If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader PI. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
I am 38 yr old male in a happy marriage with 36 yr old wife & 7 yr old son. I work in a small IT outsourcing firm in India handling multiple responsibilities, mostly reporting to #1 or #2. We live in a tier-2 city, which allows us a decent work-life balance & helps reduce 'aspirational' expenses to a great extent.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
I am the primary earning member. I have an annual pay of about 20500 USD, with a profit sharing option that gave about 9000 USD last year. My pay is structured to ensure maximum contribution to provident fund (tax deduction at entry, tax free growth, tax free withdrawal at retirement), such that take home pay is around 1200 per month.
My wife works as a part-time teacher at my son's school & gets about 100 USD per month, enough to cover their transport expenses. Next year, she'll join full-time, which would result in some reduction in school fees and an expected income of about 300 USD per month.
We have an apartment in our city (bought it without a loan), where my retired parents reside. We live in a rental apartment nearby paying about 250 USD per month. Our house is valued at about 100,000 USD, but I see that as a sunk cost & do not include it in my assets.
My sister with 2 kids moved in with my parents after her husband's business went sour. She works here, while he is working in another city. We are providing lifeline support to her by way of food & shelter.
Our prorated monthly expenses are:
- Rent: 250 USD
- School: 60 USD
- Car: 100 USD
- Groceries: 150 USD
- Maid service: 30 USD
- Eating Out: 25 USD
- Vacation Travel (twice a year): 125 USD
- Parents' Expenses: 275 USD
- Other Shopping: 100 USD
I hit the ESOP lottery in my previous job & thus managed to create a decent cushion, allowing me the choice of accepting a lesser paying but more enjoyable work life.
My current assets (including those in the name of wife & son) amount to around 525,000 USD, spread across equity/debt, locked/liquid, public/private options.
What are the current financial issues you're facing (saving, paying off debt, etc.)?
As of now we do not have any debt & have enough liquid savings to tide over any potential crisis in near-term.
Long term concerns are related to growing the asset base in a way that allows for adequate security of inflation-adjusted principal for perpetuity.
Our son is diagnosed with ASD, but developing fine in terms of intelligence, though lagging in social skills, despite significant improvement over last few years. We would like to be in a position to provide him basic support in case things do not work out financially well for him in future.
Writing a will has been put off for quite some time, mainly because of lack of expertise around on how to word the transfer of our son's custody to my wife's brother if neither of us are around.
I am most likely to buy a new car within this year (previous one is almost 10 yrs old), but am struggling to choose between something I need (small hatchback for 5500 usd) v/s something I want (a luxury sedan for 40000 usd).
As we do not have credible insurance options, we are mostly self-insured, which could hit our savings hard if multiple failures occur.
A major part of our net worth is still tied up in my previous employer's stock, but I'm unable to find the courage & rationale to diversify effectively.
My wife is extremely reluctant to take up basic understanding of our financial situation or manage finances besides paying the regular household expenses.
My parents have adequate assets, but if they do something stupid & get duped by my sister & her husband, I will need to handle that contingency.
What are your plans for the future (retire early, build your career, etc.)?
I would like to retire by 45. As of now, the withdrawal rates in terms of growth & inflation seems to be in favor, but I'm not able to have enough guts to take a firm decision.
I would like to work with my wife to showcase her innovative teaching capabilities using the online medium, so that might be an area to work upon after retirement.
I would like to put more effort into developing my son's potential, with an aim of overcoming his current challenges to help him become an independent adult.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Just say NO to debt, not matter how bad the situation looks.
If it is not related to basic needs of food, clothing & shelter, it can always wait.
Do not get swayed by the tax benefits of housing loans - always do your own math.