My journey from debt to financial freedom in 5 years

Alok Vaidya was a successful IT professional who suddenly found himself in a very precarious position in 2018. He was benched.

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

A week later, he was informed that he only had 60 days to find another project/assignment. If he couldn’t, they would let him go.

Considering the very real likelihood of being unemployed, he realized he had no savings.

He shares the 5 lessons learned from this situation to the point where he achieved financial independence.

Lesson I: Prepare for the unexpected.

After 17 years of work, here I was. A 44-year-old man with a 14-year-old son, and 60 days to find another project or get back to work. The search for a new job at a senior management position weighed heavily on me.

I was doing well and never had to worry about saving because retirement was a long way off. My wife and I each earned decent incomes. I had no emergency fund. No financial plan. No investment. Besides that, I had a few loans. My only asset was the house we were staying in.

Mentally and emotionally, I was distraught. What happens if I can’t find another job for months? Would I be able to live as I am now? How will we manage our daily expenses? How do I manage my mortgage? How are we going to 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 hadn’t looked at in a decade. I contacted everyone who could help me find a job. Now we are constantly on the lookout for higher paying job opportunities.

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

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

  • I looked at several sources of income.

I reached out to all my entrepreneur friends looking for advice or side gigs. I started working on building an affiliate marketing business. I started providing digital marketing services to a few clients to earn more money. I joined a friend of mine as a part-time CTO. Soon I was working 24/7. Well, almost.

  • I started to put my finances in order.

Simultaneously, I started checking the internet for personal finance management. That’s when I discovered the FIRE movement – Financial Independence, Retire Early.

I liked the part about financial freedom. About saving and investing to grow your money, so you can live the carefree life you want when you’re not making money.

What I didn’t like was the starting point. Everyone was talking about starting as early as possible, preferably in your twenties. Was it too late for me?

One thing I was sure of was that I wanted to speed up the savings process 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’s our choice whether we want to keep working or relaxing on a beach.

  • I realigned my lifestyle to my new reality.

As a family, we started living a frugal life. We’re cutting back on discretionary spending like dining out or ordering food online. No vacation. No subscription like Netflix or Spotify. We seized our loans (consumption and car). We paid all credit card charges and stopped using them. We have made mortgage foreclosure our top priority before considering any investment.

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

I was pretty overwhelmed and realized that I didn’t have the knowledge or the expertise and wasn’t able to tackle this problem on my own. Moreover, it took a long time. So I decided to opt for professional services in terms of financial planning and advice.

There are many certified financial planners and independent financial advisors. In my research, I came across many paid financial advisors. This indicates that they have no self-interest when recommending investment products as they do not earn commissions from fund management companies, only fees from clients. So they have an interest in helping you succeed.

If you are suspicious, it could be a mentality problem. Unless you realize the importance of financial advice, you won’t want to spend money. People will buy a luxury car or an iPhone, but are not comfortable paying for financial expertise.

Then there is the issue of trust. Here are some of the questions I faced:

  • 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 advisor has understood my situation and my fears?
  • Is the advisor capable enough to establish a personalized financial plan?
  • After paying, will the plan work or not?

I knew I needed help getting my finances in order. It was a priority. Even though I couldn’t afford it, I paid a large sum for my financial planning.

I couldn’t trust anyone even certified so I decided to go with a reputable financial institution.

Lesson IV: Ultimately, the responsibility stops with you.

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

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

I began to read and study intensely on the subject. I had more time to spare during the confinement and I used it to achieve this goal.

Even if you employ the services of a professional, you need to know where your money is being invested and why. It’s your money after all, so you have to take matters into your own hands. To be responsible.

Lesson V: Write everything down to get a clear snapshot.

Throughout this trip, friends would often tell us about these problems. I realized that people had no plan. Nobody knows how much money he will need in retirement. They do their daily work and earn money, but do not invest enough for the future. In some cases they are but without goals. They do not know if their savings are sufficient or not. Most did not realize the need for financial planning.

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

Create an annual cash flow statement so you know where your money is coming from and where it is going. Do this for the years before and after retirement.

Once everything is in place and documented, an Excel-based model takes care of everything automatically, including what-if analysis. For example: What if I save and invest more? When will I retire? Can I afford to pay for a luxury home theater system? I use this Excel template now even for small discretionary purchases (our needs).

More than 5 years…

I did it. I save. I invest. I have an emergency fund. I have several sources of income. I don’t just depend on my 9am to 5pm job for my income.

We sent our son abroad for undergraduate studies. We can retire anytime 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 build wealth
  2. A money mistake that cost me dearly
  3. This advice will revolutionize your relationship with money
  4. 3 Money Lessons You Can’t 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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