Naveen Garg, 43, who is an architect, loves to conduct small robotics experiments with his 15-year-old daughter Anika, and calls himself a gadget geek. Not surprisingly, spending on gadgets was a major expenditure for his household, until of course he met a financial planner. “I used to have 7-8 headphones earlier, while I would actually use a maximum of two," said Garg.
Gadgets, including mobile phones, were not the only expenditure he and his wife Abha, a homemaker and fitness trainer, would indulge into. “We used to do a lot of impulsive shopping, from clothes to mobiles to other household goods that we really didn’t need all the time," said Garg.
In Garg’s mind, there was a balance between spending and saving. “I have been a DIY investor since the past 10-plus years but there was no particular thought with respect to goals," said Garg, who dabbled in mutual funds as well as direct equity. “Eventually, I realised that I needed expert opinion to chart out a future path for organised savings," said Garg. He started researching and got some leads on Facebook, and after a couple of discussions decided to go to Chandan Singh Padiyar, a Sebi-registered investment advisor, for a financial plan in 2018.
After the first few meetings, Garg realised he needed to make major lifestyle changes to achieve his financial goals. “He was saving less for his retirement, and planning was an exercise through which he realised he needed more cash flow for this retirement corpus," said Padiyar.
But cutting down on “impulsive shopping" was only a small change in Garg’s lifestyle. One of the major alterations was quitting the company he worked for about 11 years and shifting to a new one to get the desired salary hike. “I needed higher inflow to meet my goals, and I took the plunge," said Garg.
For Padiyar, counselling the Gargs on lifestyle changes was the first step, so that some of the money that the couple had but was not saved was freed up to be put to better use. It was also about focusing on increasing the income by exploring a better opportunity.
The second—and more critical—aspect was getting adequate protection in place. “I had practically nil term insurance. I also had a family health insurance plan but that was insufficient," said Garg. He is now in the process of buying a term insurance plan and has already topped up his health insurance to take care of his family’s medical needs.
The third step was to look at goals and build a portfolio in line with them. “The biggest problem in Naveen’s portfolio was that he had not considered allocation as per the goal. For example, he needed a substantial amount for his daughter’s education but his major corpus was either in retirement-related debt assets or equity-oriented assets, so liquidity was an issue," said Padiyar. Garg, however, does not immediately need the education corpus for his daughter, who is in Class X, as she is planning to take humanities in Class XI and her education after school is not expected to be very expensive.
The couple’s primary long-term goals are their daughter’s education and marriage, their retirement and buying a house. “I plan to settle in a tier III or Tier IV city in Madhya Pradesh, from where I belong, after retirement, so I do not have any immediate plans of buying a house," said Garg.
He invests in mutual funds and direct equity for his long-term goals, and sticks to debt investments for his emergency corpus and short-term needs.
Garg and his family had to take some drastic steps to put their money life in order, but they took it in their stride. This was a result of conviction to achieve their financial goals that came from having a financial plan.
Mistakes I won’t repeat
1. Never trust your banker for investments
2. Avoid money transactions with family or friends
3. Avoid impulsive expenditure