In this edition of the reader story, we have an account of how a 55-year-old who retired recently securely draws an income and manages spending.
About this series: I am grateful to readers for sharing intimate details about their financial lives for the benefit of readers. Some of the previous editions are linked at the bottom of this article. You can also access the full reader story archive.
Opinions published in reader stories need not represent the views of freefincal or its editors. We must appreciate multiple solutions to the money management puzzle and empathise with diverse views. Articles are typically not checked for grammar unless necessary to convey the right meaning and preserve the tone and emotions of the writers.
If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail dot com. They can be published anonymously if you so desire.
Please note: We welcome such articles from young earners who have just started investing. See, for example, this piece by a 29-year-old: How I track financial goals without worrying about returns. We have also started a new “mutual fund success stories” series. This is the first edition: How mutual funds helped me reach financial independence. Now, over to the reader.
Dear reader, I have been following freefincal since 2012. The articles by pattu sir are one of the key reasons I am financially independent today. When pattu sir asked me to share my investment journey, I was not enthusiastic as it was boring.
All I did was invest systematically each month. My income was reasonably high, my existence frugal, and I was lucky not to encounter debt. Since I did not want to say ‘no’ to pattu sir, I suggested I write about how I manage my income and expenses after retirement, emphasising security.
I do not claim my method is superior. It makes me sleep better. My retirement corpus has two basic components: An income floor, which helps me handle day-to-day expenses. This is accomplished via interest payment from a Govt bond purchased via RBI Direct. This is a 40-year bond. I expect this to provide income for the rest of our lives (my wife and I).
For more details, see articles by Pattu sir.
The remaining corpus is in a mix of equity and debt mutual funds. This is to handle inflation in expenses. I also have a small emergency stash of FDs in my two bank accounts (see below).
To manage income and expenses, I have two bank accounts. We shall call them income and spending accounts.
- Income account: Operated primarily via online banking. We have an ATM card but rarely use it — the interest from the government bond hits this account. If I redeem from MFs, it is paid out here. This account is linked to a feature phone. Since this is our main income source, I wanted this to be as secure as possible. We access it only from home. We do not take the feature phone when we go out. All our investments are linked to this phone.
- Spending account: All our day-to-day expenses are reflected in this account. This is linked to G-pay/UPI (which has become essential). From time to time, we transfer some funds from the income account. The balance in this account is significantly less than the income account. So, even if we lose the smartphone or if it is hacked, the loss will be lower.
Another benefit of using two accounts is that the income account is a cash buffer. It can handle our basic expenses for close to a year in case of difficulties. This is the simple system we follow. It is certainly not foolproof, but it makes us sleep better. My wife is the second holder of all our accounts and knows how to operate all investments.
I believe “only the paranoid survive” (Andy Grove). Please let me know if you have any suggestions for making this system more secure.
Reader stories published earlier:
As regular readers may know, we publish a personal financial audit each December – this is the 2022 edition: Portfolio Audit 2022: The Annual Review of My Goal-based Investments. We asked regular readers to share how they review their investments and track financial goals.
These published audits have had a compounding effect on readers. If you would like to contribute to the DIY community in this manner, send your audits to freefincal AT Gmail. They could be published anonymously if you so desire.
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Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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