Interview – A Financially Independent Entrepreneur

This interview is of a person who has already achieved his Financial Independence and FIRE (What?).

In his previous avatar, Ram Medury has worked as a CIO in the IT and Financial sectors. Currently (and after achieving his Financial Freedom), he is busy building his startup.

I thought it would be interesting to learn from his journey of Financial Independence.

So here is the interview where Ram answers my questions about how he managed to exit from the dreaded race and started living a more fulfilling life.

Dev – Tell us something about yourself (background, professional life, etc.). How did you reach where you are?

Ram – I come from a South Indian middle-class background and have spent my teens in the North. This helped me gain a cosmopolitan outlook. I had a carefree childhood, was interested in computers since then and picked up my graduation in Computer Science which was followed by an MBA.

When in college, I got a chance to interact with the founders of Infosys. After that meeting, I made up my mind that I would join that company when I pass out of college.

My love for computer programming (i.e. seeing logic take shape as code and in turn solve big problems) and the pursuit to do different things led me to different countries and different roles at Infosys.

After spending 13 years there, my first switch was when I joined ICICI to head their general insurance company as a CIO.

I continued in CIO roles for 7 years before finally deciding to start a company that uses technology to solve real problems for common people.

Dev – When did you start taking personal finance seriously?

Ram – As a child, I never experienced a lack of money as my family gave me a good upbringing. I guess being from a family of modest means helped us in meeting our needs and limiting our wants. For example, we rarely went out for dining, or travel for vacations. But that in no way made us feel that we were missing out on something.

This habit helped a lot once I started earning money.

In the initial years, I did not have a meticulous plan on how to save money. Neither did I define any goals. I would simply save in post office schemes, PPF and VPF.

I liked to see money compound and keep adding up in the passbook. 🙂

Expenses were moderate and I would spend on travel, books and music. I would travel like crazy. Exploring places around Bangalore first, then Japan, US, Europe, etc.

Around the time we had our first child, I started taking stock of my finances – income, expenses, cash flows, etc. and started taking investing seriously.

Dev – How were you managing money before that and after that?

Ram – I have already covered the ‘before’ in Q#2 above.

After that, things became a bit more structured. I would have an Excel sheet tracking all the things I did in terms of cash flow.

Since I was in the US at that time for some months, tools like Quicken really helped in this. Later my excel took over as we then did not have any such tools or apps. But soon enough and due to my regular tracking, I had a good picture of what my needs were, my financial goals and where my investments were.

I added some equities and mutual funds to my portfolio after the initial years. This helped increase the pace as is the case with equity. When direct mutual funds were launched a few years ago, I promptly switched my holdings from regular to direct plans which further accelerated the journey.

Dev – I am sure the idea of FI didn’t come on day 1. But what made you think about FI in the first place?

Ram – The idea of FI was in the back of my mind – not as an end in itself, but as a means to do things without fear. Without fear of family needs not being met, or fear of failing if I started a business.

There is this romantic notion of retiring by 40 (Early Retirement) that I used to read and hear about. But it was not a goal for me – or so I thought.

But in my mid-thirties, as compounding started to help my investments, I started to wonder if it was possible.

Dev – And how did you plan for it? Give details and how long did it take to achieve it after you had decided to aim for it?

Ram – I guess I was enjoying the journey of saving and investing, without necessarily charting out the destination. I already had major goals listed in my excel sheet and I could see that I was being able to meet them.

As I realised that I was getting there, my first reaction was “Am I really there?”

And then… “Did I err in my math”?

So I would ask some of my good friends and senior colleagues on what they thought Financial Independence meant and what kind of numbers they would be comfortable with.

It seemed strange to me that I was kind of there and some of them were not.

Then I had this question: What is stopping me from doing what I really wanted to do?

This process took about 12 months as I was nearing 40. I then used the biological clock as a trigger to finally quit my corporate career. It was a tough decision as I was doing quite well and giving up a very lucrative salary.

But the call I had to take was: Am I working in a job only for the money?

• If yes then I am not being true to my values and aspirations I had.
• If NO, then what the Hell… 🙂 Go for it!

So this is like the coin toss made by Amitabh Bachchan in the movie Sholay. Any ways, FI-RE was the way forward for me. 🙂

Dev – There are easy thumb rules for people looking for FI. Like 25x or 30x of annual expenses. Did you incorporate some in your planning?

Ram – I read voraciously about everything available on the internet on this topic. A basic search threw up sites like MMM (Mr. Money Mustache) and ERE (Early Retirement Extreme) which helped me clearly see that there are practical tools out there.

It was very reassuring since the FI movement in India was and is still nascent.

The rule of 25x appealed to me a lot. Adding some conservative buffer to it by jacking it up to 30x makes one feel safer.

The other important aspect is planning for the non-retirement goals.

The main one is children’s education. There are some parents who wish to ‘go for the best’ – say an Ivy League education for the child and spend a lot. If $50-60k p.a is required then we are talking about half a million dollars for two children, which can make attaining FI tougher for many people.

This is a tricky topic but I wish to be open-minded about this.

If the child is really deserving and needs some help (financially) to get into a particular school then fine. But one doesn’t know as the child is still very young. If the child is deserving anyways, he or she could get a scholarship; education loans are also available easily. It puts the onus on the child to ‘fight’ for what he or she wants, and repay any student loan if required. If the child is not so deserving, then why give the child a sense of entitlement, early on?

The point here is to be realistic about the amount required for the education and understand how it relates to your FI calculations. And not to stress over it.

Put a definite number and if you fall short then other options are anyway there.

Dev – In our conversations, you mentioned how frugal living helped you achieve your goal. Talk us through that.

Ram – We know how much we spend as a family and are comfortable in that. This includes occasional eating out, and annual vacations – we usually spend a week or two in the High Himalayas.

There are so many ways to enjoy life without having to indulge in excessive spending.

I often prefer to bike to work (one of the benefits of doing a startup is you get to decide where you work). The commute is something that costs a lot – not just in terms of fuel, car expenses, but also in the time it takes and the toll it takes on health.

Dev – I am sure your spouse had a major role to play in your journey. How did she support you in your journey?

Ram – Fortunately my wife and I share similar views on how to spend and how to make the most of whatever we spend.

She is a good critic… so my half-brained ideas shape up well. 🙂

Once an idea takes shape she is there to help in the follow through.

Dev – Before achieving the target corpus, I am sure you used to track various things. What were they and how did you track them?

Ram – Tracking expenses was a must to know that we were on the right path. Without knowing the asking run rate, how can you win a cricket match while chasing? Isn’t it?

Tracking the portfolio and how it is growing, the asset allocation mix is also critical. I track it usually once a month and try not to look at it each day.

Then I tracked readiness for the essential financial goals of life like children’s education and marriage. And the retirement corpus using a thumb rule like 30x.

Dev – What about other financial goals? I know people who in a hurry to reach FI, end up putting less money for other goals. And that doesn’t work well. How did you balance that?

Ram – For me knowing that the other goals are well taken care of was a must. Without that, I would not have the peace of mind to start my next big project.

So I picked only a few goals other than retirement plan – children’s education and my startup’s 2-3 years capital and focused on them. And added a 20% buffer for that extra peace of mind.

The fact is that retiring at 40 doesn’t mean idling away the next 20 years. While the startup will guzzle capital initially, it has to start making revenues after some time. While making a lot of money is not the focus (why would I quit a ‘big’ job then), there will be additional income coming in as you deliver value to your customers. So that adds (or will add) to the ‘buffer’.

More than the numbers this is a journey of knowing oneself, being very comfortable in one’s skin and not being swayed by ‘comparisons with the Joneses’. It requires a certain degree of Stoicism of which I am a big fan. A certain poise, very similar to a comfortable and steady Yoga asana!

Dev – Share your emotions of the big day – when you finally decided to call it a day.

Ram – It was a steady journey that eventually culminated in the decision.

I cannot recall the exact day. Incidentally, I was going through a phase of life when I was meditating very regularly up to 1 hour daily for almost 3 months. Then the decision happened sometime in that quarter.

But of course, when I put in my resignation after working in corporate jobs for 18 years, it was a moment of trepidation. I knew that it was a new phase of life, no going back. So I was sandwiched between ‘mustering the guts to quit’ and the excitement of embarking on something new.

There was a lot of fear and in hindsight, I now realise that I was able to overcome the fear of fear itself. Most of the anxiety comes from fearing something ‘fearful’ that never materialises.

Dev – I am sure it was not just hunky-dory all the way. What were the challenges you faced in this journey?

Ram – With the 20-20 hindsight wisdom that I now have, I can say that I could have done this earlier. Maybe 5 years if not earlier. If I had drawn a clear path and stuck to it by investing in equities in my 20s the goal of financial independence would have been reached much faster.

In fact, I now have built a small heuristic that if one saves 50% of the salary and assumes that the investment grows at 10% and salary also increases by 10%, then one can ‘break free’ in just 7 years!

Tweak the returns up, and it could be faster. Add some buffer (after all one gets married and has kids in this phase!) if you wish, and the timeframe should not exceed 10 years.

Dev – Achieving FI at a young age is fine. But it’s equally important to have a plan for after-FI-life. How do you manage your money and time now?

Ram – I am 3 times busier now with the startup and enjoying doing everything hands-on from business strategy, marketing, and product management to coding, setting up the servers etc. Bumming around is the last thing on my mind 🙂

This particular phase is not the time for me to sit back and travel the world, though I can afford to do it. Once the startup settles into a rhythm, then maybe I can balance things better.

Yes, the children are growing up and I make sure that I spend adequate time with them. I remind myself that this time won’t come back, and time is much more valuable than money.

Having been CIO at large organisations before, I also get calls from industry folks for advice on their business-technology plans. I have no plans as of now, to do a full-time IT Strategy Advisory but I do get many such opportunities.

Though I have declared FIRE, I have not yet found the time to delve deeper into my longer-term aspirations: Yoga, Spirituality and Vipassana – given the projects I have started. And there will be a definite time for that in future.

I also have a sky-high reading list and hope to catch up on that someday.

Just these things can keep one fully occupied 24×7. Basically, I have better things to do that are keeping me really busy. Things more important than ‘making more money

The point is that if one has a few passions, then after-FI life is one of great opportunity and immense fulfilment. That would be real life – not just hanging on to an identity derived from one’s profession or job or upbringing.

Dev – What do you think holds people back from achieving financial freedom?

Ram – Several things – many think it is not possible and don’t make any attempt. Many are stuck in the rut and cannot imagine a life beyond their standard job.

Some are scared of what it means, and what will they do after FI. They cannot imagine the immense possibilities.

Many live their entire life running towards more and more possessions, stuck in debt servicing the loans taken to buy them. And doing all this doesn’t make them happier either because they are always chasing the next thing. No redemption for such folks who live on this hedonic treadmill.

Some may have an interest but may not have the discipline to invest diligently and smartly. Some are stuck in high-cost investment instruments or altogether wrong investment products like ULIPs, traditional insurance policies, etc. All these mistakes add up and delay Financial Independence almost up to the age of their retirement!

So to pull it off it requires a lot of things: confidence in oneself, conviction to not do what the herd does, being stoic enough to live well within your means, ability to manage your money & enjoy the number journey, and finally the badassity (as MMM says) to see it through.

Dev – People feel saving a lot (which is necessary for FI) means sacrificing today for an unknown tomorrow. What do you have to say about that?

Ram – I disagree that saving today means denying your tomorrow.

Life is too vast to define in narrow terms of currency.

There are enough studies to show that happiness and money are not correlated. Beyond a basic minimum number, money has limited ‘marginal utility’. Bill Gates himself despite his billions said:

“Once you get beyond a million dollars, it’s still the same hamburger”.

You can spend smart and still enjoy yourself today.

• How about having friends and family at home over a nice dinner, instead of a dinner at a high-end restaurant? The money saved will be in thousands of rupees and the fun will be 10x.
• How about going for a hike near your city outskirts vs visiting a shopping mall? Money saved will (again) be in thousands and health gained and a lot of family time.
• How about using a bicycle to commute instead of splurging on an SUV?

I can give hundred such examples.

More than money, these are lifestyle choices and if chosen well they give you much better health and happiness. Besides being far more planet-friendly. FI actually becomes a nice byproduct.

Much of modern life (post Agricultural Revolution) is sheer nonsense and after Industrial Age, we have managed to both wreck ourselves and this one Earth that we have.

Equipped with these choices, you enjoy the journey and before you realize it, you would reach the FI destination. The beauty is that life is great even after FI.

Dev – Any influencers whom you tracked during your journey to FI and that helped you stay motivated?

Ram – None in particular, as I was enjoying my journey.

Yes, had I discovered some of the online resources 10 years before or even earlier, my ‘destination’ would’ve been reached 5-8 years earlier.

Dev – What’s your advice to the people who seek financial freedom and early retirement?

Ram – Firstly one should design a great life around things they are passionate about. These will give you great pleasure in your journey, and could also become post FI business ideas. Examples could be farming, blogging, crafts, music, building a business etc.

This is important to envision a life beyond a 9-to-5 job or the next company switch.

Secondly, one should track one’s spend carefully and target a realistic savings rate – for some, it could be 50% and for someone else 20%. If one likes to spend on certain things in life and enjoys it, then include it in your spending – don’t deny yourself. But please be realistic.

Third, one should invest in a simple portfolio with an asset allocation that meets their risk profile. The portfolio should meet their own financial goals and be primarily invested in instruments like PPF, SSY and good Mutual Funds.

In a nutshell, keep things simple, design a great life, grasp the simple match of FIRE (required savings rate and portfolio returns) and before long you will reach your destination!

Dev – That’s all from my side. Thanks a lot for answering my questions. It was wonderful to have you share your insights.

Ram – Thanks Dev!