Multiply Networth 6X in 6 Years

First of all I apologize for the rather obvious eyeball grabbing title of this post.  But hey I do have the data to back it up so maybe it is not too bad after all!  

Well this is a follow-on post to the one I had done about a month ago about growing networth.  That post basically talked about some data points pulled out over the last 6 years detailing the growth of my networth.  As I clarified in my post earlier, this was not meant to be any indicator of portfolio performance, but merely my attempt to track one of the key indicators in my journey to financial independence and early retirement.  The key reason I track my networth is to be able to understand the dynamics of personal portfolio management, and how to improve the management over time.  In some sense you are the fund manager of your own personal networth (which is your own personal AUM), and you are constantly looking for ways to manage it better and nurture it to reduce volatility, and improve growth rates, consistently year over year.  

So here is some comparative data for investment growth over the 6 year period from mid 2009 to mid 2015.  This is the same period that is covered in the post that I had return before, and I have reproduced the networth plot below here just for convenience.  

Please read the previous post for details and specifics related to the graph above.  In this post I want to focus more on how this growth was achieved.  Now I have said many times before in my blog posts, that I am a huge believer in the power of equity investments, and in some sense, I am betting a large part of my early retirement goals on the performance of the Indian stock markets.  Clearly the growth in my portfolio over the last 6 years should be closely linked to the behavior of the Indian stock markets, since I have a very large percentage of my assets allocated to equities (over 75% at last count)  

Interestingly enough, the Indian stock markets did very poorly over a large stretch of the 6 year period I am describing above.  Only in the 2014 timeframe, did the markets zoom up based on the NAMO effect.  Prior to that for a very long stretch of time, the markets did hardly anything and returns were not particularly encouraging.  In fact I wrote a post towards the end of 2013 lamenting the 6 Sideways Years of the SENSEX.  Little did I know that the market would pick up steam like crazy in 2014! However, I never blinked right through those disappointing 6 years, and kept up the rate of investment, and in fact even increased it, as I waited for the hopefully inevitable growth of the Indian economy, and the resultant stock market gains.  As you can see in the graph above, the real returns started kicking in from late 2013, and began to hit the roof only in 2014.  The first half of the graph above is downright disappointing in comparison.  Mind you that 6 years is a very short time to draw any conclusions regarding stock index performance.  I am simply stating facts here that are accurate for this particular 6 year period.  It is anyone's guess if it can be extrapolated to future 6 year periods.  

Now let me start by bench-marking performance to a few different investment avenues available to the average retail investor.  I typically use Kisan Vikas Patra (KVP) as the baseline performance metric, and a proxy for safe ultra-reliable and guaranteed investments, like FDs, RDs, savings accounts, debt funds, etc.  KVP guarantees that it will double your money in 100 months (8 years and 4 months).  This is a CAGR of 8.7%.  Basically if your networth grew at 8.7% per year, then it would have doubled in line with the KVP in 8.3 years.  Now since we are discussing a 6 year period, we need a CAGR of 12.2% per year to get the same doubling effect.  In our high inflation, high interest rate scenarios of the last 6 years, it is not impossible to get this level of CAGR from pure debt instruments.  However, you should be cognizant of tax issues when dealing with debt funds.  Poor allocation methods focusing on tax inefficient strategies like FDs would not get you anywhere near this kind of return post-tax.  Please remember as far as your networth is concerned all computations need to be inclusive of the impact of taxes, since only the monies left in your hands count towards your corpus!  But bottomline, it is hard to imagine a pure debt focused portfolio getting more that a doubling effect on your networth.  You need much more oomph! in your asset allocation to drive real growth in wealth.

Next lets look at a 100% equity portfolio that is indexed to the NIFTY.  This is very easy to construct by putting all your money into an ETF that mimics the NIFTY, like the NIFTYBEES for example. Here is how the NIFTY has done over the same 6 year period from mid 2009 to mid 2015.

The NIFTY has been incredibly volatile over the last 6 years, with highs of 30%+ returns and lows of approx 25% losses.  Overall the NIFTY has delivered 2.09X growth in these 6 years, which is not much more than the 2X calculation we did earlier with a CAGR of 12.2%.  2.09X growth over 6 years is a CAGR of 13.1%.  I'd wager there are ways to get similar 13.1% annualized returns from a very intelligently managed pure debt portfolio too!

However, in the Indian context, any savvy investor will tell you that though the NIFTY represents the overall stock market performance, it is possible to handily beat it, by a simple strategy of picking high quality Mutual Funds, and sticking with them.  Indian fund managers seem to have the ability to beat the NIFTY index at will (or atleast the good ones seem to do this year on year).  I have discussed before that HDFC PRUDENCE is my mutual fund of choice over several years now, and a large portion of my equity investments are routed through this fund.  In fact I had blogged about this as recently as March this year in Building Wealth One SIP at a Time, extolling the virtues of investing in this balanced equity oriented fund offering from HDFC.  Here is how the prudence fund has done as represented by the growth NAV in the table below.

Comparing the results for HDFC PRUDENCE vs NIFTY from the table above, you can see that the prudence fund has typically beaten the index in up years by ~6% points, and in the boom year of 2014 by as much as 19%.  It has also done well in down years like 2011, limiting the downside by 8% when compared to the index.  2013 seems to have been a bad year for the prudence fund when it lagged the index by 6%.  The summary is a 2.73X multiplier effect by staying 100% in the prudence fund from mid 2009 to mid 2015, an impressive market beating CAGR of 18.2% over this particular period.

Clearly you can see the power of equity investing in a period that has seen high volatility, and a sustained region of mediocre to flat results, followed by an accelerated boom period.  However this still only gets us to a 2.73X multiplier and nowhere near the 6X+ that I got on my networth.  The secret is rather simple, which is the additional monies that I have pumped into my investments over this 6 year period.  Like I mentioned before, even though the markets were disappointing upto 2013, I kept up my investment pace right through those long dark years from 2008 to 2013.  Over the 6 year period I was able double my corpus simply through savings.  Basically I managed to save the same amount in the 6 years from mid-2009 to mid-2013 as I had when I started in mid-2009.  This was primarily driven by living well within our means, and is probably interesting enough to merit a separate post regarding our experience in making this happen.  Suffice it for this discussion that I got a 2X multiplier simply from savings over the last 6 years.  

The 2X from savings coupled with 2.73X from prudence gets us to 5.46X, which is now approaching the 6X+ gains that I got in my overall networth.  The remaining gains were made by the growth in the savings from the last 6 years.  Since I am in the accumulation phase of my retirement journey, every single penny saved, is further invested aggressively in a high growth equity oriented portfolio.  The remaining gap from 5.46X to the actual returns in my corpus are simply the gains achieved by these savings in turn growing through the duration of this period in the form of SIPs, and additional investments in direct equities.  

So here is the summary in the form of a bar chart graph for easy visualization.  

The left most bar shows the scenario if I had chosen to invest my entire starting corpus in a safe guaranteed return asset like KVP.  My returns in 6 years would have been less than 2X (not taking taxes into account)  The second bar represents a pure debt scenario that I have described before in this article delivering 12.2% CAGR.  Again like I mentioned before watch out for taxes in this scenario too!  The third bar represents a 100% NIFTYBEES ETF investment. Taxes are much simpler in long term equity oriented schemes, basically ZERO for LTCG!, so this bar does take take into account, and is a real representation of potential corpus growth.  The fourth bar represents a 100% investment in HDFC PRUDENCE, again with ZERO taxes comprehended.  The final bar is the actual return in my portfolio, split into the various components for easy visualization.  Note the equity gains from the original corpus taking the overall total to an impressive 2.73X.  Then there are additional savings getting invested back into the same high growth equity oriented strategy.  And a final topping coming from the growth of those additional savings completing the totem pole of my final corpus across 6 years of saving and investing as aggressively as I possibly could. 

This has been a dream run so far, and I am not too sure if it can be repeated over the next 6 year period.  However, I am keeping my fingers crossed, saving as hard as ever, and hoping my investment strategies are supported by a rocking Indian macro-economy.  Hopeful as ever!  Happy investing!

I made a mistake : Fixed returns can lead to Early Retirement

Several months ago, I had stated to my wife, quite brashly if I may add, that debt-like returns would not find any place in our retirement portfolio.  I have been in a tearing hurry to grow our retirement corpus and I thought that the slower growth rate of debt-like investments, when compared to equity based investments, was something I could not tolerate.  In fact I was so convinced about my logic, that I even posted a blog entry justifying my position.  I could not have been more WRONG!!  However, like all good things, ones financial strategy is also never 100% right, and there is always room for improvement.  I have now realized my mistake, and made room for some more fixed income into our retirement portfolio.  There is one key recent investment opportunity though that triggered my change of heart.  If you are a keen follower of personal finance, then you already know what I am talking about!  Yes, I am of course talking about ...

... tax free infrastructure bonds.  But before I get into the details, here are some related thoughts.  The biggest fear I have with building a retirement portfolio is taxes.  Taxes can take a huge bite out of my withdrawals from the retirement portfolio when I eventually need the money!  I cannot afford to pay anywhere from 10% to 30% of my withdrawals to the government.  Unfortunately there are only a few ways in which you can protect your retirement portfolio from taxation.  Your EPF and PPF contributions follow the EEE concept.  This means that the money going into PPF/EPF is not taxed, it grows tax free, and is not taxed when you withdraw the money.  However, there is a maximum limit to how much money you can save this way.  PPF maxes out at Rs1Lakh per year (was Rs70,000 earlier; increased to Rs1Lakh since Dec'2011)  EPF is limited to 10% of your basic salary if you are a salaried employee.  My next target is typically the long term capital gains route.  Currently long term equity capital gains are taxed at 0%  So you can stash all of your retirement portfolio into equity based investments, and withdraw them via SWPs (Systematic Withdrawal Plans) without worrying about taxes (assuming naturally that you have held these investments for more than a year)  However, the first problem with this approach is that equity based investments tend to be high risk, and you do not want to be withdrawing from your equity portfolio in a market downturn.  Also with the new proposed DTC (Direct Tax Code) around the corner, this benefit might be withdrawn at any time.

Dividend income is the other possibility.  You can currently invest a large part of your retirement income in dividend yielding equities (either through directly buying high dividend yielding stocks, or through dividend mutual funds) and live off the yearly dividends that they generate.  However, though dividend returns are currently not taxed, that could also change once the DTC is approved.

I am not aware of any other means currently to protect your retirement withdrawals from the taxman.  In this scenario, the announcement of the tax free bonds came as a welcome relief, and really perked my interest.  Back in 2003, the government of India had announced RBI relief bonds at 6.5% tax free interest.  Unfortunately at that time I was not focused on my retirement planning.  As I learned more about the taxation policies, I began to realize that there were very few avenues to save money, and build a portfolio that could generate sustainable and predictable yearly returns, without paying a fat share to the government.  The US allows for investments via ROTH IRAs.  This structure, allows you to channel your investments (upto a limit of course) through it such that your withdrawals are tax free.  The ROTH IRA is basically a TEE structure.  The money going in is already taxed, but once inside the structure, it can grow tax free, and can be withdrawn tax free.  This is a powerful method to rapidly grow your investments.  In India the only TEE structures are life insurance policies, ULIPs, and pension plans.  Pension plans and traditional endowment policies are typically linked to fixed return instruments, and hence their returns tend to be low.  ULIPs are no different from long term MF investments from a taxation perspective.  India currently does not provide a formal TEE structure like the ROTH IRA. 

Therefore when the tax free bonds were recently announced, I was pleasantly taken by surprise.  I mentioned to my wife the moment I noticed this investment avenue that we should take full advantage of it.  I had completely forgotten my earlier statement that I would never include debt-like instruments in my retirement portfolio!!  The opportunity to lock in tax free returns of over 8% for 15 year periods was too good to pass up.  I will not get into the details of the tax free bond offerings from NHAI, PFC, HUDCO and IRFC here.  You can easily find tons of literature describing the various aspects of these bond offerings on the internet.  Suffice it to say that guaranteed pre-tax returns of upto 12% per annum (for folks in the highest 30% income bracket) were too mouth watering to pass up.  Obviously several people thought the way I did.  The HNI allocations of all these bond offerings were over-subscribed within days.  Fortunately all of them had separate allocations for retail investors like you and me.  There was a limit of Rs5L per bond offering in the retail category, which I thought was high enough for most retail investors.  In case you had more money available to invest, you could have spread 20L across the 4 offerings, and a total of 40L if you and your wife applied separately.  At 8.6% tax free returns, you can generate ~Rs29K per month tax free for the next 15 years guaranteed!!  This is possibly the highest guaranteed returns post-tax that you can generate across any existing TEE schemes. 

No wonder I had to admit my mistake, and change my retirement investment philosophy.  My only regret at this time is that I could not free up enough capital to invest in this tax free offering.  If there are more tranches of such offerings in the future, I fully intend to watch out for them, and plan upfront to free up some more cash to invest in such risk free and tax free opportunities.  Did you capitalize on this opportunity for your retirement portfolio?  Such no-brainer opportunities do not come very often!  It would be interesting to know how many of you participated in this bond offering.  Let me know.

Household Savings Rate : How do we measure up?

It is the last day of the month, and our only sources of monthly income, i.e. our paychecks hit our salary accounts today.  I had talked earlier about shooting for a 85% savings rate, and the need to be able to track this religiously, if we want to have any chance of hitting this super aggressive goal.  We have always struggled to come up with a system to track our expenses.  Either we get too ambitious and try to record every single penny we spend, and end up failing miserably in the attempt, or we become too lazy and forget to track any spending at all.  So we figured the first step was to come up with a simple way to monitor our overall monthly expenses and then refine the method if we see the need for it.  So instead of messing with tracking spreadsheets, notebooks, etc, my wife and I came up with this pretty simple method, that was staring us in the face.  Today, I simply added up my wife's and my monthly October paycheck, and I withdrew 10% of the amount in cash from our nearby ATM. 

We now have the entire month of November to eke out, using just the cash we have in hand.  We purposely chose to limit the cash withdrawal to 10%, so that we have a 5% buffer in case we needed the extra expenditure to finish up the month.  We intend to cover all our monthly expenses by drawing down from this kitty and paying in cash for all our spending.  There are a few expenses that are paid in auto-pilot mode through online websites such as utilities and phone-bills.  We will simply draw out an equivalent amount of cash from our 10% stock and keep it aside to ensure that we stay true to our target spending allocation. 

To summarize, we will only spend the "real world" money that I withdrew from the ATM in hard cash (which is 10% of our joint monthly income) and will leave all of the remaining online wealth (in bank accounts, SIPs, home loan EMIs, insurance payments, etc) to remain as investments. 

I suggest this method to you as well, as it should be pretty simple, and reduces the burden of thinking about it.  The one thing that will not be covered by this method, is tracking where our expenses are actually going into (for example how much are we spending on food, utilities, entertainment, health care, school fees etc) However, for starters if we can stick to the 15% spending target, I don't think there will be much need to figure out where we spent it.  It is only if we are consistently over-spending beyond the 15% target, will we need to spending distribution, so we can figure out where to cut back.  But then, we will cross that bridge when we come to it.  For now, on towards a frugal November!

Early Retirement : Monthly Income Sources

I am very interested in developing passive income sources to meet my monthly expense needs.  Currently we are stuck in the economic rat race, with all of our monthly income coming in from our salaries.  We have no other sources of income (other than some small interest earnings from our savings bank accounts; which I actively try to minimize, since I am not interested in accumulating any debt income)  We also get some dividend income from stocks, but that is too small at this time to make any significant impact to our overall income profile.  We do not have any rental income either.  So my Oct'2011 snapshot of monthly income sources, looks as follows:

Now this is a pretty depressing picture to look at from an early retirement perspective.  Ideally I want the bulk of my monthly income coming in from non-salary sources.  At this time we are 100% locked in to our jobs since we are completely dependent on our salaries for monthly expenses.  Over time, I will need to come up with additional income sources to first supplement, and then replace our current salary based monthly income.

Dividends are the way to retire early

I have always been fascinated by dividend returns from stocks as a means to support my income needs once I have actually retired.  Dividends are particularly exciting since they are not taxed at this time (of course once the new tax code kicks in, dividends may be taxed as well)

As an example Azim Premji, the promoter of Wipro, took home Rs1345Crore (approx USD$269 Million) in the form of completely tax free dividends in 2011.  Of course, being a promoter of Wipro, he owns about 74% of Wipro shares. 

Now I cannot dream of owning so many shares of a leading blue-chip company, but I plan to start in my own small way.  I have identified Hindustan Unilever as the company in which I will invest to secure dividend returns.  I started with ERU2.37 invested in Hindustan Unilever.  That investment is currently worth ERU3.13, which is a healthy 30% gain.  However, my primary motivation behind this investment is not stock capital gains, but the steady stream of dividends from this FMCG company.  So henceforth, I will separately track all dividend returns from this investment, and also re-invest it back into HUL shares to grow my nett investment corpus in HUL.

Finally, while I wait for the dividends to accumulate, I also use a fairly risky options call writing strategy to derive additional monthly income.  For the Oct25'2011 expiry, I have made ERU0.18.  This is a very small number, but given that the risk is high, I do not have the guts to write more calls.  Still it is a 5.7% monthly return on my HUL investment, which is quite significant.  I will continue to try my option call writing for the Nov'11 expiry, and in the meantime re-invest the Oct'11 expiry gains back into HUL shares. 

Lets see how this strategy pans out over the long run.

Want to Retire Early? No place for Debt Instruments!

One of my key learnings on this journey to early retirement, is that I need to give my current corpus the best chance of growing significantly over the next several years.  To achieve this aggressive goal, I have decided that my portfolio cannot have any debt instruments!  To put it simply, I will not be investing in Fixed Deposits, National Savings Certificates (NSCs), Post Office Monthly Income Schemes (POMIS), Recurring Deposits (RD) etc. 

 Now this is a bold statement, given that my parents always focused on debt-like products for all their savings.  However, I firmly believe that in the accumulation phase of my career, I cannot afford to take the path of low risk guaranteed returns.  Also, I already have a fair portion of my portfolio in debt-like products that I cannot avoid.  A part of my salary compulsorily goes towards the Employee Provident Fund (EPF) which is basically invested in debt.  I also invest in balanced Mutual Funds, as part of my MF portfolio, and these funds always have a portion of their AUM invested in debt.  Finally, I continue to service a home loan EMI, and I think it would be better for me to pay off that loan (if at all I want to invest in debt) than directly invest in debt instruments.

Do you agree with my strategy?

What are Early Retirement Units (ERUs) ?

I am extremely uncomfortable sharing the actual numbers about my salary, savings goal, final retirement corpus etc in a wide open public forum.  However, I think it would be very difficult to discuss any early retirement strategy without diving into some detail regarding savings percentages, investment plans, asset allocation etc.  So I figured the best way to get around this concern, is to share all my numbers with a scale factor included.  That way I can confidently share all the details, without being concerned about my privacy. 

As an example, if I use a scale factor of 10000, and my monthly salary is Rs30000, I would refer to it on this blog as a monthly salary of ERU3 (Early Retirement Units 3 = Rs30000 / 10000)  Similarly if I invest Rs100000 in Mutual funds, I would refer to it as a MF investment of ERU10 (Early Retirement Units 10 = Rs100000 / 10000)

In this manner, you will get a clear understanding of my savings and investment plans, and can easily apply it to your own situation by scaling up or down appropriately.  At the end of the day, it is the relative proportions of income, savings, investments etc that matter, and not the absolute numbers!

How much do I need to retire?

The big question for all early retirement aspirants is, "How much do I need to retire?".  I know this is a critical and difficult question to answer, since there are several discussions around this very thought in blogs and personal finance websites.  I realise that the final amount that one comes up with is very dependent on your personal situation, monthly spending assumptions, risk taking ability etc.  However, I am sure there is a common thread that you can find in the following thought process no matter where you are from. 

I am going to start with the assumption that I will require ERU1000 to be able to retire early (with some adjustments and frugality in my lifetsyle)  I will also set myself a stretch goal of ERU2000, which is twice my basic target.  This is to ensure that I am focusing on a larger goal, which should help me reach my basic target with more certainity, and hopefully earlier as well. 

To provide some perspective, my wife's and my current combined take home income is ERU7.34.  This means that my baseline target for overall retirement savings/investments is ~11.3 times my annual take home pay.  My stretch goal would amount to ~22.6 times my annual take home pay.  I will try to add some detail on how I arrived at these numbers the next time, but as of now, I think the stretch goal is practically impossible to achieve!  The baseline target sounds more realistic, but I will have to come up with a detailed plan on how to reach this goal. 

Let me know what your thoughts are regarding a safe retirement corpus?  What multiple of your annual take home pay do you need to have saved up, to be ready to retire?

Early Retirement : Networth or Corpus

One of the key vectors on your journey to early retirement, is the net accumulated wealth, also known as networth, or corpus, that you have at any point in time. You need to actively measure and monitor your networth at least once every 2-3months, and make a decision as to what your networth target is going to be when you actually retire. This is not an easy decision and will require a fair amount of planning, some mathematical computations, and the guts to actually implement this plan. For starters, I will try to put down my networth target, and my current networth, so I can see how far I am from my goal, and consider whether my 85% monthly savings target will get me to my goal or not.

I am very uncomfortable sharing the exact details of my personal wealth, salary, income etc on an online forum like this. So I will be publishing scaled numbers on this website. The thought here is for you to get an idea of my income sources, progress towards networth targets etc, without getting stuck in discussing actual numbers.

My next post will cover my networth target, and a plan on how I intend to achieve it.

How to Retire Early in India

I have seen several articles talking about a relatively recent trend of people planning to retire early in India.  In our generation today, this could be fueled by rising incomes/salaries, and the increased load that most of us face in the work environment.  So while in my parents generation, the objective was to keep working as long as possible to sustain ones family (usually extending well into their 60s), in todays generation, people are actively considering retiring in their 50s.  The popularity of VSPs (Voluntary Separation Programs) offered by companies, wherein employees choose to take an early retirement package, and leave the active work force voluntarily, is a clear indication of this growing trend. 

However, the one thing that I do not see in all of these early retirement discussions, is real life examples of people who have achieved their early retirement dreams.  I notice a lot of free advice easily available on the internet covering the basics of savings, investments, compounding, LBYM, etc,  but no real evidence of people successfully applying these concepts and realising their early retirement goals.  I also notice that the folks dishing out this advice, are not the ones who have actually achieved early retirement themselves.  So I really wonder how all of these so called financial planners and investment gurus, can be believed if they themselves have not walked the journey towards early retirement. 

My objective on this blog, is to document my own attempt at early retirement, step-by-step, backed up with my own data, lifestyle choices, investment decisions etc.  Based on my success or failures going forward, readers can take valuable lessons to apply to their own financial planning.  Either way, you as a reader cant lose! You can apply my successes to your situation, and steer clear of my failures to increase the probability of your hitting your early retirement goals.  Good luck to us all!

Tracking Savings for Early Retirement

My previous post covered my aggressive intent to save 85% of our monthly take home pay for investment purposes.  The key of course is to have the discipline to maintain this aggressive goal and actively track it month by month.  To have any chance of success here, we figured we needed an easy and automated method to implement this, so we are forced into following this guideline for savings.  So our proposal is: as soon as both my wife and I get our monthly salaries in our salary accounts, we will move out 85% of that months' income into investments (through SIPs), or EMIs (for our home loan) or into our secondary bank account.  All monthly expenses will continue to be routed through our respective salary accounts, in the form of utility bill payments, monthly credit card payments, and cash withdrawals for day-to-day expenses.  Let me know what you think of this approach and if you have used something similar before.  We will kick-off with this method starting November 2011. 

Early Retirement : How much to save?

The key determinant of success to achieve your early retirement goals is your savings rate while you are working.  The higher the percentage of savings, the better chance you have of meeting your early retirement goal.  Now of course, the level of savings you can achieve is also dependent on your monthly income levels.  At the start of your career, when your monthly income levels are low, it will be very difficult to achieve a significant savings percentage.  Since you still have to meet your basic expenses for food, housing, clothes etc (the basic essentials) it will be difficult to increase your savings percentage.  However, as your career advances, and your monthly income levels go up, you should be able to start increasing your savings percentage, as typically your monthly basic expenses will not increase much after a certain level.  Particularly in the Indian context, it should be possible to save a very large percentage of your take home salary, if you stick with the principles of LBYM and do not unnecessarily extend your lifestyle. 

I always like to take aggressive goals when it comes to enabling my early retirement.  So far starters I am going to target a 85% savings rate on my monthly income.  This might sound like a huge portion of my monthly earnings, but the objective here is to be as aggressive as possible and find ways to reduce my monthly expenses to enable this savings target.  Just to be clear about my accounting method, here are a few assumptions I will make. 

1. The 85% savings target applies to both my and my wife's monthly take home income.  Any yearly bonuses etc will be additional savings and not accounted for in the 85%

2. All investments in stocks, MFs, real estate EMIs, insurance premiums, are considered as savings for the purposes of this exercise.

3. All expenses in the form of monthly food, entertainment, vacation spending, intermittent medical expenses, utility payments etc are NOT savings and will need to be accommodated in the remaining monthly 15%

Now that I have written this, it makes me wonder if I can achieve this level of aggressive savings, and importantly is there a way for me to track that I am really meeting these savings goals.  My next post will cover how I intend to measure my savings rate, to check how I am doing when compared to the target of 85%

Why do I want to retire early?

The first thought that comes to my mind when I think of retirement is "early".  How do I retire early, and get out of this rat race?  I have been in the corporate world for several years now, and lately I find myself increasing dis-illusioned by the whole corporate atmosphere.  There has got to be more to life than dragging oneself to work everyday, doing ones best to claw your way up the corporate ladder, put in the mind boggling long hours and late night meetings, soak up the pressure of increasingly tight deadlines, and worry oneself about meeting mindless targets quarter after quarter, and sometimes day after day.  When I started my career, I never dreamt that there would come a day when I would feel like this.  Today I know that I am burnt-out, and I want out.  I figured the best way to keep myself honest to my goal, is to first acknowledge how I feel, and share my feelings out here.  Going forward, I intend to chart out a course of exit, and blog my journey to early retirement in this journal.  Lets hope this story has a happy ending.