Watch: Achieve Financial Independence (FIRE) in India While Living Abroad
How NRIs can reach financial independence in India: the Rule of 25, beating inflation, and what it actually takes to build a retirement corpus.
The full write-up, with the numbers and the links.
What this conversation covers
- Key Takeaways
- 1️⃣ What Does FIRE Really Mean?
- 2️⃣ Why is FIRE Easier for NRIs?
- 3️⃣ How Do You Calculate Your FIRE Number Using the Rule of 25?
- 4️⃣ How Can You Beat Inflation in Your FIRE Plan?
- 5️⃣ How Long Does It Take to Build Your FIRE Corpus?
- 6️⃣ What Mindset Do You Need to Achieve FIRE?
- 7️⃣ Where Should NRIs Invest for FIRE?
- 8️⃣ What Mistakes Should You Avoid in Your FIRE Journey?
- 9️⃣ What Does Life Look Like After Achieving FIRE?
- 🔟 Karthik's Golden Rules for NRIs
- ❓ Frequently Asked Questions About FIRE in India
Transcript
Auto-generated captions, lightly cleaned
0:07 Welcome to Dy return Diaries embracing home again the podcast that shares personal Journeys and expert insights on returning to India I'm your host ainash pedi here to guide and inspire you on your Dai return Journey welcome to another episode of D written Diaries today's episode is very special so this is part two of our episode from past which is episode three where we have talked to Karthik where he shared about his return return to India Journey this episode is a specific Deep dive into fire which is retire early we will get into the details in terms of kik's approach how he planned for fire in India so I'm looking forward to the discussion with that welcome karik to the show thank you so much Ain nice to meet you again same here so Kik maybe
1:09 Let's start with you know defining the fire you know from your perspective what it is and you know explain a little bit for our audience yeah so the definition of fire in its most simple form is reach a position in in life where you are no longer working for money so you're able to quit your 9 to5 job and do anything that you want without having to worry about how do you manage your family expenses cool so that's great I think it's basically the you know independence of not to work from a financial perspective so you have the flexibility to do what you want and you know just as an definition the fire is like basically Financial independent retire early but retire early is a subjective but the main objective here is not to work for money and you know you can do what you would love to do so that is the key
2:11 Key core concept of that so Kik if you can explain from your perspective like how did you approach it I think this is something that you have planned while living in us I think you wanted to do this fire when you move back so you don't want to work for money when you when you're living in India so if you can talk through your Fame framework on how you approach you know this number like how you thought about the cost of living so that would be very helpful yeah if you think about fire there are actually multiple variations of fire if you go by the academic definition of fire there is something called a fat fire where like it's fat fire essentially means that you you want to maintain the same standard of living even after you quit your job so in order to achieve that the the Corpus needed or your the the
3:12 Structuring of of your the plan is different than like for example lean fire lean fire is is where U you after you quit your 9 to5 job you cut down on your expenses and you live very modestly so and then there is something called Barista fire where where you do quit your 95 job in that but then you try to compensate by doing something else which is which might not be as taxing as your 95 job but it still gives you some income so what we have planned so far is a barista fire where like my wife for example is has taken up a job which is not very pressurized like she she's it's not very taxing on on our family and so there is some sort of income coming in of course it's not matched to what we used to earn earlier but then we we
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4:13 Chose to be before we move to any of those stricter forms of fire we thought a barista fire would be a little bit more like on the road for us so yeah so as far as definitions go you you have first choose like what type of lifestyle you want to achieve after you do fire MH and then and then you have to construct a plan towards it like and this has to be very early on because to achieve fire I think it's at least a decade worth of effort so I want getting into more details you know it's like you have to first of all plan as to to how how much you need and then and then how you're going to save that much right so in our case what we did was and I think in most people it's very relevant to the return to India family
5:14 They they have the best chance of achieving fire amongst other people like for example a person who who works in us and wants to retire in us it's going to be very hard for them to achieve fire because because they they expenses are going to be in the same category and similarly for India as well so it's only possible I guess for people who have worked in in a in in like in a western country and are ready to switch to a low low cost of living country like India I feel that is a pretty easy and doable way for many people yeah I mean so I think that's a very very good point I think in terms of you know the cost of living and like you know when you're earning to save that Corpus fund especially when you're are abroad and working in a western country it's much easier to meet that Corpus fund with the savings that
6:14 You are managing in a western country and you know adjusted to the cost of living by living in a lowcost living country right I think that's a key point there so if we have to peel it a little bit more is there some certain number you know that you can like you know is it 30X of your cost of of your annual cost I I don't know again I think you know in your case if you can talk a little bit specifics about what should be a corpus amount or how should people think about what money that they have to save when they think that they would be good for the retirement and also like how do they come up with that number and you know any any any other insights I think that would definitely help for them to people to understand tactically what they should be thinking about when they're talking thinking about fire in India as their r2i yeah yeah great question so I think
7:15 There have been a lot of reports about fire in the US and what has been figured out in the US is that there's a rule of rule of 25 or 4% rule like whichever way you want to call it which is at the point when you retire you need to have 25 times the annual expenses of your of of your family so that's a thumb rule that most people in us follow for the retirement but when I did my research I couldn't find any such rule for Indian Indian growth and Indian inflation so so what I feel is because of the lack of you know a concrete research report on this what I feel is you could feel it this way typically for a family the big ticket items are like a house a car and their kids school expenses like educational expenses so if you take these three off the equation
8:15 Then you have a very in I mean the amount of elasticity involved in your predictions is going to reduce so what I suggest is figure out where which city you want to live figure out what kind of house you want to live and how much does it cost now and maybe can if you can predict how much it's going to cost later but what I would suggest to most people is before you before you do this fire ensure you already own a house which with no loan on it should not have any loans when you when you do a fire so like once you have a house that you want to live in that you think this is the house that is going to satisfy your family for the next decade or so ensure your cars are paid off you have money for it and then think about which school you're going to put your kids in and what the school fee structure is and once you take these three out I would say the monthly expenses would range between 50,000 to
9:16 One lakh a year in a in a in know Metropolitan City so that's what will will otherwise if you ask people they'll have varying numbers because they have these three big chunks inside the equation so my suggestion is remove these chunks and then you can estimate it to be around 50,000 to one lakh and you're you're very comfortable with it okay I think that's great so the way I understood was if you remove these big ticket items which is the house school and the automobiles and then you know the cost of living we are talking about maybe like say 50,000 to one lakh which is what you need per month and you have everything else is paid off so that that's what you need as a monthly expense so let's take that an example of one lakh that you have to you know maintain and you have everything paid off what should be your Corpus amount you know when you are thinking about like living in India are we still looking at 25 times of you know annual which is like 12 lakhs so in this
10:17 Case you know we're talking about 1.8 CR or 2 CR so just trying to make sure you know what that number would be in that case if you're somebody's thinking along those lines yeah so so this one lakh of your expenses should be pretty liquid and it should be pretty should be invested in pretty safe instruments right because that's what you're going to live live off so you're right this calculations would be around that so let's go by the fixed interest rate of of India and I know nowadays it's high but let's say an average of 6% or 5% and then how much would you need to support 12 lakhs a year right so yeah you're right about two two CR would give you like 10 lakhs a year so 2.5 CR would give you 12 LS 12.5 and how do you consider about the inflation adjustment I know maybe the one lakh now is maybe a good amount for an expenses when we are in 2023 but
11:19 A decade later you know with the inflation you know in India which is a bit more higher than you see on a Western countries how how how do you approach about these inflation adjusted expenses and you know the Corpus fund anything that you plan accordingly for that yeah so so I would say again because there lack of research what the best thing you could do is put the rest of your portfolio in inflation correlated Investments what I mean by that is like real estate stock market so so that way then these things tend to grow with infl inflation so what so you're kind of becoming inflation proof because your other Investments are growing with inflation so so then so that's what so the what I told you in the starting is the minimum right at the minimum you need to have a paid of house but to beat inflation you need to have extra investments in form of real estate so
12:20 Then they can grow with inflation and they can form a good Nest Egg you know in retirement okay so maybe just to help the audience a little bit so that it's clear sorry if I'm like you know going a little bit specific here but I think I just want to make it a little bit more clear for the audience so the way I look at it is one is you know paid off house automobile and you know plan for the kids education right so there is a good chunk of money that you put aside based on your needs and there is something that you have something that you put for a liquid you know which is your monthly expenses and then there is another pie of investment or some amount or Corpus fund or the investment M to beat the inflation adjustment you know so that's what I think I heard so you're looking at three different buckets and I don't know if there is certain ratio or anything that you can you know for for the third one I think the first two are very clear easy to calculate just based on everybody's needs what that amount could be I think it's very easy to calculate but for the third one for a core inflation adjustment investment
13:22 Is there something that people have to think through in terms of the number or you know how do they come up with that amount or the number and what should they be planning in that particular category got it so the third bucket where we talked about having real estate investment or stock investment is the buffer right so the more you have the more buffer you have so so I mean I I don't think there's there's a there's a standard number for it because it just depends on what your comfort level is for the amount of buffer you have right so yeah I mean everybody's their own risk taking their own comfort of what they need for this inflation adjustment it's it's a little bit subjective you know similar to like what they think about the first category like you know how much of house they need or what kind of a car this is also a little bit subjective in terms of what kind of
14:24 Risk they want to take and how much of buffer they want to you know think because of the infl adjustments and so on so it's I think you know from a number perspective people can think about like maybe you know 6 to 7% or 5% you know inflation in India I mean if you look at the history in terms of like you know what has been and I think the key thing is whatever you are investing in this vehicle it has to beat the inflation and you know you still maintaining that additional buffer that you have for your you know needs I think that's a key message there that it has to be invested in the returns after inflation has to be at least you know 3% or 5% more that way like you know it's invest inflation adjusted returns or higher to make sure that your buffer is always available for you correct correct and that's that's also where this this notion of this types of fire come into picture right like if you if you have really confident that the third bucket is big enough for you to live off it then you're in the
15:27 Fat Zone of file right but if you don't think you have enough then you have to be in Barista fire where you have that additional income coming in where you're keeping on adding to the third pile got it I think that's a very good point in terms of how people are approaching the fire of living and that depends determines like how much of P that you need to maintain for your fire living yeah correct correct exactly yeah okay so maybe let's step back a bit so I think you know for your perspective from your perspective you have some numbers in mind so can you talk a little bit about how you planned or like you know how you thought through from a savings I think you kind of mentioned about it would take at least a decade to you know go through that maybe there are a lot of sacrifices that you might have to done and do I mean you know to reach that you know to the savings like you know it's like the fruits right now versus fruits later right I mean there's a lot of things that you have to do to make sure that
16:28 You are saving enough to meet this Corpus fund anything that you can advise people who are living in us or abroad in terms of how they can think about from the savings or Investments or plan to meet this Corpus fund for these you know for the fire yeah sure ainash I feel you should never un underestimate the power of compounding so a dollar or a rupe you save early on in life will will do much more good good for you than a dollar you save towards end of your career so so what I mean is people in their late 20s early 30s if you can have a lot of free cash flow in that in that age and you invest that free cash flow in in these good instruments right that will add a solid foundation to your fire go so I would say like we as a family we
17:28 Were a double income family right from the start so we were saving almost like 1.5 times our salaries you know which is like one person salary and and we would live off half person's salary so I'm assuming you mentioning there after taxes like in terms of the one yeah yeah okay typically yeah that's it I mean like the like 1% salary is for surely safe and then another person we would hit around 50 4% is is what we would say and this we were able to do early on and that I I believe helped us lay the foundation because we invested in in our case we invested in real estate of Hyderabad but I'm I know of couple of friends who invested in in stock market as well so and and it and we all know how well the stock market did the last 10 years I mean discounting the last three years but overall yeah it's it's been good returns yeah I have to say Kudos I mean
18:31 I think you know saving one and a half of you know the salary I mean it's it's definitely a very stretch for a lot of people but I mean kudos for you to able to keep that you know discipline and making sure that you are saving enough for your Corpus fund to have a better life in the later part of it so I mean thanks for sharing that anything that you can advise people who are thinking about fire you know currently and how they should approach it or how should they plan any anything that you can guide or advise them I would say like when you're young what's more important is how much more can you earn than trying to be trying to save every dollar you know because by squeezing on the on the bottom side you can only go up to how much you to earn right so what I say is put more focus on learning new skills
19:33 Increasing your U like like your your income or you know the money in exactly yeah income or money so so that way then you're able to save more and then and and some things are pretty obvious right don't do stupid things like like having a credit card balance and paying interest on it every every month so those are pretty obvious in my mind like don't do don't buy really fancy stuff you don't have to live a really stingy life you just lead a normal life like what Indians are used to right anyway that's our upbringing growing up so just continue that life yeah and then and then try to earn more in the early stages of life and invest that yeah I think that's great I think as you said you know it's important to focus on the inflow which is like on income side or the on the thing there is one point that I might want to add on there is as there is an increase in your
20:35 Salary or increase in your income your lifestyle does not have to be adjusted the same way so you know just be mindful about it because the additional income that you're getting can be going towards the savings so your savings rate would be increased because your income has gone up but you can also maintain a decent lifestyle and you don't have to adjust your lifestyle because just your income has gone up so so which makes it hard for your savings rate to increase and which makes it hard to achieve that Corpus fund because your lifestyle is also increasing that which means that your 25x or 30X you know the requirement is also changing so keep that in mind I think the focus is more on the early savings you know the dollar saved early as Kik mentioned you know is going to be much more value because of the compound interesting and also maintaining a a good lifestyle and not being adjusting with the adjustment of the income I think that plays a big role in terms of achieving the fire so Kik from your perspective is
21:39 There anything that you would have done differently or you know or any advice that you would provide to the audience you know from based on your experience and you have been living in India for you know maybe close to a year approximately So based on your your expectations and your living lifestyle anything that you would do differently or anything that you would advise people who are considering to do a fire with the return to India so one thing I if I could do differently was I would get early on in my age into the stock market I think I was a little late I then what I would have preferred earn right and then because owning part of a company is a successful company is a great thing and we shouldn't be scared of the losses that
22:40 We we see in the in the news having a long-term Horizon will will always ensure that you you come profitable on the on the towards the end and also at the same time I would advise people to to invest in the same city that they're planning to retire in early on so you're able to keep up with the inflation of that City so that way even in at the point when you when when you move into the city you're not surprised so that that helped us early that helped us a lot because we always knew Hyderabad was our destination and we have invested in Hyderabad like for for for at least a decade now got it yeah so it's the early investment and you know try to do the investments in the city that you're planning to move so that way that investment is
23:41 Already like kind of inflation adjusted growth and whatnot I think that you already would see yeah and at the same time I think you know people who are in in in not it sure I mean I think they can definitely diversify right in terms of like you know they don't have to put all the eggs in one basket like whether investing in us or whether investing in India you know they can kind of diversify and then once they clear with their decision I think they can decide on how they want to approach and move forward with that correct so the timing I would say the like the timing is important so so what I would advise is let's say you have a this fire is is a decade long plan I would advise people to invest in their city in the first five years of their plan so that way then your Investments are already going to catch up with with the way the the the city is going to grow and then the last five years you can invest in the US that way you have a diversified portfolio and at the same time you're
24:43 Not going to miss out on the growth of the city of the Indian city that's happening yeah cool I think that's a lot of valuable information there Kik is there anything else that we haven't touch based or we haven't covered that you want to share with the audience no I mean I think fire is an amazing concept A lot of people can achieve it if if they if they can change their like I mean they don't have to make a lot lot of changes but if they have that as part of their goal in the long-term planning it's pretty easy easily achievable for especially the return to India the community that's definitely a great point and the key thing is the discipline I think what you want in the life and just go at it and be
25:44 Consistent with whatever that is I think and as Kik mentioned for folks who are planning to return to India you have a best shot at it than people who want to retire or like want to settle in us or vice versa right I think because you are moving to a low cost of living you know comparatively and so you have a best short at of short at fire that so thank you very much Karthik for taking your time and you know providing a lot of valuable information about your fire Journey what it means for you and how you approached it this is very helpful and thank thanks a lot thank you ni thank you all for joining us on this insightful journey of Dy return if you enjoyed this episode and want to explore more stories and expert advice make sure to subscribe and hit the notification Bell don't forget to leave a comment below with your thoughts and experiences by the way check out the links in the
26:45 Description below for our Facebook group and social media for updates and engaging discussions as well as connecting with fellow Thea wrers thank you once again and until next time may your Des written journey be filled with Joy growth and endless possibilities
