How this salaried couple started their own ventures
The couple set an annual savings target as monthly cash flows are unpredictable
PremiumYour appetite for risk grows when you have a financial cushion to fall back on," said Bengaluru-based Sushobhan Chowdhury. And that ‘financial cushion’ helped when Chowdhury, who is in his early 40s, gave up his well-paying job in Dubai to start his own business in 2018. He now runs an advertising agency and a food venture.
“I took the leap only after I was sure that I had enough liquid savings to sustain me without having to cut corners and compromise on the quality of education of my children and my family’s lifestyle," he said. When Chowdhury left his job, he had an emergency fund worth six months’ of the family’s expenses and a runway of 18-24 months for his business. What also helped was that his wife, Saira Samuel, took up a job here soon after returning from Dubai.
Mint spoke to the couple and their financial guide Rohit Shah, who is the principal officer at Sebi-registered investment advisory firm GYR Financial Planners Private Ltd, to understand how the couple started their own ventures without compromising on other financial goals and their approach towards financial planning.
Evolving idea of risk
The birth of their first daughter in 2012 prompted the couple to start thinking of financial planning. “Until then we were living life king size and didn’t have a future plan. Whatever investments we had were largely illiquid—in real estate and a couple of endowment insurance policies. When Saira took a sabbatical and I had to shoulder all responsibilities and the growing expenses, I realized I had already lost a lot of time and needed to approach financial planning actively," said Chowdhury.
Real estate made up about three-fourth of the couple’s investment portfolio in 2012. When the couple collaborated with Shah in 2013, Chowdhury was at the lower end of the risk spectrum. “I grew up in an environment where we were trained to not take too much risk, to be in a secure job and invest in safe products where chances of losing money are negligible." he said.
On Shah’s advice, the couple diversified their investments into equity through mutual funds (MFs), as most of their goals, including their daughter’s education, marriage and their own retirement were several years away.
“Even after Rohit explained to us the merits of equity, I did my own research on MFs and stock markets. What also helped was that Rohit didn’t rush us; instead, he slowly nudged us into the stock markets as he understood my low tolerance for risk. He also sat down with us to evaluate and make us understand the hidden risks of investing in traditional insurance policies. We surrendered those plans over the next few years," Chowdhury said.
Currently, equity makes up nearly 36% of the couple’s investment portfolio, up from 2% back in 2012, which was mainly for tax-saving purposes through equity linked savings schemes (ELSS).
Simultaneously, the couple also increased their monthly savings to create enough liquid surplus for contingencies, to repay existing personal and auto loans and to fund Chowdhury’s business plan.
An adequate buffer allowed Chowdhury to quit his job and start his own business.
“During the transition, there were minor setbacks, like payments that were due for my property in Kolkata and medical emergencies involving my elderly parents, but we were comfortably able to sail through this with just our savings," said Chowdhury.
Even today, debt and cash combined makes up 39% of their portfolio.
“In the last two years of the Covid-19 phase, we were in a defensive mode. They started the second venture in early 2021, so the need for liquidity was high. Thankfully, their first business outperformed and the second venture has also picked up and the couple did not have to dip into their savings," said Shah. The focus will now shift to increasing equity in the portfolio, within the rules of asset allocation.
Dynamic investment plan
Samuel has taken up a systematic investment plan (SIP) but Chowdhury’s investments needed a more dynamic approach as he doesn’t have a fixed monthly income. As and when he has a surplus from the business every 2-3 months, he puts a lump sum in the investment portfolio. “As he can’t commit every month, we have set an annual savings goal for the couple, and through the year we ensure that the savings goal is achieved," said Shah.
Planning for a lump sum investment every quarter also requires a lot more thought than investing via SIPs. “Every time there’s a lump sum amount to plan for, we invariably end up reviewing and re-balancing the portfolio," said Shah.
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