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.