(Jithendra M/Mint)
(Jithendra M/Mint)

It’s never too late to streamline your finances

The Sanklechas started putting money matters in order late in life, but with the newfound discipline, they find themselves looking at a secure future

Usha and Rajan Sanklecha, both in their 60s, are true examples of the dictum that it is never too late to do the right thing. Rajan was in his late 50s with most of his financial responsibilities already taken care of, when he and his wife decided to consult a financial planner.

At 67, Rajan became a corporate consultant, after retiring from a long stint at the helm of a large company. Usha, 60, is going strong with her enterprise which supplies linen sourced directly from weavers in India to hotels both within the country and abroad. Both of them believe in retiring only when they no longer enjoy what they do, and neither sees it happening anytime soon.

Rajan is an inveterate spender who finds it difficult to hold on to money. This explains why the couple’s savings and investments have always been unplanned, and not tailored to their goals. But a substantial dual income meant they were able to arrange for the funds needed for their children’s education and weddings, as and when the need arose. “We played it by ear. Our income allowed us a good lifestyle but did not extend to formal savings. It was true of most middle-class families at the time," said Rajan.

The couple was able to fund their daughter Payal’s wedding, as well as their son’s education abroad. “Our son Pranay got a partial scholarship to a school in the UK when he was 13 years old. We agreed to fund the rest for him to complete his A levels and subsequently his education at Oxford," Rajan said.

Real estate has been the asset class that has given the Sanklechas the best returns. It is a reflection of the period when real estate and equity were seen as wealth creators. Apart from their home in Bengaluru, which has a bigger garden than their living space to cater to Usha’s green thumb, almost 70% of the Sanklechas portfolio used to be in real estate.

The lesson the Sanklechas learnt from their experience in real estate is the importance of liquidity, so that the money would be available when required. This is what led them to the idea of consulting a financial adviser.

When he was looking for an adviser to help him invest the proceeds from a real estate investment, Rajan was introduced to Saurabh Bansal, founder, Finatwork Investment Advisor, a Sebi-registered investment advisory firm. “I wanted someone with expertise, so that I did not have to give them directions. It had to be someone I would know I could trust right away. I found what I was looking for in Saurabh," said Sanklecha.

The main challenge for Bansal was to find the middle ground between Rajan’s adventurous nature and Usha’s more conservative attitude towards money. The other was to strike a balance between preparing for retirement and allowing the couple to enjoy their wealth now.

The first exercise was to determine the risk that the family could take given their age and situation. “I asked for 18% annual returns on my investments given my real estate experience," said Sanklecha. But the risk profiling exercise put his ability to take risk at a much lower level. “Reorienting their idea of risk and return was a gradual process," said Bansal.

The two primary goals that Bansal helped the Sanklechas crystallize were accumulating a retirement corpus that will allow them to continue with the lifestyle they are accustomed to and taking care of any contingency, particularly health-related ones.

The couple’s real estate-heavy portfolio was what struck Bansal as a roadblock. Monetizing it and channelling the proceeds towards the couple’s financial goals was a gradual process. “People’s perceptions about their investments don’t change easily. It took an event like demonetization and the long spell of stagnant real estate prices to bring home the risks of an illiquid asset," said Bansal.

Building the retirement corpus required the Sanklechas to commit to a periodic investment plan. An experiment with a recurring deposit with a post office helped them realise that they could save if they made it a part of their routine.

Over time the couple’s investment in real estate has been lowered to around 30% of their portfolio. “The focus is on liquid investments like mutual funds," said the planner.

They also hold some direct equity investments and bonds. “We did not want to draw down our corpus, and Saurabh took that into account, while ensuring that we can access the money whenever we need it," said Rajan.

Contrary to the belief that a financial planner can add value only in the earlier stages of one’s life, when they have multiple financial goals to achieve, the Sanklechas prove that an adviser can help streamline finances at any stage.

According to Rajan, Bansal has brought in the crucial element of discipline into their financial life. In turn, Bansal thinks the trust and commitment he shares with the Sanklechas is what makes their client-planner relationship work so well. When asked what he wishes he had done differently in terms of managing his money, Rajan said “I should have found Saurabh early in my life."

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What I learnt

1.Have clear goals after considering all aspects of your financial life

2. Sign up early with a financial planner

3. Look beyond familiar investments and consider all available options

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