Goodbye Alameda, Hello Kochi!

On our quest for financial independence we relocated to Kochi in Kerala, India. Kochi is the industrial city in the tiny state of Kerala bordered by the Arabian Sea along the southwestern coast of India. We considered several locations for relocation before settling on this unlikely place. These factors contributed to our decision:

1. Cost of Living: As we expect a lull before generating income from our vocation (few years possibly), it was critical that we stretch our money as far as possible. To this end, Kochi won hands down - as we had a place to live (which needed remodeling) the day-to-day expenses should be low on an ongoing basis. Kochi along with most other second-tier cities in India does very well in this regard, for many of the recurring costs such as property taxes, utility rates, labor charges, etc. are low compared to global standards.
2. Education: Kerala has a well-developed school system (literacy close to 100%) with numerous choices. Costs vary depending on the type of school (public vs private) and on the value-added services offered. Though public schools are free they were not an option for us given their limited facilities. Private schools usually conduct an entrance examination even for lower grades - sometimes having connections can help get an admission. We chose a newer private school around ten miles away from our residence mostly because they offered admission without an entrance test and partly because from friends we learnt that the school catered to expatriates like us. Despite being one of the more expensive private schools in the state, costs are only about one-tenth of the average cost of sending kids to private schools in the US.
3. Language: When considering relocation to a foreign country, language skills (or its lack of) can be a major impediment. Many schools offer alternate language options but it can be hard if the medium of instruction is in a new language altogether. Kerala was a good choice for us in that regard as our kids were in the beginning stages of becoming literate in Malayalam.
4. Logistics: Proximity to family is priceless.

We relocated towards the end of May 2010 and our things arrived a month later none the worse for the move. Of this relocation experience, we have to say that while there were many surprises, overall it has been a net positive. Kids are happy at their new school, house remodeling is progressing albeit slowly, and this blog is falling into gear with the frequency catching up to the time when we were in Alameda. Working on our vocation had been in the back burner for some time now, although we should be able to reverse that trend in the coming months.

Above all, it is a great feeling to be freelancers – no one to report to, no stress of deadlines, taking the time to ensure that kids are doing well at school while also trying to do well at our commitments. We will update this series on a regular basis from now on focusing on our experience being expatriates.

Last Updated: 07/2010. 

A Peek Into Our Roadmap to Financial Independence

As discussed previously, frugal living, reducing expenses, investments guaranteed to beat inflation, and passive income generation are key issues on one’s road to financial independence. Each of these contributes to either:

1. Reducing the amount of money required on a monthly basis, and
2. Generating income to offset living expenses.

Having been in the software industry for over 15 years, and having worked full-time at it we are aware that though stressful at times the jobs are well-paying and intellectually challenging. Simultaneously juggling the responsibilities involved in bringing up two young children in elementary school has flavored and toughened us. The never-ending slew of layoffs in the recent years, not isolated to just our industry, has been gentle on us. It has always been our dream to resourcefully manage time until the nestlings confidently take to the sky.

Bay Area living, in an excellent elementary public school district comes with its own suite of out sized living costs to which we are not immune . A residential area with excellent schools and low housing costs is a holy grail. Below is a look at our expenses in a typical month:

• Housing (Mortgage, HOA, Property Taxes) – 65%
• Basics - Food, Fuel, Attire, Utilities, etc. – 12%
• Travel and Entertainment – 10%
• Children's schooling, training, and misc. – 7%
• Others - Insurance (housing, personal, auto), Home Maintenance, etc. – 6%

For minimizing expenses beyond what can be achieved through frugal lifestyle, relocating to a lower-cost area has been on our radar for a long time. Frugal lifestyle has helped us build liquid investments but income generation (dividends and interest) from the same are petite compared to our salaries. Another diminutive source of revenue is this blog and together they account for the bulk of our passive income which is woefully very modest now.

Our plan to achieve financial independence can be summarized as follows:

• Relocate to the South of India (our native soil). Infrastructure is practically non-existent there, when pitted against Western standards, but the area offers some distinct advantages and below are a few highlights:

1. Lower living costs.
2. Proximity to our extended family.
3. Immediacy to growing areas of the world.
4. Opportunity to experience global living thanks to our US citizenship.

• Our primary residence there will be the house we bought outright a few years ago. Housing which accounted for 65% of our monthly expenses in the Bay Area should then account for a much lower portion of our total expenses – zero mortgage, much lower HOA and property taxes.
• The children will be attending private school and that is one area where the costs will be significantly higher than in the Bay Area. The kids now attend free public education and the decision to private school them comes with a higher price tag, although it will be less than private schooling in the US.
• As for passive income – slowly, but surely we have been adjusting our stock portfolio toward investments in companies with consistent dividend growth. By selling our house and realizing the equity tied up there, we should be able to increase the size of our stock portfolio, thereby increasing dividends (passive income). Developing other streams of passive income as time allows is always in the offing.

We hope to pull this strategy off in the next six-months around the coming school year. As with all ventures there are several unknowns and uncertainties:

• How well will we deal with the new environment?
• How long will it take before the avocation becomes a vocation?
• How successful will our passive income strategies pan out to be?

There is no denying the comfort zone we are in currently. But, it is our gut feeling that this opportunity will cease to exist, once the kids start middle school and that justifies this timing.

Last Updated: 12/2009.