‘We can now spend whatever is left after investing as we wish’

Mumbai: Having a child can change a family's perception. The same happened with Ravi and Divya Jotwani when their daughter, Saarya, who is 7 months old now, was born.

Ravi had been investing on his own before this, but realised that they needed a better structure if they were to meet future needs like their daughter’s education. “When we had our child, I thought that finances have to be planned properly. At the specified time, I should have the money,” said Ravi, who is technical lead with an IT company in Pune.

Ravi and Divya wanted independent and unbiased advice. “But many advisers we found were associated with some company,” he said.

During the search, Ravi came upon a group of advisers on Facebook, of whom one was based in Pune—Chandan Singh Padiyar, Sebi-registered investment adviser, and founder, www.padiyars.com. “We shared our details with him and felt he would give us right advice,” said Ravi.

Getting on track

Among the couple’s main goals are investing for their daughter’s education and marriage. 

After going through the couple’s financial details, one of the first things they were advised to do was rationalise their earlier life insurance policies. Like many people in India, Ravi and Divya were also burdened by many traditional insurance policies that provided little by way of cover or returns. When their planner explained these concepts and numbers to them, they realised that they needed more cover. “I learnt that if two things are clubbed together, the benefit tends to be less,” said Ravi.

But simply abandoning a policy for which one has been paying premiums is not advisable either. “I was told (by the planner) that if the remaining duration of a policy is less, I should continue, but if the duration is more, then stop,” he said. Instead of the policies they had, Ravi and Divya were advised to get a suitably large term insurance cover. 

The next step in building a safety net for the family was putting in place an emergency corpus. For this, they are investing in liquid or arbitrage funds, instead of instruments like savings account or fixed deposits.  

In terms of investments, Ravi had been investing in equity mutual funds but through an online distributor, and almost totally in equity-oriented schemes. Unlike many investors, Ravi was very interested in the stock market and thus had a heavy equity tilt.

To diversify investments and reduce the overall risk, he was advised to invest in debt funds too. “Not everything should be in equity; some should be in debt too,” said Ravi, adding that he does not invest through the online distributor anymore. “I invest through direct plans now. In the long run, I will save more,” said Ravi.  

The couple also has a home loan of 20 years duration for a house that is self-occupied. They have paid equated monthly instalments (EMIs) for about seven years. As of now, they do not plan to pre-pay the loan, “but after some time when I have some surplus, I will (partially) pre-pay,” said Ravi.

Ravi’s mother had wanted to gift her granddaughter some money, which the couple wanted to keep safe. “Chandan said that since emotions are attached to this gift, a fixed deposit or a post office deposit could be used,” said Ravi.

Long-term effects

It’s only been about 5 months, but the Jotwanis are already feeling the effects of having a financial plan.

For instance, “we are spending only on essential things,” said Divya, adding that increased investments may have meant a few adjustments for the family in the way they spend, “but the investments are for our future and present”.

Earlier, they spent first, and saved later. “Now we consider what we have to invest and then we spend,” said Ravi.

While a lot more is going towards investments, the plus point is that whatever is left is for the couple to spend as they wish. “We can now plan our trips,” said Ravi. “Earlier, we weren’t sure of how much we will be able to save by the end of the year,” he added. Now that they know, they plan their holidays accordingly.