April - June 2020: Slow and steady financial progress

The first quarter of the financial year 2020-21 provided a much needed boost to our financial progress. Primary reasons for this were:-

• Slight recovery in the equity markets 
• Interest payout for EPF and PPF
• Increased savings rate during the lock-down 

Below are the highlights for the last three months

Savings rate 

• April – 83.29%
• May – 88.52%
• June – 79.89%

Average savings rate for the 3 months was 83.9% which was better than Jan-Mar quarter and aligned with our expectations. 

Expenses

Rent and utility bills contributed to 60% of our total expenses. In June, we bought a home appliance and some furniture for our work from home setup. This was a significant expense but also improves our quality of life. Further, these items are a long term investment and would not repeat until 5-10 years. 

There were 0 expense on travel, outside food, commute, clothes and travel due to the prevailing lock-down as well as precautions during unlock phase.

For entertainment, we renewed our yearly subscription of an OTT platform and also stocked up beer and spirits for 2-3 months. 

Below pie-chart depicts category-wise expenses:-

Recovery in equity investments

The global and Indian equity markets started showing early signs of recovery as the lock-down was lifted in phased manner. Our investments in stocks and mutual funds were up around Rs 3 lakhs from March. While the portfolio is still in loss overall, further recovery is expected with economic activities getting back to normalcy and hopes of Corona vaccine or medicine.

Passive Income and temporary FI

The best thing about the 1st quarter of a financial year is the passive income generation in form of yearly interest payout. We received an amount of ~ Rs 2.5 lakhs in our EPF and PPF accounts along with smaller contributions from FDs. 

While calculating our post-tax monthly interest from debt instruments like PPF, EPF, FDs and RDs, we found that it was higher than our expenses in the months of Feb – June 2020. This means that we achieved financial independence for now. While its a great news, the current passive income isn’t sustainable for future. Thus, we have to continue progressing towards our FIRE target. 

Forecast for next quarter

The number of Coronavirus cases has increased significantly post the unlock phases. Hence, we will refrain from going outdoors or travelling. With expected continuation of work from home, there will be little/no expenses on commute, shopping and outside food. We are targeting a savings rate of 85% or above in the July-Sep quarter. 

Below graph shows our financial progress during last 3 months