BackBetter late than never: it’s always the right time to start a plan
Better late than never: it’s always the right time to start a plan
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When Mukul Kulkarni realized he needed a plan, he was already in his late 40s, but the fact didn’t deter him. He knew he was late entrant, but also believed that it’s better late than never. Says he: “See if you want to enjoy the fruits of a tree you should have planted it long ago, but if you haven’t then, now is the best time. Don’t procrastinate and waste time or else the error will turn into a blunder."
An architect, who has not only built his own house, but also helped many others design their houses, never had a cash flow problem in terms of expenses or savings. But as he advanced in age, he increased his insurance and with it went up the premiums. That bothered him somewhere. “The agent would take away obscene sums as premiums. I didn’t see the benefits coming back in the proportion I was paying for it. Some where at the back of my mind I also knew that I was losing time," says Kulkarni, explaining what led him to the plan finally.
A chat about these anxieties with a few friends and a certified planner was on his way to meet Kulkarni. “I know a lot of people who feel that since they earn the money, they are the best judges of how to manage it, but that’s not true. We can’t be better than a qualified professional," he says.
A professional check found many problems in his portfolio but along came the much-needed solutions, too.
Problems
Interest and credit: Kulkarni never realized how much he was paying in interest on his credit cards. “The minimum dues on a credit card is a very small amount. So it’s quite tempting to just pay that bit. And we fell for the temptation despite being in a comfortable financial position."
It was only when the planner showed him how his dues would mount in due course that he realized his folly. “Now, I use credit cards only for online bookings," he says.
Lack of experience: When Kulkarni first started earning, he had no idea how to go about managing money. “I opted for the avenues I had seen my father use without trying to understand what they were meant for," he adds. So, he had bank fixed deposits (FDs) and insurance policies that were not really tailored to his needs.
Tax savers: He dabbled in a manufacturing business for a while and directed his investments to save taxes on the advice of a chartered accountant. This didn’t generate good returns. Now he has realized that investing to save taxes doesn’t really work for his portfolio.
Solutions
Getting rid of FDs: His planner, Ranjit Dani, brought about changes in his portfolio according to his needs and risk appetite. He suggested Kulkarni to withdraw the bank FDs. “FDs don’t earn a very high interest so they were neither inflation-proof nor were they tax savers," says Kulkarni.
Insurance: He substituted his money-back and endowment insurance policies with term plans. Now, he is saving nearly 50% of the money he spent on premiums, but is covered for a higher amount.
Equity investment: “I had burned my fingers when the markets crashed in the late ’80s and ever since never invested in the markets. But Dani got me to invest in the markets both directly and through mutual funds," he says. Even during last year’s recession, Kulkarni didn’t withdraw from the markets. “Had I been on my own I would have panicked and withdrawn the money."
Spending habits: From saving what remained after spending, Kulkarni has switched to spending what remains after saving. “Earlier expenses were not really segregated; now our priorities have changed," he says.
Goals in place: Although he knew that he would need money for his children’s education and marriage, and retirement, planning put everything in perspective. “I am now aware of exactly how much money I need, when and why. And I also know where it will come from," he says.
Everything seems to be in order for Kulkarni now—from his paperwork to his family’s involvement in money matters.
harshada.k@livemint.com
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