Home / Money / Personal Finance /  Focusing only on 80C products won’t sort your money life

Sunny Goel is a senior professional in an insurance broking firm but until a few years ago, his own finances were not quite in shape because he didn’t have much idea about investments. He had parked most of his corpus in “secure" investments like fixed deposits and Public Provident Fund (PPF), but didn’t venture into equities. “My portfolio was mismanaged. I only focused on 80C investments for tax exemption. Come April and I would park surplus funds in PPF for the sake of saving tax," he said.

At an insurance event a few years ago, Goel met Krishnan V., partner, K&R Planners LLP, who later went on to manage his finances along with his partner Rajiv Guha.

Over a cup of coffee, Krishnan explained how investment management services work. “I used to have a different picture about investment managers. I thought they had their own vested interest in terms of brokerages. The discussion was a bit of an eye opener for me," he said. Krishnan asked Goel about his goals and whether or not the latter felt confident of achieving all his goals with the way he was managing his money. Goel realised he had no answer to that.

In 2016, Goel went ahead and got his financial plan made by Krishnan and Guha. They saw that Goel’s finances needed some structure as he had not paid much attention to some aspects. “The likely reason for this was that he was not under any immediate financial pressure," said Krishnan.

In some ways, Goel was starting afresh. “He had recently closed a mortgage. In the process, his liquid savings and investments had depleted. Technically speaking, he was like someone starting his first job, with only his home as an asset. There was no contingency fund or savings. We highlighted this, and told him this was not a good position to be in. He needed an emergency fund to keep him afloat in unforeseen circumstances," said Guha.

While Goel had a few short-term goals lined up that he didn’t have a financial plan for, Krishnan and Guha wanted him to understand the mechanisms of investing before he took the plunge. “Since I was a relatively new investor, they didn’t push me to invest in equities right away. First, they wanted me to figure out what investments and returns are all about, and how one should measure the performance of an instrument. They also took my needs and goals into account and assessed my risk appetite and told me that I was a moderate to high risk taker," said Goel. After the initiation, Krishnan and Guha gave Goel a detailed break-down of his finances, and stressed the importance of his income expense ratio. “They went into minute details, right down to eating out and vacations," said Goel.

The planners then decided to address a glaring gap in Goel’s financial plan. He was under-insured, with a life insurance cover of only around 10 lakh. “Being a finance professional, it’s not expected of me, but when it came to my own finances, initially I made a lot of the same mistakes that other people make," said Goel. He needed a term life cover of a substantial amount, in line with his lifestyle and needs. “An important aspect that he had missed was the possibility of an interruption in his earning due to an accident or illness. We asked him to get a personal accident cover which would cover disabilities," said Krishnan.

With adequate insurance and an emergency fund in place, it was time for Goel to explore new investment avenues. “He was mainly concentrating on traditional, risk-free investment avenues. When we showed him how these investments will pan out till his retirement, and how long the resulting corpus will last him in retirement, it was an eye opener for him," said Guha.

Goel was immediately sold on the idea of investing in equities in a methodical way. “They advised me on how to invest in equity and debt. They didn’t recommend that I enter the stock market right away, at least not before I became familiar with the workings of the market," said Goel.

Aside from short-term goals like taking an annual foreign vacation, Goel had to provision for his sister’s wedding, and support his parents after they retire. To ensure that Goel could meet all his expenses without compromising on his investments, the planners worked towards sorting Goel’s existing assets into revenue generating ones and less efficient ones. Goel then liquidated a few assets that were not generating a lot of revenue and channelised the proceeds to investments and expenses alike.

Another long-term goal that Goel had in mind was early retirement. “In our most recent meeting I brought up the idea of early retirement, at around 50, and asked them how I’d prepare for it and if I would have enough to cover all my expenses. They drew up a month-wise cash flows statement from now till I am 50, to give me a comprehensive idea of how I will be managing my expenses, and how much I will have at 50," said Goel.

Now Goel is on track for meeting his financial goals, even retiring early. While Krishnan and Guha maintain that the final decision about all investments lies with Goel because at the end of the day, it is his money, Goel is sure his finances are in good hands.

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