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It was financial planning that helped Amit Joshi, a 44-year-old information technology professional, realize how to prioritize spends at different periods of time and manage expenses.

Joshi, who is a director in one of the leading IT firms in Pune, sat down with Mint to discuss how his life changed after seeking professional help. He is married to Pooja (42 years), also an IT professional, and the couple have a 14-year-old daughter.

Initially, the couple used to invest mostly in government schemes such as the Public Provident Fund (PPF) and also had a market-linked insurance policy. They had limited exposure to equity mutual funds, which were a combination of large-cap and equity-linked saving scheme (ELSS) funds. And, most of their liquidity was in the form of bank deposits and recurring deposits.

Joshi rues the fact that theirs was an ad hoc and a limited investment plan, which was due to “lack of awareness".

Fortunately for the Joshis, they realized soon after their daughter’s birth that with the kind of career progression they wanted and the kind of goals they had set, an ad hoc or a product-based investment approach would not take them anywhere.

 

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After doing online research and following up on some references, the Joshis in 2009 zeroed in on Suresh Sadagopan, managing director and principal officer at Ladder7 Wealth Planners.

“They were saving money and were investing in the places that they felt were appropriate. A key shortcoming was that there was no goal-based planning. Not that they were doing something bad. There was no real planning. There should have been an overarching investment plan. That is what we tried to correct," said Sadagopan.

A key learning that Joshis had after meeting Sadagopan was that they needed to have a holistic investment plan with a basket or a pool of funds or instruments. “The second realization for us was on the returns part. Returns are important but that can’t be the sole parameter behind an investment strategy. Dividing allocation or realignment for life goals was the third realization," Joshi said.

In terms of allocation, the couple today has about 65-70% in equity and the rest in debt, which gets reviewed every year.

A key change that happened in terms of the overall financial plan was the insurance cover.

The couple earlier had a term cover and individual group health plans provided by their companies, but Joshi admits that the coverage was not adequate.

According to Sadagopan, as far as life insurance is concerned, 90-95% of the people are underinsured; while most of them don’t have any medical cover.

Today, the Joshis have individual term insurance plans, which are around four-five times of their annual incomes. Apart from group health plans, they also have an adequate family floater plan.

In terms of short-term plans, the couple’s main goal is their daughter’s education. For this purpose, they are mostly looking at debt instruments, with a small allocation to large-cap equity fund. According to Joshi, he might also look to upgrade his four-wheeler in the next three-four years.

The next step of planning is investment for long-term goals, which includes retirement and their daughter’s marriage.

A portion of that is invested in employee provident fund, PPF and gratuity, besides employee stock ownership plans (Esops) and restricted stock units (RSUs). The Joshis also have a mutual fund portfolio based on large-cap, mid cap and flexi-cap funds.

Personally, covid-19 has been a mixed bag for the Joshis. While, their working hours have increased, work from home was a blessing in disguise for the family. And, fortunately, there was no impact on their remunerations since the couple was employed in the IT industry, which did not see much of the covid-led salary cuts or layoffs.

According to Joshi, cutting back on discretionary expenses is one key lifestyle change that will continue after the pandemic. “Amit and his wife have been keeping their expenses very much in control, which is actually a major factor for a financial plan to work. Controllables are our own expenses, while non-controllables are inflation and how much your salary grows. The controllables, they have actually been able to keep it under check," said Sadagopan.

Sadagopan believes that one key thing that has worked in favour of Joshi was his opting for a financial plan early in his life. However, Amit feels that it would have been better had the couple gone for financial planning earlier.

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