Step 2: Visualizing the future

The journey TOWARD FI involves  material changes. It is always great to look forward and imagine the world without financial dependencies. For many, FI (Financial Independence) is about quitting their mundane jobs and pursuing some interest, like traveling around the world.

As I said in my previous post, I am not so enthused about where I am financially in my life. While that sounds down and out, I have to say that there are so many things in my life that I am extremely grateful for.

For one, I love my job and the company I work for. I truly enjoy the challenge of going to work everyday, working on intriguing strategies, leading a team of arguably some of the brightest minds in the world, executing on some amazing technology and making a social impact. It is all I could have asked for from my job.

So my journey toward FI is not about quitting my job. It is rather so that I can focus more on doing what I love.

As I write this post, I am trying to envision what a great future would look like. Thinking too far out makes it hard to map the steps I need to take from now to then.

So here is my simple goal. 

“I want to be debt free so that I am not weighed down by the fact that I am spending my hard earned money on paying interest to some bank. I would like my hard earned money to contribute more to my savings. I want to work knowing that my work is paying toward a positive future. Every day, I want to take one more step toward having the option to say goodbye to work, in case the rosy work life I have today changes for the worse. “

What does that actually mean? 

1. I want to pay off all my debt ASAP and be Debt free

2. I need to map out all my potential future expenses and calculate how much I need to truly be financially independent.

3. I need to work daily toward fulfilling those goals

4. I need to do all of these within a reasonable timeline – say 10 years.

OK. Now I have something I can work with! 

Step 3: Staring the beast in the eye

So I finally took stock of all of my debt.

In all, I stand to pay out $91,600 at 8% per annum. I am absolutely dumbfounded when I try to internalize the fact that I pay about $7500 in interest every year. $7500 a year could serve very well if invested every year into a retirement fund.

Here are my loans
1. $54000 with a payment of $480
2. $14500 with a payment of $182
3. $15900 with a payment of $192
4. $6900 with a payment of $80

In addition, I also have a credit card debt of $2000.

So as I look at my total loan payments, it is about $934 per month or about $11,200 per year. In effect, my student loans only go down by about $4000 every year. That is outright ridiculous. I can’t be paying out as much to the banks just because I chose to get an education.

My goal is to now take a debt snowball approach. I really did think about the avalanche approach but I know I lack the discipline to fight it out. I need some small wins here and there to keep me motivated. Though the snowball approach is not the best financial option, it still offers the encouragement I need.

For those un-initiated, the debt snowball is when you pick the smallest loan and put all your effort in paying it out while paying minimums on the other loans. Once the smaller loan is paid off, you repeat the process with the next smallest debt and so on. The avalanche is a different approach where you focus on the debt with the highest interest rate first.

So as I was saying, My goal is to tackle the smallest debt i have, one by one. My first goal is to save $2000 in the 30 days and pay my credit card debt. That is roughly $65 a day. To start off I need a daily goal so I can stay focused and achieve it.

My next post will be one that I will update daily with my progress toward $2000.

Step 1: Internalizing the Situation

Let me start by saying this : It’s quite amazing to go through an MBA program. 

You walk in green as a cucumber and walk out a changed human being. I am extremely grateful for what the education has endowed me with, especially the power of organized self reflection. This blog and the changes I am making in my life are a direct result of the fine education. Irrespective of the cost, I will say this – Given the option to go back in time, I would still do this again.

The last 4 years out of business school has been exactly what the program sold me – continuous growth, increased responsibility, crazy hours and a changed life. I have been blessed to be able to partake in this journey.

Some changes however are not as welcome. Business school can be a giddy experience. Right out of school you are exposed to the high flying corporate life. For a while, you tend to forget who you are and where you came from. The material changes in my life are significant. I, like many others, have succumbed to the material influences that only business school and its after life can endow you with.

Let me back up a bit for context.

I grew up in a simple middle class family in India and moved to the US for business school. As I reflect on my life prior to business school and look at my life now, the changes are surreal. My earlier life revolved around going to work, coming back home, playing the guitar, watching a movie and studying for my GMAT or work. Instead of focusing on few things regularly that add value to my life, I have given in to the excesses of corporate life.

The biggest blow has been my student loans. Walking out of business school with $100K in debt, I stupidly paid only the minimums (aka cut throat interest) and instead indulged in material pleasures. As an international student, you are forced into student loans with 10% interest. Yes, you heard it right – ten freaking unbelievable percent.

The big change though happened sometime in 2016 when I came across the minimalists. My busy work schedule left me frustrated and forced me to think deeply about happiness and explore what made others truly happy. I started to realize that all my expensive purchases couldn’t make me happy. I had so many hobbies that I intermittently indulged in. (I did however fund each of these hobbies with the best gear that credit cards could buy)

Today, 4 years down the lane, I sit in the very same spot I sat as I walked out of business school – neck deep in student debt. I make good money at work. The fact though is that I am technically broke. My net worth is negative due to all of these student loans and excessive spending. I need to reel this back.

I have decided that enough is enough. 

It is time for a change. 

It is time to move TOWARD FI. 

It’s time to regain control over my life.