Fixing goals and time frames

Fixing goals and time frames

Name: Alhad Oak

Age: 35 years

Profession: Advocate

Spouse: Kalyani

Kids: Gayatri, 6 years

City: Mumbai

Planner: Sumeet Vaid, Ffreedom Financial Planners

Just a year into the plan and already Oak can feel the difference it has made to his financial life. And the best part is his wife is a part of it.

During the initial sessions, the planner sat with the couple and took note of their dreams and aspirations, their current financial health, spending patterns, incomes and choice of investments. “The planner insisted that both my wife and I be present during these sessions. So, in a way, her involvement has also increased and this was the first time both of us sat down together and actually put our goals on paper with timelines. Earlier, I had never really endeavoured to do this," he says.

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Business expansion: Oak runs his own law firm. He was hoping to expand his business in a few years. The couple along with the planner fixed a year to achieve this goal. “But I embarked on the expansion plan early," he says. “There was some unused space in my office which I had left unfurnished. As the first step to the expansion, I started furnishing this area." Oak achieved his first goal a few months earlier than he had thought.

Home and second car: “Earlier, I only knew that I wanted to buy a home and have a second car for my wife, but a year ago, I didn’t know when I would finally buy these," he says. Now Oak knows he would have these by 2013 as he is saving and investing with the targets in mind.

Daughter’s education: Oak has a six-year-old daughter. “I have started saving systematically for her class X and class XII tuition fees, her graduation which will be expensive if she goes for a medical, engineering or any other professional degree and also postgraduation," says he.

Since this is a long-term goal, the money stashed away for this purpose is invested in equity instruments. “I know for a fact that I will have the money when I need it and that her education will be taken care of without much ado," says Oak.

Early retirement: That dream is not uncommon in today’s demanding lifestyle and Oak is no exception.

However, he doesn’t want to stop work altogether. On retirement, he wishes to set up a good library, something that he sorely missed during his student days. “When I was a student, I studied in a 24x7 library, but it wasn’t great. So I want to start my own library which will offer good services and resources to students, especially those who are doing professional courses because the books and resources for these are expensive," he says.

This means that apart from a corpus for his daily needs, he would also need to put some money aside to invest in the library for infrastructure and resources. This has also been incorporated in the financial plan.

Problems and solutions

Equities: As mentioned earlier, the biggest problem in Oak’s portfolio was that his investments were not oriented towards returns and he was mostly invested in debt instruments. Although he always planned to invest in equities, it never materialized, since he kept trying to time the market. “But when the markets went up, I didn’t want to invest because I wanted to buy stocks when they were cheaper and when the markets fell I lost my confidence and didn’t want to invest in the markets at all," he says.

The planner introduced equity to his portfolio through mutual funds, thereby increasing his returns substantially.

Insurance: Oak relied on the advice of friends and relatives when buying insurance. “I used to assume that they would always give me the best advice since they had my best interest in mind," he says. He never realized that probably they themselves didn’t have the knowledge to guide him properly. Between his wife and him they had at least seven policies, but none of them provided adequate cover. Moreover, they had only life insurance policies.

Besides increasing their life cover, the planner introduced home and health insurance policies in their portfolio.

Segregation of personal and business finances: Earlier, there was no distinction between business and personal expenses. “I did both transactions from the same bank account. Now I have separated the two and treat them as separate entities and strictly maintain the two bank accounts," he says.