Learnt to save the money before spending it
Pooja and Shobhit Chaudhary realized that only a change in the way they spent would help them meet their life's goals
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Before he was introduced to the concept of financial planning, Shobhit Chaudhary believed in spending money and the saving part came much later. But a few meetings with Khyati Mashru, founder and chief financial coach, Plantrich Consultancy LLP, made him realise that all this time he had been following the opposite of what actually works—saving money before you spend. Shobhit, 37, who works in the information technology sector, lives with his parents, wife Pooja, and Disha, the couple's 8-year-old daughter. Up until about 4 years ago, his only investments consisted of two life insurance policies. Somewhere there was a nagging feeling that this is not sufficient for all his desired money goals.
Pooja and Shobhit met their financial adviser, which was a wise step to take, as they understood that both of them needed to be just as prepared to take on their household expenses and plan accordingly to meet their future financial goals. According to Mashru, “In our first interaction it came forth that they were not able to live as they would like to. In the second session we had, I spoke to them about how life may look at 50 years of age if they continued to spend the way they do. In designing their household budget, we went into minute details like how much got spent on groceries, on milk...."
The first step was to understand how much they could save, and then to allocate investments as per their goals. It started with a 3-month challenge to consciously work on their expenses.
Envelopes denoting different expenses were made to keep track of how much was being spent. This conscious tracking by Pooja meant that in the first month itself, they were able to control their expenses and save out of the envelopes they had made.
Mashru said, “The challenge was to try and save and as a reward buy a gram of gold at the end of the month with the saving." This appealed to them as gold is seen as a long-term investment and can be collected over years for practical purposes like weddings in the family. At the same time, it was an additional saving and an investment.
The couple has two main long-term goals—their daughter’s education and marriage, and their own retirement. But at the same time, he didn’t want to give up on near-term goals like travelling with his family. Thanks to diligent money management and a proper structure, the family has already been on their first international vacation.
In the process, the couple learnt two important lessons—bringing a proper structure to their finances, and being able to trust and follow the advice given by Mashru at each step.
Other than setting up monthly investments in mutual funds aimed towards long-term goals, Shobhit now has a term plan to secure his family's well-being. He said, “My father is now retired and I am the sole earning member in the family. This meant that I have to consider all aspects of my family’s future." Earlier he used to view a term plan in context of an investment and thus didn’t find it worthwhile. But now Shobhit understands that the term plan is a contingency provision, or a security blanket, for the family and returns are not the main consideration.
Simultaneously, they are finalizing a suitable health insurance plan for the family, which will be over and above what is provided by the company Shobhit works for.
One can almost hear the smile in his voice when he says that in addition to this structure, savings and the vacations, they have also accumulated enough to be able to make a down payment for a small apartment.
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