Living on 55 Lakhs Package in India | Fix Your Finance Ep 22 #Finance

55 lakhs! You get joining bonus for 2 years? -Yes. -Wow! You took a few big purchase decisions. Yes, I knew I would get the pay jump, so I took it before I got the jump. In your case, it looks like you are just securing your future. But your present is getting compromised. Hello and welcome

to a new episode of Fix Your Finance powered by CRED. Today we are in Bangalore to meet a 26 year old tech bro. His name is Sumanth and he recently shifted to Bangalore from Hyderabad. He is

working with a big startup. How’s it going? I go to the office on Monday and Tuesday, rest of the days I work from home. On the weekends, I go out for dinners and spend time with my friends. What was your role in your previous company? I was working as an SDE 1 in the previous company. Here,

I am SDE 2. Software Engineer 2. It’s a level up. How long have you been working for? I completed by B. Tech in 2017. I worked for a company for a year. It was a big company, but it didn’t pay well. I did my masters from IIIT Allahabad. Then, I landed up with Amazon. At Amazon, I was

get 19 lakhs per year in-hand. After Amazon, I joined my current company. Currently, what is your total compensation, pre-tax? Total compensation is around 55 lakhs. -55 lakhs! -Yes. -Wow!. -I have a lot of money. Amazon was a tech giant. That gave me more leverage in negotiating offers with

companies. -Of course, the brand name worked really well for you. -Right. This total compensation of 55 lakhs, can you help me with the breakdown? So, 37 lakh is base. You get 4 lakh yearly as variable pay. On top of that, 6 lakh is my joining bonus. So first year it’s 6, second year

it’s 6. You get a joining bonus for 2 years? -Yes, one is joining, second is retention. -Oh, wow. Then, there is an ESOP for 8 lakhs. And after all the deductions, what is your in-hand monthly salary? I get 2.3 lakhs in-hand monthly. Now that you have seen a big jump and are making a good

amount for the past 3-4 years, I want to know your relationship with money. Most of the time, I could not get things that I wanted from my family. So, I decided that if I make money, I’ll make it big. I didn’t want to work for a meagre amount. That was the plan since childhood. When you

were staying with your parents, how much do you think was the monthly expense? -I think 4-5k. -Wow. And how much rent do you pay for this house? I’m paying 17k for this house. That has been a big jump in your life, man. So rent is 17k. How do you manage your food? I have a cook who comes and

cooks for me twice a day. She charges me 4k per month. And how much do you spend on groceries? I spend 4k on groceries. I pay Rs. 1500 to a maid who washes dishes and keeps the house clean. Travelling is an expense too. Do you have to go to the office everyday, or is it a remote situation? Mostly

remote. I go to the office twice a week. My office is close by, just 1km from where I stay. I just walk or drive my car. -Okay, so you have a car? -Yes. -When did you buy it? -1st January, 2022. -How much did it cost? -It costed me 10.5 lakhs on road. 10.5 lakhs on road. Did you

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance it? So, they were offering me 100% Loan without any down payment, so without paying a single penny, a car was in my home. -What was a rate of interest? -7.45%

-Quite a good rate. What is the tenure? -7 years. If you are taking a Loan, restrict the duration to 4-5 years, going forward. 7 years is a long tenure. What is the EMI? -Around 16k per month. -16k. Apart from this, do you have any other Loans? Yeah. I purchased a

home in Hyderabad. I can see that after the big pay jump, you took a few big purchase decisions. I knew I would get the pay jump, so I took it before that. How did you know that you’d get such a big pay jump? I knew what the pay was like in the market. Either I would get promoted and get the

same amount at my previous workplace, so make the same money in a new workplace. -Your parents live there? -Yes. The Loan amount is 43 lakhs. The EMI is 33k per month. What is the interest rate and duration? It was 6.8 when I took it. RBI increased the interest rate, so now

it’s 8.2. His interest rate increased suddenly because he took a floating rate home Loan. The bank sets an external lending rate as their benchmark, and then based on your CIBIL score and Credit rating, they give you a kicker. The riskier you are, the higher

the interest rate. In most cases, the EBLR is the Repo Rate. To control Inflation, RBI recently has increased the repo rate. That’s why his home Loan interest rate has also increased. Since the interest rate has increased, so has the duration. It has become

29 years from 20 years. EMI is same, but the duration increased. I wanted to know if I should pay off the home Loan, since it has only been a year, or if I should invest, for higher returns in the market. Of course, you’ll get higher returns in the market, while you continue

your home Loan. But 29 years is a very big tenure. Your Loan will keep going on until you’re 55. Do you want to work throughout, or you want to retire early? I want to be financially free so that I can take the decision accordingly. -The first major step is

to have lower Liabilities. -Got it. 29 years is a big duration for anyone. You said that you get a joining bonus, a variable bonus, and you can also exercise your ESOPs. You should work on reducing your principle amount in your initial years. This way, your duration will reduce.

These are your basic expenses and Liabilities. What are your variable expenses? How much do your spend on your car’s maintenance and fuel? -10k per month. -10k per month. Do you go for long drives over the weekend? It costs 6-7k per trip, whether I’m going to Hyderabad

or any other place. -Do you have Credit cards? -Yes, I own 3 Credit cards. For what purposes? Why do you have three cards? Mostly for cashbacks from multiple websites like Myntra, Flipkart, Amazon. If you are buying Credit cards for cashbacks and

offers, I would recommend you to sign up with CRED. CRED has a feature where as soon as you add your card, it tells you about the different offers and rewards detected. This way whenever you are shopping or spending money, you will always get the best deal. So please download CRED right away, the

link is in the bio. How much do you end up spending in a month, inclusive of all your expenses and Loans? I think around 85-90k. So even after all your expenses, you are left with a lot of Savings. How do you manage your money? I put 1 lakh in

Equity. I know that I’m dumb, so I don’t get into stock picking. I learnt this from you. Mid-cap index, small-cap index, Nifty index and tech index. I invest in these 4. Apart from this, I invest 10k in chit funds. It’s not about being dumb. Everyone has topics

that they know about, and don’t know about. If you are aware that you don’t know things about some topics, and if you outsource that to an expert, that is the smartest move ever. If you are taking index funds, check out the AUM, and the tracking error. Tracking error is basically that

if the index is at Rs. 100, and the mid-cap index fund is at 99, then the error is 1%. -Right. -So, the smaller the error, the better. -Do you have an emergency fund? -Not a fund, but I purchased gold for my mom. I think of it as an emergency fund. In case something bad happens, I’ll take the

gold and either sell it off, or get a gold Loan at a cheaper interest rate. Ideally, you should not be taking a Loan against gold. I would recommend for sometime, try to at least have 1-2 lakhs in your bank account, because you have Liabilities,

and the economic conditions are also not the best. So if for some time, you can reduce your SIP amount and keep a Savings, be it anywhere. -Do you have a health Insurance? -I have a health Insurance. It has a top-up of 10 lakhs, and a super top-up

policy of 90 lakhs. -What about a term Insurance? -I wanted to ask you, how do I come up with the right amount? How much should I spend on my term Insurance? It is tricky to figure out the cover amount, as there are many variables. I feel it should roughly be 15-20

times your annual expenses, plus Liabilities. You are investing about 50% every month. Are you holding yourself back in some areas of life? I feel like I should spend, but I can’t because I have a target in my mind that I need to reach this number by the end of 2023. I even

postponed a vacation for this reason. My family wanted to go to Jaipur, and they asked my to join. But I told them that we’ll go later because I have to hit this certain number in my mind. One distinctive feature about targets is that the finishing will keep moving. When you do hit that

amount at the end of the year, your life is not going to change drastically. The next step would be the next target. This is beating the purpose of money. Money is an enabler. It gives you the freedom to spend more time with your family, to have better experiences in life, and to also secure your

future. It looks like you are just securing your future. But your present is getting compromised. I think I will start spending on experiences going forward. I will not compromise, I will take that vacation. Probably be a bit kinder to myself and spend on myself. You said you want to be financially

free early in life. What amount do you think is enough to take it easy? Right now, about 3.5-4 crores. Next is, if you had an unlimited budget, what would you gift your parents? A world tour. How much do you think you’ll spend on your wedding? I’ve not thought about it, but going by my

friends’ experiences, I think 10-15 lakhs. The last question is, if money was out of consideration, what would you do for a living? I’d teach coding to other people. I really life teaching, so I’d do that. Very nice. That basically tells you that you are not very unhappy with what

you are currently doing. -You are very satisfied. -Right. On that note, we are towards the end of the show. Thank you so much, man. And thank you all for watching till the end. If you want me to come to your home, check out the link in the description. Fill up the form, and we will get in touch

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