My journey from debt to Financial Freedom in 5 years

Sep 15, 2022

Alok Vaidya was a successful IT professional who suddenly found himself in a very precarious position in 2018. He was put on the bench.

(A term used in Indian IT Services companies that indicates you are in-between projects and not generating any revenue for the company, but still on the payroll.)

A week into that, he was informed that he had only 60 days to find another project/assignment. If he was unable to do so, they would let him go.

Staring at the very real probability of being unemployed, it hit him that he had zero savings.

He shares the 5 lessons learnt from this situation to the point where he attained financial independence.

Lesson I: Be prepared for the unexpected.

After working for 17 years, here I was. A 44-year-old man with a 14-year-old son, and a 60-day deadline to find another project or put myself back in the job market. To hunt for a new job at a senior managerial position weighed heavily on me.

I was doing well and never had to worry about saving, as retirement was a long way off. My wife and I each earned decent incomes. I had no Emergency Fund. No financial plan. No investments. On top of that, I had a few loans. My only asset was the house in which we resided.

Mentally and emotionally, I was distraught. What if I do not find another job for months on end? Would I be able to live the way I currently am? How will we take care of our day-to-day expenses? How do I service my home loan? How will we fund our child’s education? I panicked.

Lesson II: Attack a problem from all possible angles.

  • I weighed my professional options.

I updated my resume, which I had not looked at for a decade. I connected with everyone who could help me find a job. Now we constantly stay on the lookout for job opportunities with better pay.

I aggressively started looking for projects within the same organization. And fortunately, I found one within the 60-day window.

Later, my wife and I both negotiated our respective salaries in our companies.

  • I looked at multiple sources of income.

I reached out to all my entrepreneur friends to look for consultancies or side gigs. I started working on building an affiliate marketing business. I began to provide digital marketing services to a few of the clients to earn more on the side. I joined one of my friends as a part-time CTO. Soon I was working 24x7. Well, almost.

  • I began to get my finances in order.

Simultaneously, I began to check on the internet about personal finance management. That is when I discovered the FIRE movement- Financial Independence, Retire Early.

I liked the part about financial freedom. About saving and investing to let your money grow, so that you can lead the worry-free life you desire when you are not making any money.

What I did not like was the starting point. Everyone was talking about starting as early as they could, in their 20s most preferably. Was it too late for me?

One thing I was certain of, that I wanted to speed up the process of saving as much as possible. I wanted to achieve financial freedom as soon as possible to live a financially-free life. Once we reach that point, it is our choice if we want to continue working or relax on a beach.

  • I realigned my lifestyle to my new reality.

As a family we started living a frugal life. We cut down discretionary expenses like eating out or ordering food online. No vacations. No subscriptions like Netflix or Spotify. We foreclosed our loans (consumer and car). We paid all credit card dues and stopped using them. We made mortgage foreclosure our top priority before considering any investment.

Lesson III: Sometimes, you really need to ask for help.

I was rather overwhelmed and realized that I did not have the knowledge or expertise, and was not in a position to tackle this by myself. Also, it was very time consuming. So I decided to opt for professional services as far as financial planning and advisory go.

There are numerous certified financial planners and independent financial advisers. In my search, I came across many fee-only financial advisers. This indicates that they do not have any personal interest when recommending investment products as they do not earn commissions from fund houses, but only earn from client fees. So they have an interest in helping you succeed.

If you are wary, it could be a mindset issue. Unless you realize the importance of financial advisory, you will not want to spend the money. People will buy a luxury car or an iPhone, but are not comfortable paying for financial expertise.

Then there is the trust issue. These are some of the questions I grappled with:

  • How can I share my most personal information with a stranger? Will they maintain confidentiality? Will they judge me?
  • How do I know if the adviser truly understood my situation and my fears?
  • Is the adviser capable enough to draw up a personalized financial plan?
  • After paying, will the plan work or not?

I knew that I needed help to get my finances in order. It was a priority. Even though I could not afford it, I paid a hefty amount for my financial planning.

I could not trust an individual, even if certified, so decided to go with a reputed financial institution.

Lesson IV: Eventually, the buck stops with you. 

The best part of financial planning was the clarity I got on how much money we needed before we could retire, and how we could achieve all our financial goals.

But when the brutal bear market hit us in March 2020, my investments in the market went down significantly. When the market is going down, no one can save your money. Not even the most reputed financial organization. So I decided that it was time to take charge of my finances.

I began intensely reading and studying on the subject. I had more time to spare during the lockdown and used it towards this goal.

Even if you employ the services of a professional, you must be aware of where your money is being invested and why. It is your money after all so you must take charge. Be responsible.

Lesson V: Write it all down to get a clear snapshot.

During this entire journey, friends would often talk to us about these issues. I realized that people do not have any plans. No one has any idea how much money they need in retirement. They are working their day jobs and making money but not sufficiently investing for the future. In some cases, they are but without goals. They do not know whether their savings are sufficient or not. Most did not realise the need for financial planning.

List all your financial goals, big and small: child’s education, child’s marriage, buying a luxury car, annual international vacation plans, etc.

Draw up an annual cash flow statement so that you know where your money is coming from and where it is going. Do this for pre- and post-retirement years.

Once you have everything in place and documented, an excel-based template takes care of everything automatically, including what-if analysis. For example: What if I save and invest more? How soon I retire? Can I afford to pay for a luxury home theatre system? I use this excel template now for even small discretionary purchases (our wants).

Over 5 years…

I did it. I save. I invest. I have an Emergency Fund. I have multiple sources of income. I am not dependent solely on my 9–5 job for income.

We sent our son abroad for under-graduate studies. We can retire any time now. But we are still working to take our financially-free life to the next level; from decent to luxury.

You can follow Alok Vaidya on Twitter.  

Related Reading from the experiences of others:

  1. A simple habit that helped me in wealth creation
  2. A money mistake that cost me dearly
  3. This advice will revolutionize your relationship with money
  4. 3 money lessons you cannot ignore
  5. Advice to my 20-year old self
  6. How a 54-year-old woman took charge of her finances
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