Photo: Hemant Mishra / Mint

Photo: Hemant Mishra / Mint

Unlearning childhood lessons: breaking away from a financially insecure past

Unlearning childhood lessons: breaking away from a financially insecure past

Three years into a well-paid job with nothing in the bank to show for it, Uday Bhaskar, now 32, knew something was going wrong somewhere. Though he part-funded his father’s housing loan then, he knew that was not a good enough excuse.

Around this time he met his friend Pramod, who showed him a way out. Says Bhaskar: “I had to scramble for money whenever I had to pay my insurance premium, while Pramod had a beautiful way to handle his payments. He used to invest in a monthly investment plan and at the end of the year use the accumulated amount to pay off his obligations. In fact, he managed to save a neat sum of pocket money, too."

Photo: Hemant Mishra / Mint

Inherited problems

For Bhaskar, money and its management had roots in a childhood with crossed signals and recurring financial crisis. Despite his engineer father working with good companies and a regular income stream that was not frugal by any benchmark, it was not a smooth journey. They were always short of money.

He says: “My father had to pawn my mother’s gold repeatedly and even ended up losing some of the jewellery. It was not as if we were living in poverty, but poor money management took us through some hard times. I remember looking around in the house for spare coins to buy vegetables during one such crisis."

Bhaskar, a software engineer with Cisco Systems Inc., didn’t want his life to go the same way. So, when he realized that the lessons of his childhood were playing out in his own life, he got his money life together.

Rectifying road

Not only did he have to take care of his own finances but realized that he had to take care of his parents during their retirement and silver years. And he was sure that his life would play out differently than his dad’s.

“My planner put me on an effective road to saving," he says. While the usual math for saving is income minus expenses, Bhaskar’s planner got him to turn the rules on their head. “My rule was income minus savings equals expenses," he says.

Since he was the sole breadwinner of the family, the first step for him was to get enough insurance to protect his family. “Apart from my existing insurance cover, I took an endowment and a term insurance," he says.

He invested about 30% of his income in a few equity and balanced mutual funds and dabbled in direct stocks through the demat account he had opened. “The planner made me understand that I could not expose all my savings to market risk."

Budgeting days

“At the beginning of every month, the investments get directly debited from my account through the electronic clearing system (ECS) and I have to make do with whatever is left," says Bhaskar.

Small things such as shopping for groceries once a month and for vegetables once a week helps him cut costs. “I shop for lower prices for everything. Now, I even know the prices of vegetables!" he grins.

A financially planned life has already helped Bhaskar indulge on a holiday with his wife Lavanya and buying the house he desired. Now, his focus is planning a safe future for his six-month-old son Vibhav and buying a car.

However, there is a downside to everything. “Every month, I am left with barely Rs10,000 after all the deductions." Sometimes it pinches him that he is unable to splurge on impulse, but the regret is only momentary.

The plan meant cutting down a lot of expenses, but Bhaskar doesn’t mind that because he knows when his son grows up, he will have a kitty to take care of his needs.

Planner’s post-mortem

Unlike most others, Bhaskar’s finances were in a reasonably good shape when he approached Bangalore-based financial planner B. Srinivasan. However, his saving pattern was not organized.

Says Srinivasan: “I explained to him that even though he was investing very carefully, he was not doing so in a structured way." Bhaskar was more into direct equity and the planner steered him to investing in mutual funds. The planner explained him the pros and cons of investing directly into stocks.

When Bhaskar met the planner, he was in a hurry to buy a house for himself because he saw a lot of his friends doing so. “We suggested to hold on the purchase till he genuinely needed one for personal use," says Srinivasan.

Srinivasan also maintained that employee stock options (esops) were a part of the salary. So, when Bhaskar bought a house, the planner made him liquidate his esops. This helped in bringing down the loan amount.