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Niranjan Borse, 41, aspires to have a bigger house and a better car but his children’s education is more important for him. “The current cost of education is already very high. So when my sons grow up, it’s going to be exorbitant," said Niranjan. While he knows that education and living expenses will go up over the years, he isn’t very good with calculating how much money he will require for meeting his goals. “I want to make sure I give my children (Ratish, 10, and Kush, 6) the best education so they are independent," he said.

For someone who believed in investing in debt instruments only, understanding the concept of equity mutual funds and believing that they are a good investment option didn’t come easy. “A friend suggested that I explore investing in mutual funds through SIPs but I wasn’t very sure so I decided to meet a financial planner," said Niranjan. Nisreen Mamaji, certified financial planner and founder, Moneyworks Financial Advisors, said when Niranjan and his wife Rina first met her, they were heavily skewed towards fixed-income products such as endowment policies. They had to be explained about how they should change their risk profile and how high risk meant high returns. “There’s a rule which states hundred minus your age should be your allocation to equities in percentage terms. Of course, it depends on a lot of factors such as number of dependants, cash surplus and so on. But it is important to do a detailed analysis of your finances before you decide your equity and debt allocation," said Mamaji. 

Other than his children’s education, Niranjan’s planner is also helping him save for his annual vacations. “I require at least 1 lakh every year for travel because that’s my passion. I make sure I take frequent trips be it short trips or long ones," said Niranjan.

In the last three years that he’s been working with Nisreen, he said he’s able to distinguish between his goals and prioritise them. His other goals include planning for retirement, his mother’s medical expenses and some money for his home renovation. “Depending on the tenure of the goal the financial plan was constructed. If it was a short-term goal of 2-4 years , I asked him to invest in a hybrid equity fund (for goals more than three years away) or a fixed-income product. For long-term goals like his sons’ education, which is 5-7 years away, he’s invested in large-cap funds," said Mamaji. “For retirement, it’s a combination of focused and mid-cap funds." 

It’s a myth that your goals will take care of themselves. You have to be proactive to achieve all your goals. Niranjan’s planner sat with him to have a chat on life planning because without planning your life, it’s difficult to be able to plan your finances. “When I started talking about retirement to Niranjan and his wife, I could see tears in their eyes. He suddenly realised that if something happens to him, his family will have nobody to depend upon," said Mamaji. He shifted from a traditional insurance policy to a term plan with a much higher cover. Buying an insurance policy is necessary but analysing if the cover amount will be sufficient is also equally important. “Taking into account the inflation rate, time horizon, and the future value of rupee while buying an insurance policy is imperative," said Mamaji. 

When Niranjan understood the power of compounding, he was no longer sceptical about mutual fund investments. He is in fact intrigued by the product and feels he shouldn’t have delayed investing. “Middle-aged couples should make sure they have a plan and stick to it. Even if you make withdrawals from any particular fund, remember to replenish it," said Mamaji. She also stressed on the importance of teaching children good financial habits.

What I learnt

■ It’s necessary to take risk to get better returns

■ Financial plan must be in line with life goals

■ Investments are not just to save taxes


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