My experiments with MINIMALISM

I had first heard about “minimalism” from Karan about 10 years back. I kind of got a flavor of it when he used to save money by avoiding contributing when amongst us (boys’ get-togethers) and then spend the same money on the girls he so fondly (and hopelessly) chased !!! I was going through a completely different phase of my life then and so totally forgot about it after that.

Been brought up in a typical middle-class Indian family, all I knew about personal finances was that we never had enough money and that I shouldn’t be taking any independent financial decisions – I should always cross-check and seek permission from my folks. It actually was a good way to ensure I did not land up in trouble or get duped. So I was happily living with it.

All that changed about 5 years back when I found myself under a debt of close to
Rs. 50,00,000/- (Rs. 50 lacs.) and the owner of a pretty spacious 2-BHK apartment. I literally found myself under the debt because, as mentioned above, this decision was taken for me – one which I also agreed to – largely !!

When the first EMI was deducted, I started to get my head around all the loan-interest-principal-repayment-tenure sort of terminologies. This was for the first time ever in my life that I found myself under debt. I didn’t quite remember even borrowing a few 100 rupees from friends from the time I started earning. I had heard the earlier generation (my father, uncles etc.) describing  the experience of being under the burden of a loan and how they had wished to get up one fine morning and find all their loans paid-off miraculously !! I could now very well understand what they meant !!

Thanks to a few past and present friends-cum-colleagues, I was introduced to the amazing benefits of early repayment of the loans. I got a glimpse of the amazing things MS-EXCEL lets you do, when a pre-written macro showed approximately how much money I could save by doing early repayments on my home-loan. For starters, (just like I was at that point of  time) early repayments are payments that you make to your loan, in addition to the regular EMIs. You are basically repaying an extra part of the principal so that the same amount is removed from the interest calculation.

The following calculations will demonstrate the power of early repayments:

** All figures in Indian Rupees:

My Principal Amount         =   44,00,000/-
Monthly EMI                        =   40,000/-
Tenure of the Loan             =   30 yrs.
Count of EMIs to be paid   =   12*30 = 360

Total amount I would
repay through the EMIs    =   40,000 * 360 = 1,44,00,000/-

Which meant I would end up paying a whopping Rs, 1,00,00,000 more on the principal amount of Rs. 44,00,000. In addition, I would be tied down for the next 30 long years.

In a friendly discussion at home, my folks admitted that this was precisely their plan –
to tie me down for a good no. of years so that I don’t end up taking any “socially unacceptable” decisions about my career !!!

It was precisely this moment that lightning struck !!! I decided it was about time to take things (my finances) in my own hands !!! I had some savings with me so I made use of that MS-EXCEL macro to see what difference the part repayments made !! I must say I was simply astonished to say the least.

** All figures in Indian Rupees:

Part or Early Payment within
the first year of tenure   =   4,00,000/-

Total interest saved        =  40,00,000/-

Reduction in tenure of the loan =  approx. 9 years or 100 months

So by paying just 10% of the amount upfront, I was saving a massive 90% amount in EMIs. I shared this statistic with my folks (who knew these bits already).  They voluntarily offered to lend the same amount of money which I could put into this early repayment.

The math changed once again, and this time it was even more pleasing for the eyes. I must admit, never before have numbers made me feel so good !!

** All figures in Indian Rupees:

Part or Early Payment within
the first year of tenure              =  8,00,000/-

Total interest saved                    =  approx. 58,00,000/-

Reduction in tenure of the load  =  approx. 14 years. Or 170 months

These numbers were simply too massive to ignore and hence I instantly made these payments to the bank (much to their dismay). The revised figures in the loan account was such a pleasant sight !!

But when I looked into my salary account, I realized the other side of these early
repayments – no liquidity!! With no other alternate source of income and having made a promise to myself that I won’t take any further financial help from my folks, the only option left with me was to SAVE from my salary.

And that’s when I was reminded of MINIMALISM !!!

If I were to make a list of “life-changing decisions and moments”, this would surely be amongst the top few !!!

So what did minimalism mean to me ??!!
In very simple terms it meant that going forward, I would weigh all my major or extra expenses against the part repayments I could make with the same amount and go ahead if and only if the benefits of those extra expenses out-weighed the benefits of the repayments.

When I started doing this calculation against almost all of my financial habits, I realized that they were actually pretty good – all credit to the kind of upbringing and strict supervision I was put under by my folks. I may not have been very aggressive in investing and making my money grow but I, at least, was NOT reckless with my spendings !!

So here’s how I was able to further streamline my expenses and practice minimalism.

1. This is my first and only bike that I have been riding since December 2006 – which makes her 13 years old to the date. A lot of new, advanced and gorgeous looking bikes are now present in the market. With the amount of money I end up saving from my salary post EMI, I can easily buy a new bike of my choice, in cash !!
   But with the minimalist approach, I have been able to put “a few more bikes” as repayment to my loan.

   This has also made me realize that, in fact, this bike doesn’t need a replacement at all; at least for another couple of years – after which she won’t be allowed on the roads – legally!! I have also learnt a lot more about the engineering of this bike every time a part gets worn out. Not to forget, the respect I get from the mechanics for keeping her up and running even after 13 years and 1 lac plus kms. is unparalleled !!

   

   Of course I do get looked down upon by the fairer sex for riding an old bike but hey, you know what, even that saves me a lot of money – if you know what I mean !!

2. We have owned this car for close to 9 years now. But with these looks and just under 60k kms. on the odometer, she definitely has a few more years in her. That frees up another couple of lac rupees that I can put into the repayment and that also means another few lacs earned (in the interest saved).
3. That’s how my bedroom looks like. For someone who is obsessed with open, clutter-free spaces, I cannot imagine adding even one more thing to this set up.

   Not having a huge king / queen size bed means I can move that mattress all over the room depending on the seasons. This also means no air-conditioner – another 50,000 rupees (at least) available for the repayment. A quick google search highlights the side effects of being in air-conditioned environments all the time. And not to forget the harmful effects of the CFCs released from the ACs !!

4. In trying to get to the root of the massive digestion problems I have been having for all these years, I have learnt that the only good, safe and healthy food I can have is the one that’s made at home. I realized that more than 90% of the stuff that I have been eating outside had zero nutritional value and in fact it did more harm to my body. As a result of some very important changes to my diet, for the first time in many years, my BMI index is in the ideal range. Its extremely heartening when friends point out that I now cover more ground on the football field. The best reaction was that of my family doctor, who was completely foxed by the ideal blood pressure readings. I am the reason there’s coconut water amidst the breezers and old monks and black dogs and glenfiddich’s at the get-togethers !! Guess what, its the cheapest of all of them and by the fag end of the party, I am the only one in senses ” thoroughly enjoying and capturing the antics” !!!

As I write this blog, I have been able to repay more than 50% of my home loan in just about 5 years. I am aiming to repay the remaining by early 2021, at the very latest.
If I am able to achieve that target, going back to the first table above, I would have saved 23 years or 276 months of EMI. In terms of the amount, it would approximately be equal to Rs. 1,10,40,000 !!!

But more than the money saved (which actually is a huge, huge amount), it’s the life lesson on minimalism that has been my biggest learning !! The massive confidence it has given me to be myself and do what I know is right is way more than the monetary value of these savings !!

And by the way, my previous blogs should tell you that I have not missed out or compromised one bit on my passion for travel. If anything, I have been able to do more of it. A few more are already lined-up !!

Just like I was inspired and have benefited from a fellow minimalist, I hope I am able to pass on the baton to at least a few new……. minimalists !!!