When Inderdeep Kaur and Ishkaran Singh moved to Bengaluru from Pune in January 2016, they were in a dilemma—to buy a house in the new city, or rent. Different people told them different things; some said buy, some said why bother. All the answers were based on personal experiences or perceptions and not data. The couple was not convinced, and decided to approach a financial planner whom one of their friends was consulting.
When they went to Piyush Khatri, founder, Sahastha Financial Consultants, with the question of whether to buy or rent, instead of giving an answer he asked them what their goals were. This question led to many more, and Inderdeep and Ishkaran found more answers than the one they were looking for.
“He said our answers to questions like how much health insurance we had, when do we want to retire, how much we want to save for our daughter’s education...would decide whether we should buy a house or not," said Ishkaran, who is a software professional.
They realised they had not thought about things. “We had been very shortsighted and had thought of only retirement and daughter’s education. There are a lot of things to be done before we can achieve these goals," said Ishkaran.
The couple felt their main goals were their four-year-old daughter Sehej’s education, their healthcare needs, lifestyle expenses such as vacations and car, and retirement planning. Once these were determined, timelines set and amounts assigned, the conclusion was that they did not need to buy a house in Bengaluru (the couple already owns a house in Pune for which the loan has been paid off).
“This freed us from having to save or invest towards a down payment. Plus, having a house could have restricted our career choices—we thought what if we have to move to another part of Bengaluru," said Ishkaran.
The numbers helped them understand the facts, said Inderdeep, a data scientist. “Even if we decide to buy a house at some time, this will help us understand what our capacity is, what time would be right, how much loan to take," she said.
Their insurance too was enhanced. They had a health cover earlier but discontinued it because they thought having corporate covers was sufficient. “But Piyush explained that many things are not covered by these policies," said Ishkaran. The couple now has a family floater policy. They also have separate term plans, and personal accident covers. They will buy a critical illness cover soon.
Their investments, too, went through a complete overhaul. “We were investing in mutual funds but in an ad hoc manner, and in very small amounts because we neither had confidence in our choice of products nor the knowledge," said Inderdeep. Earlier, between them, they had 12-14 SIPs. This was streamlined to about seven, and the “amount invested in them has increased", said Ishkaran. “We had no data and what we read was vague. So, the fear of risk meant we put only a little amount," he added.
The investments are now not only aligned to specific goals but also their risk appetite. “We diversified our portfolio instead of parking money in fixed deposits," said Ishkaran. Their portfolio is now diversified.
They had also not anticipated the amount they would need for goals such as education and retirement. “Piyush adjusted the cost with inflation; we hadn’t thought of that. The final cost came as a shock," said Inderdeep.
What started with a decision to buy or rent led to a whole lot more. “Till we didn’t do this, we didn’t realise what we were missing," said Inderdeep. So not only do they know that buying a house would not serve much purpose, thanks to a financial plan, the couple is more confident about all aspects of their finances.