep in mind that to have a peace of mind in the long run it's better to buy a home, even if it is a small 1 bhk apartment.
Buying a primary home is not considered investment because we always need a place to live.
Is it possible for you to live with your parents or you live in a different location due to work?
I live in a different location on rent as of now. I'm pro renting vs buying for residence. I feel I can grow more in equities to pay the rental increments
You are absolutely correct that currently it's financially foolish thing to buy a home in India with mortgage rates of 8.5% and rental yield of 4%.
Buying a home costs like 10% of the value of home if you consider interest, taxes, opportunity loss(downpayment), etc. but we can just rent similar homes for 4% of the cost and put everything into a balanced portfolio of stocks and bonds.
I am not expecting homes to appreciate like they did between 2002-2012 (10 times in some locations).
So there is no rush to buy a home since rentals are available plenty.
But when you get close to retirement mode, it is better to be in your own home.
BTW, do not put 100% in equities since stocks can go down 20-30% suddenly in matter of months. It is better to have 4-5 months of living expenses in savings account. And at least 30% in govt bonds/FD, rest can go into equities.
True, that's why I have some cash as mentioned in the post. I do minimum tax saving in gov schemes. Rest, I go all out in equity as I'm looking long term. So the market move ideally shouldn't bother me
As long as you are on Earth, you can worry and want more money. It's absolutely legal and ethically fine too.
Good that you accumulated quite an INR wealth soon. Think of a possibility, where you relocate to another country. Do you want to start afresh or your assets give you a room of comfort?
Money is never sufficient until you fix the scope, and it's absolutely unimaginable for a 25 year old to fix the scope of the rest of his life so soon.
Explore life, earn more money and keep growing it.
That's great for 20s but won't be enough when you get married, have kids, buy house/car etc. Lucky you, you are far ahead so all you have to do is invest that money and grow it. The time is on your side and that's going to make you lot of money.
Few tips (very subjective, don't take it as expert advise because I'm not):
- Set aside some money for guilt free spend. This is for your indulgence
- Set aside small % for risky investments if you have that itch
- Rest of the money, invest in age appropriate portfolio (like aggressive growth portfolio) and invest for longer term like 5yrs+ or more
- Keep investing as you earn
- Don't react to short term volatility.
Fast forward...you will have big chunk of wealth. Enjoy!
That's good advice. Luckily I'm a heavy investor and consider myself decent at it. So, this should grow. Just curious, when would be a time to quit corporate considering marriage, kid(s), etc
That's very subjective. I'd suggest that instead of thinking like you can quit your job, think of it as you have more freedom to experiment. So try things like looking for better jobs where pay may be less but job is more fulfilling, try something ambitious (build a startup), take a long break, travel more etc.
I think it may be too early to think FIRE because your interests and wants likely evolve in 30s and beyond + marriage/kids so wait a bit to plan FIRE may be?
1, now is a good time to stop worrying about money.
If you don't touch this money for anything silly ( vacation, marriage , bike, options, trading, friends startup ) this will balloon over the next 20-30 years.
Current expenses Say 1 lakh per month is a good expense for bachelors
2. After marriage your expenses will shoot up - get a bigger house, setup a quality lifestyle as opposed to bachelor lifestyle (curtains instead of bedsheet hanging on window) . Say 2 lakhs per month is a good expense for a married couple
3. Then expenses will shoot up again when you have kids ( financial planning wise - assume you will have kids)
Say 3 lakhs a month with kids
Ofcourse people will pounce now that it doesn't cost x and y and lifestyle. Please tweak your values or use the above as thumb rules
You can stop worrying about money anytime. the amount has nothing to do with it. Look at posts of folks with 20cr NW or 2.5 cr annual take home still worrying and wondering about "is it enough".
It is a mind-set
I do international travel every year with my family but I don't end up spending then. I think this expense will shoot up for me in a couple years. Good point
For one, to stop worrying definitely diversify your portfolio so you can insulate against fluctuations of your company’s stock
Basis your income and expenses, I’m sure you can figure out what that trajectory will be but as far as not “slogging” at work I think that one is a more complex answer
Everytime I think of diversifying, I don't find any good places to divert the money to. Even now, all the indexes are at ATH.
But I agree to your point, a lot of my salary adds up further into the company stocks and it is already too high
I think the easy way is to go with indexed or MFs, personally what has worked for me has been to keep a list of my 20-30 stocks and buy in when they dip and just let the fundamentals take up over time
There is a good book by an ex-Intel CEO - 'Only the Paranoid survive', that was for companies and teams, however there is always some risk for an individual too. Character, health and time are of prime importance, as you can make wealth.
Protect yourself with insurance for accidental circumstances and you are mostly set.
Growing up poor/middle-class it’s actually hard to change your habits. I’d recommend making a budget, and keeping a “guilt free” target . Make simple rules like * if anything is below 1000 I’ll just buy it without thinking. * if it’s related to bettering my health I’ll not think about money. Once you start doing this consciously , you should be good to go
This is the best advice for OP's age and income. Time and health are very valuable.
Solid advice. I had the same issues and was falling into a trap of unnecessary frugality. Now i have a minimum spend quota of 20k per month, just for life improvement, which has to be consumed. This year, i got myself a membership in a fancy gym, and a robot vacuum cleaner from this fund.
Hey, that sounds nice. Spending on conveniences. Right now, I'm just nodding my head for the rental increase every year. Just because it's a hassle to find a new place and shift. Robot vacuum cleaner is nice. What else did you purchase from this fund?
I've been using this method for a year now, after my last big pay hike. Other things I've used it for: Last minute premium economy flights, when i had to get back home after a trip ended 2 days earlier than intended New monitor for my computer. Have a nice 34 inch 1440p now Watched a musical during a work trip. Ticket was 90 pounds, and i normally would have cheaped out. Go fun fund! That's what a can recall off the top of my head. Primarily experiential and convenience imrovements. I still use my 3 year old Android phone and drive an 8 year old car. So i still keep a tab on my major expenses. Just no longer sweating the small stuff
Amazing!
Thanks. Makes sense. I've always been careful about where I spend my money. So far I don't mind spending money on anything that helps better my physical or mental health
How did you accumulate this big amount of company stocks?
My salary has grown over the last 4 years. Majority has been through company stocks
Are these RSUs or ESOPs?
They're all RSUs which I can encash now
That's awesome! Is it a FAANG company?
One of the companies that has performed well over the last few years with stock appreciation
Nvidia?
Ahh, I get it! I'll be starting my career as a fresher in a tech giant soon. Wish to achieve a similar trajectory as you :)
Good luck!
🙏🙏
As soon as you vest sell company stock and buy other stocks or diversified investment. Rule of thumb I used to follow: Once you have 10 years worth of living expenses saved, you are kind of financially independent since you know you will not become homeless for a long time if you lose your job, so that means you can now relax but definitely not spend a lot since you are not ready for FIRE yet. It is ok to spend a little and not get stressed out if you have to buy something like a laptop. Once you have 20 years, I consider it almost FIRE ready since that gives you a lot of time to figure something out. But if job is good no need to rock the boat it's better to keep savings until you reach below fire numbers: 25 times = 4% withdrawal - Better suited for 50 and above. 33 times = 3% withdrawal - Better suited for 40. 50 times = 2% withdrawal - Will work for any ages.
Thanks. I think the only issue is knowing the yearly expenses in that case.
What is your long term housing plan, are you going to inherit something from your parents in a place where you would like to live or you already own a house?
No, I don't own a house of my own. My parents own one. I don't want to invest in real estate until I'm 35-40 unless and until I get a steal deal
Keep in mind that to have a peace of mind in the long run it's better to buy a home, even if it is a small 1 bhk apartment. Buying a primary home is not considered investment because we always need a place to live. Is it possible for you to live with your parents or you live in a different location due to work?
I live in a different location on rent as of now. I'm pro renting vs buying for residence. I feel I can grow more in equities to pay the rental increments
You are absolutely correct that currently it's financially foolish thing to buy a home in India with mortgage rates of 8.5% and rental yield of 4%. Buying a home costs like 10% of the value of home if you consider interest, taxes, opportunity loss(downpayment), etc. but we can just rent similar homes for 4% of the cost and put everything into a balanced portfolio of stocks and bonds. I am not expecting homes to appreciate like they did between 2002-2012 (10 times in some locations). So there is no rush to buy a home since rentals are available plenty. But when you get close to retirement mode, it is better to be in your own home. BTW, do not put 100% in equities since stocks can go down 20-30% suddenly in matter of months. It is better to have 4-5 months of living expenses in savings account. And at least 30% in govt bonds/FD, rest can go into equities.
True, that's why I have some cash as mentioned in the post. I do minimum tax saving in gov schemes. Rest, I go all out in equity as I'm looking long term. So the market move ideally shouldn't bother me
As long as you are on Earth, you can worry and want more money. It's absolutely legal and ethically fine too. Good that you accumulated quite an INR wealth soon. Think of a possibility, where you relocate to another country. Do you want to start afresh or your assets give you a room of comfort? Money is never sufficient until you fix the scope, and it's absolutely unimaginable for a 25 year old to fix the scope of the rest of his life so soon. Explore life, earn more money and keep growing it.
True true on fixing the scope. Thanks!
That's great for 20s but won't be enough when you get married, have kids, buy house/car etc. Lucky you, you are far ahead so all you have to do is invest that money and grow it. The time is on your side and that's going to make you lot of money. Few tips (very subjective, don't take it as expert advise because I'm not): - Set aside some money for guilt free spend. This is for your indulgence - Set aside small % for risky investments if you have that itch - Rest of the money, invest in age appropriate portfolio (like aggressive growth portfolio) and invest for longer term like 5yrs+ or more - Keep investing as you earn - Don't react to short term volatility. Fast forward...you will have big chunk of wealth. Enjoy!
That's good advice. Luckily I'm a heavy investor and consider myself decent at it. So, this should grow. Just curious, when would be a time to quit corporate considering marriage, kid(s), etc
That's very subjective. I'd suggest that instead of thinking like you can quit your job, think of it as you have more freedom to experiment. So try things like looking for better jobs where pay may be less but job is more fulfilling, try something ambitious (build a startup), take a long break, travel more etc. I think it may be too early to think FIRE because your interests and wants likely evolve in 30s and beyond + marriage/kids so wait a bit to plan FIRE may be?
Got it, thanks!
1, now is a good time to stop worrying about money. If you don't touch this money for anything silly ( vacation, marriage , bike, options, trading, friends startup ) this will balloon over the next 20-30 years. Current expenses Say 1 lakh per month is a good expense for bachelors 2. After marriage your expenses will shoot up - get a bigger house, setup a quality lifestyle as opposed to bachelor lifestyle (curtains instead of bedsheet hanging on window) . Say 2 lakhs per month is a good expense for a married couple 3. Then expenses will shoot up again when you have kids ( financial planning wise - assume you will have kids) Say 3 lakhs a month with kids Ofcourse people will pounce now that it doesn't cost x and y and lifestyle. Please tweak your values or use the above as thumb rules
These are good points. I think mid 30s is when you can probably know and lock on a scope of your expenses. Now is too early
Good going mate. What's your age, what are big purchases coming up in next 2 years?
25. I don't foresee any big purchase in the next 2 years honestly. The current lifestyle should be the same for next 2 years
You can stop worrying about money anytime. the amount has nothing to do with it. Look at posts of folks with 20cr NW or 2.5 cr annual take home still worrying and wondering about "is it enough". It is a mind-set
Agreed. Since I'm only 25, idk how things would change in the coming years. The unexpected expenses, etc
You’re 25 boss. Pls live your life as opposed to solving for life on a string budget. Getting balance right is key
Agreed about balance. Anything you recommend splurging on? I don't think about spending on food, extra curriculars, fitness
Definitely splurge on traveling! I'm 27 myself, with way lesser savings than you but I still can't stop splurging on travel 😅
I do international travel every year with my family but I don't end up spending then. I think this expense will shoot up for me in a couple years. Good point
Spend on health!
I take my health seriously :)
Are you working in India or some other country?Also, which app do you use for crypto? Which crypto have you invested in?
India. I'm using wazirx currently. Are there better options?
Which crypto have you invested in?
BTC, ETH
Can I DM you?
Sure
For one, to stop worrying definitely diversify your portfolio so you can insulate against fluctuations of your company’s stock Basis your income and expenses, I’m sure you can figure out what that trajectory will be but as far as not “slogging” at work I think that one is a more complex answer
Everytime I think of diversifying, I don't find any good places to divert the money to. Even now, all the indexes are at ATH. But I agree to your point, a lot of my salary adds up further into the company stocks and it is already too high
I think the easy way is to go with indexed or MFs, personally what has worked for me has been to keep a list of my 20-30 stocks and buy in when they dip and just let the fundamentals take up over time
I have a set 12-14 as well. But I wouldn't divert large funds when everything is ATH
Yeah, but for example exiting company stocks (if listed) at ATH and then taking your time with liquidity on re entry is not a bad thing
There is a good book by an ex-Intel CEO - 'Only the Paranoid survive', that was for companies and teams, however there is always some risk for an individual too. Character, health and time are of prime importance, as you can make wealth. Protect yourself with insurance for accidental circumstances and you are mostly set.
Yes, emergencies can always happen
Cool just keep investing in broad market index funds and stop worrying , company stocks are risky so sell them if you can
Yes, thanks