Your Money in 2019: Financial planning for a new beginning

Mint spoke to a few people making new beginnings in their lives this new year—from landing their first job, to having a baby to getting married to stepping into retirement—to find out how they are balancing out the joys and challenges and how financially prepared are they to make the transition.

Taking baby steps towards a new financial life and learning to save for three

Nupur Parik, 29, and Lakshya Pandey, 27, are the picture of millennial perfection. They travel the world and sample exotic cuisines together and plan well ahead for it. The new parents—they had a baby boy, Arjun, on 20 December—started saving up for the bundle of joy and associated expenses much before he was born.

Parik, a dentist by profession, describes herself as a person of minimal needs, so saving came naturally to her. She started saving for the family soon after they got married in 2014 after dating for about two years or so.

Despite that, like many millennials, Parik and Pandey, who is a restaurateur and businessman, agree that their major spends were on travel and food. But that has changed now. “As new parents, their expenditure pattern is up for change. Usually it becomes more child-centric,” said Shilpi Johri, a certified financial planner.

For all her planning, Parik hadn’t anticipated one big surprise. The week she quit her job and decided to start her own clinic, she found out she was pregnant. “I realised that starting a new clinic then would be like having two babies to take care of. So I decided to take a break and stay with the child for the first six months or a year,” she said.

For the couple, Parik taking a break from work meant going from double to single income for a while. Now that they have had the baby, their expenses have already started growing. The hospital stay itself was very expensive, and vaccinations and doctor visits for both mom and baby add up to a hefty sum. Parik is no stranger to these costs since she has worked in the medical sector. “Medical expenses aside, just raising a baby can be a huge expense; we need everything from new clothes and toys to mattresses and diapers,” said Parik.

Fortunately for the couple, they have a lot of parental support. They live in a joint family, and Parik considers herself lucky because both her in-laws and her parents, who live in the same city, have made themselves available to help with caring for their grandchild. She also has a nanny to help.

Once the baby is a little older, Parik plans to start working part time at a hospital. Setting up her clinic will take time and energy that the new mom can’t spare as of now. It will also require funds. She has some savings put aside for setting up the clinic and Pandey will pitch in to finance the rest. “It’s a separate piggy bank. I have the two things compartmentalised as much as I can,” said Parik.

“Since one of them has decided to take a career break, the income will also change. The new parents should be ready with an emergency corpus. They should also evaluate and buy both health and life insurance,” said Johri.

Parik herself is not particularly savvy about investing, so she relies on her father to invest on her behalf. Part of her corpus is invested in mutual funds for long-term goals. They have saved up especially for the baby. Their main priority is to save for the child’s education.

Since they share a home with Pandey’s family, the couple doesn’t have any immediate plans to buy a home, which means there is one less goal for them to save for as of now. With a plan in place, Parik and Pandey are ready to take on all the challenges that come with becoming parents. Nilanjana Chakraborty

*****

Adopting right money habits from the start

Currently a final year engineering student in Bengaluru, Sumukha Chetan Prasad is all set to enter the workforce in January 2019. Though bagging a job in a leading IT company has him overwhelmed, this isn’t where he wants to finish. He wants to make sure he does well at this job so he can save enough for what he wants to achieve: a successful acting career. “I plan on working in this company a couple of years, till I have enough to put myself out there as an actor confidently,” said Prasad.

Prasad does realise the need to have a strong financial plan if he has to work towards turning his dreams into reality. “The main reason I’m working is to save up to fund my acting career. So most of my salary will go into that,” said Prasad. He has already outlined a rough plan that would help him manage his finances. “After paying off the monthly bills, whatever part of my salary remains, I will save 60% of it. Of which I will invest 20% and the rest will be spent on lifestyle expenses,” he added.

“The first thing one should do is budget. Prepare, track it, and stick to it. But because you need hacks to ensure you stick to your decisions, I recommend you save first. This can be done by moving money (which you know you can save) to another bank account to which you don’t have online access,” said Shweta Jain, certified financial planner, CEO and founder, Investography. “Or even better, start an SIP in a liquid mutual fund.”

Jain said 50% of one’s salary should go towards needs and utility bills. “I recommend 30% towards savings and 20% could go towards wants. Setting the right habits at this stage is crucial,” she said.

When it’s about learning money management, the first person Prasad looks up to is his father. “Of all the people I know, my father is the one who handles money very carefully,” said Prasad, who has two takeaways from how his parents deal with money. First, people earn money so they can spend it but it’s up to them to spend it all and repent later for not saving or spend it slowly and enjoy over a longer period of time. Second, it’s important to draw a distinction between needs and wants as it helps prioritise decisions.

Ten years from now, Prasad hopes to be financially independent. “I would like to be in a position where I can plan my future instead of dealing with the present in terms of my finances,” he said. While more and more people are meeting financial planners to get their money life on track, Prasad believes the best financial advisor is one’s spouse. This he learnt from his parents.

While this may work in a few cases, for others it may not always hold true. If you’re confused about how to get your financial life back on track and have nobody you can rely on or take quality guidance from, consulting a financial advisor or planner is your best option. Disha Sanghvi

*****

Thinking like a team to get money matters on track and buying a dream house in London

They say life changes after marriage and for Vijay Sundar Prashanth, 32, a professional tennis player based in Chennai, this includes relocating to London to be with his wife Sonam Nair, 30. Sonam, who used to work in the food industry in London, has taken a mini sabbatical from work to settle into her married life. The couple got married in November this year, and they plan to move to London in a few months.

“I wanted some time off after marriage as I want to spend more time with friends and family in India and travel with Vijay,” said Sonam. “I enjoy my work and I will start working again. Also being in a salaried job, we will have the satisfaction of having a steady flow of income. As for Vijay, he is not on a fixed salary so the income is based on his performance in international tennis tournaments,” she added.

Just a month into their marriage, the couple is still in honeymoon mode and a serious chat on money matters is not on the table yet, but they have some broad ideas. “We are yet to sit down and take stock of our financial goals. For now, we both agree on buying a house in London,” said Vijay. “My financial life has been very simple. From whatever I earn, I save some of it and keep the rest to travel, but now I have to start thinking about investing,” he added.

Sonam, though, has already started investing. “A part of my salary used to get invested automatically and some of my income gets parked in a special account meant for first-time home buyers to which the UK government also contributes,” said Sonam. “I am careful with my money but that doesn’t mean I stop myself from having a good time. Just that I would like to see a part of it getting saved every month,” she added.

The couple has other short-term goals like travelling and one of the first things they plan to do is to open a joint account. “We will park our savings and cash gifts from our wedding in this account. We can dip into this account for emergencies or for travel,” said Sonam.

Building an emergency corpus is smart, according to Suresh Sadagopan, founder, Ladder7 Financial Advisories. Money conversations for newly weds has to include insurance and managing cash flows, he added. “Whether your spouse is dependant or working, life insurance needs to be thought about. Because when both are working, the lifestyle is based on combined income. Insure not just life but health and assets as well,” said Sadagopan.

It’s also advisable to cultivate the habit of saving as a household. “Cash gifts at the wedding can be saved and invested as a start in a liquid fund or even fixed deposits if one is not financially savvy,” said Sadagopan. Expenses increase substantially as you work towards setting up your home, so having some liquidity helps; over time these investments can work as an emergency fund.

Sadagopan also advises laying ground rules. “One of the cardinal mistakes that couples make is they spend one spouse’s income and save the other’s. Ideally, both need to save and spend proportionate to their income so neither is vulnerable in an exigency,” he added.

Then there are hygiene factors. You should have your spouse as your nominee in your investments “because ideally the nominee and beneficiary should be the same,” added Sadagopan.

Marriage may bring a lot of changes but when it comes to your financial life, take a proactive approach so that money woes don’t come in the way. Deepti Bhaskaran

*****

Looking ahead to a new chapter in life and rejigging financial needs accordingly

There is a difference between love and holding on. We tend to entwine the two and that is what leads to unhappiness when people we love move away physically,” said Ritu Sundarani, a home-maker.

Experience has taught Murli Sundarani, a business leader at an American medical devices company, and Ritu the art of letting go with positivity. With their older daughter, Sneha, already married and the younger one, Samridhi, living abroad, first to study and then to work, the two of them have effectively been empty nesters for some time. It was in this period that they came up with interesting ways to become a greater part of each other’s lives. “We decided to participate in each other’s interests,” said Murli. They have both signed up for Vipasna Yoga (Murli’s choice), and ballroom dancing (Ritu’s interest). They try to do as many things as possible together over the weekend, even mundane household chores. This is the way they have realigned their lives to the new reality that it is just the two of them again.

The Sundaranis will become empty nesters in the true Indian sense when Samridhi, gets married in February 2019. “Our children’s marriage was one of our financial goals, along with their education. We have been able to meet them all comfortably with our investments,” said Murli.

In the early years, they invested primarily in bank and post office schemes. They began investing in equity mutual funds through SIPs on the advice of a financial planner, and as their income went up, kept increasing the SIP amount.

The Sundaranis like to strike a balance between spending and saving. Ritu, in fact, likes to help people in her orbit develop the saving habit and has been quite successful at it.

They are well set for their retirement, financially. The one regret that Murli has is being lulled into a sense of security by the corporate health cover he has had all his working life and not planning for health insurance in retirement. That is something he plans to take care of now when more savings will be freed up.

They are also planning on how they would like to spend the initial years of retirement which is a “sweet spot of good health, adequate time and money,” said Murli. Travelling is on their bucket list and they plan to do it differently: living in a different place for a good part of each year and immersing themselves in the culture and ethos of the place.

Dilshad Billimoria of Dilzer Consultants Pvt. Ltd advises empty nesters to use freed-up savings to close loans, if any, especially as they come closer to retirement. “Consolidating investments to a few well-managed products, re-looking at insurance needs and updating the provisions of the Will are all important steps to take,” said Billimoria. “Building a health corpus to supplement health insurance is important to take care of health issues not covered by insurance, and it can protect retirement income,” she added.

With their finances in place, a positive outlook to the future and lots of exciting plans, the Sundaranis are all set for this new phase in their lives. Sunita Abraham

*****

Planning a step-by-step transition into retirement can ease up sunset years

For Anupam Ashesh, 55, retirement is still a few years away, but he knows that once he crosses the threshold, he wouldn’t want the idea of making money to be his priority. Based in Mumbai and working with a large private sector financial services company, Ashesh has his own house in the city. However, he feels that post retirement he may not want to continue living in the city and perhaps have a quieter and cleaner life in Pune, where his wife’s family also resides. If indeed they do move there, one priority which will take shape closer to retirement is finding and buying a house in Pune. 

Ashesh feels that his asset allocation of roughly 50% debt and 50% equity is enough for both pre- and post-retirement. He hopes to fund his son’s education by the time he retires. “My son is still two years away from graduation and I would like him to be settled before I retire. My wife has another seven years to retirement. We have planned out our investments, expenses and post retirement requirements and hopefully will be okay by the time it happens,” said Ashesh. 

It helps to put some thought to what your expenses will look like in this new stage of life. For Ashesh, moving cities post retirement is certain. A goal like this requires some planning. 

“While I may retain the property I live in currently, there is another one which can be sold to generate some funds for the Pune house,” said Ashesh. 

His advisor, Khyati Mashru, founder and chief financial coach, Plantrich Consultancy LLP, said, “His investments from mutual funds and PF can also be directed towards the house property.” 

Along with the big expenses, daily spends, regular income and funds required for any post retirement ventures need to be catered to. “A combination of annuity, fixed income and systematic withdrawal from equity investments can work to create the required regular income. For non-negotiable expenses, one has to consider moving investments to safer fixed income options, whereas for things like travel, a combination of equity can work well,”  said Mashru.

Ashesh is fortunate to work in the financial services sector and has adequate exposure to the need for saving and investing in a gainful manner so that his transition to the new phase of retirement is well planned and smooth.

For many of us, retirement will not come with a defined pension like the previous generation was used to and it’s important to plan beforehand. 

Ashesh and his wife want to move into teaching roles once they hang up their boots from their regular jobs; it will keep them occupied and at the same time it will be a way to productively share their experiences with the newer generation. Lisa Pallavi Barbora