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Akshay Mendole was not looking for a financial adviser. In fact, it was his sister who asked him to go and meet a person whom she wanted to be her financial consultant. Mendole, who was an ad hoc investor himself at that point, was so impressed by the concepts that the adviser explained that he decided to get his own financial plan made too. That is how Mendole met Swapnil Kendhe, who is based in Nagpur and has been Mendole’s financial adviser for about 6 months. 

One of the first mistakes that Mendole realised he was making was that he had been investing based on returns, instead of goals. “If I saw a product that was giving good returns, I wanted to invest all my money in it. That attitude of mine has changed," said Mendole. 

But when he had to change his focus from returns to goals, he was at a loss—Mendole had never thought of financial targets. To give Mendole an idea, Kendhe told him his own goals. “This helped. I came to know that I will have to think of retirement as well," he said.  

Lessons to learn

Having a financial plan was an eye opener for Mendole in many ways. In the initial conversations, even before investments were decided, what first emerged from an “exhaustive and elaborate" data gathering exercise was a reality check. “There was a big difference between what I thought I was spending and what I was actually spending," said Mendole. He realised that having an idea of where one spends or invests is usually very different from actually knowing those numbers.

The next step was to choose suitable investment options, but before that previous investments had to be factored in. The Pune-based software engineer was burdened with fixed deposits, recurring deposits and a flimsy insurance plan, all of which were not conducive to his financial goals.

“I used to think that I have 30 years to retirement, which is a long time. But when I saw the corpus I would need and how much I would need to invest now for it, I learnt how inflation works."

Keeping the large amount that he will require eventually and the time period in mind, Mendole has started investing through systematic investment plans (SIPs) in equity mutual funds. 

Another correction he made was increasing his life insurance cover. Mendole had a traditional insurance plan, which he had bought from a relative. The cover was inadequate. He now has a term plan of a larger sum assured, though he has not discontinued the earlier policy yet. “But I will discontinue it soon," he said. 

The next corrective action was building a corpus to buy a house. Mendole is keen to buy a house in Bengaluru within 3 years, to live in. Earlier, he was doing two things to build a corpus to use later as downpayment. One, putting money in fixed deposits, and two, thinking of making as big a down payment as possible so that the home loan is smaller. Both these approaches changed. Money was moved from fixed deposits to debt funds. “Not equity funds because my goal is quite near," said Mendole. He also learnt that taking a home loan has its advantages—that he can invest his money more gainfully elsewhere, and that tax benefits apply to interest paid on home loans. “If I don’t take a home loan, I will be asset rich and cash poor." 

Apart from course correction, the financial planner also helped Mendole plug a few holes. Mendole has put aside some money to be used for his parents’ medical needs as and when required, and has also created an emergency corpus for himself.  

Strong foundation

Mendole is young and has been working for only about four years. As he moves ahead in his life and career, the scenarios will change. But he is confident that he will be ready for them. “I feel confident. I feel financially protected. If something is needed, I know I will have the money for it," said Mendole.

As his goal of buying a house is only 3 years away, and he has been saving for this for a few years, Mendole’s asset allocation has a significant debt portion as of now. Once he buys the house, he plans to increase the equity portion.

Mendole said that he had been investing blindly before he got in touch with a financial planner. In contrast, within just 6 months, he has a much clearer vision of how his money should function.

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