Manish Sharma only felt the need to get his finances in order when he tried to manage his inheritance. The 35-year-old IT professional, who belongs to Dehradun, decided to sell a property he inherited from his parents and invest part of the proceeds, but didn’t know what investments to choose.
“I wanted to buy a house where I worked and bring my mother to live with me as her health began to deteriorate," said Sharma, who lives in Gurgaon. He decided to sell his ancestral property, where his parents lived earlier, and buy a house in Gurgaon.
Sharma wanted to invest what was left over. “But since I didn’t know much about investing myself, I started looking for guidance. I did my research about financial planners and how their services could help me. Then I started looking online for planners with a good track record. That’s how I came across Arthashastra Consultants. I decided to take Shilpi Johri’s (the financial planning firm’s founder) help for putting together my investment plan," he said.
After an email conversation, Sharma decided to meet Johri face-to-face as both were based in Gurgaon. “She asked me the details of my assets, liabilities and goals, told me about the various kinds of sessions she offers and set up an appointment. She told me to bring my wife Arpita, who is a home-maker, along because she needed to be as involved in our finances as me," he said. Arpita quit her full-time job after they had their son Amogh, who is three years old now.
During the first meeting itself, Johri told them that she would not only look at their investments, but take an overall approach to building their portfolio. She also decided to take it a step further, and focus on Sharma’s career goals. “She told me that the IT industry demanded frequent upskilling, and I should invest in myself and advance my skill set by doing professional courses," he said. “By ensuring an updated skill set, a salaried individual can ensure that they are always in demand. This takes away the fear of job loss," said Johri.
“I had a few insurance policies I had purchased on the advice of relationship managers in banks as investments. But Johri told me that insurance is not an investment, and I should look at the sum assured, and not returns. The sum assured in the policies I had was very nominal," he said. He surrendered his policies and bought a term plan with sufficient sum assured.
The next thing on Johri’s agenda was health insurance, but Sharma was not convinced. “I told her that my company has a very good health insurance policy, which covers both me and my family," he said. Johri helped him understand that it was not prudent to depend only on the company’s health insurance as one is left without a cover when switching jobs.
Johri’s next suggestion was also confusing for Sharma. “She said that I should get a Will made for my mother. I asked why that would be necessary, since I am the only child of my parents and, therefore, the only legal heir. She said it will rule out the possibility of any disputes being raised in the future and make things smoother," said Sharma.
Once the basics were in place, Johri turned her attention to what Sharma had set out to do: invest the funds he had. She told him about mutual fund investments and asked him to start off with a few large-cap funds. “I wanted him to become comfortable with mutual funds as a mode of investment before adding small- and mid-caps to his portfolio," said Johri.
Sharma and his wife were also keen on buying some gold from time to time, and Johri told them they could invest a small percentage of their corpus in physical gold. She also explained to them how important it was to have a contingency fund, and channelled part of Sharma’s intended investment corpus into a separate emergency fund.
Sharma’s was a classic case of lacking direction and planning on finances. The planner helped him make optimal use of the funds he had.
Mistakes Manish Sharma won't repeat:
1) Not having an emergency fund
2) Relying on employer’s health insurance
3) Not having adequate life insurance cover
4) Waiting too long to start investing