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The covid-19 setback has taught different financial lessons to different people. For zillennials and young millennials, who have just started their jobs, the financial uncertainty has brought home the realization that inculcating a saving habit right from the beginning is key to a secure future. Like them, Delhi-based accountant Amit Mittal learnt the importance of saving and planning for a lifetime quite early in his life, after experiencing a major career setback about a decade ago.

Mittal got his first job in a multi-national bank around 2010. However, within a year or so, the bank outsourced its operations to an Indian company, and asked the staff to move to a Pune-based company. Since he didn’t want to move out of Delhi and his job became redundant at the MNC, he suddenly found himself jobless. “Like most others my age then, I spent all the salary that came and didn’t focus on saving at all. I was single and didn’t really have any responsibilities then," said Mittal, 36. As a result, when he lost his job, he had no savings or investments to fall back on. “Though my parents came forward to support me, as we live in a joint family setup, the setback helped me realize how important it is to save right from the beginning," he said.

So, when Mittal got another job in Noida in about six months or so, he made it a point to start saving regularly, even though he wasn’t able to save a lot then. “After I got into another job, my family also started convincing me to get married as I was in my late 20s. I thought I was at a critical juncture and needed to plan and invest properly," he said.

At first, Mittal started investing through a stock brokerage on the advice of a friend. However, he didn’t understand the investing process in detail and put in very little money. He thought there was too much risk involved as well.

Mittal’s family stepped in again to help him out. “One of my relatives told me about HumFauji Initiatives (a mutual fund distribution firm). Though its clientele is mainly from the armed forces, my relative put in a word for me and requested them to take me on," he said.

In 2013, he met Col Sanjeev Govila (retd), a Sebi-registered investment adviser from Hum Fauji Initiatives.

Mittal’s financial journey transformed completely from thereon. Though he had started saving before he got into a financial plan, it was not much and he was parking most of it in his bank savings account. In a way, he started on a clean slate. “Like a traditional middle-class family, his bank was the financial god for him. He only saved in savings bank accounts, recurring deposits and fixed deposits. Apart from that, his financial world consisted of his Employees’ Provident Fund (EPF) and employer-provided medical insurance," said Govila.

The planner did simple calculations to show him that his money was actually depreciating post-tax and inflation adjustments. “We explained to him the importance of financial planning and the perils of not getting into it at the earliest. How risk mitigation—life and medical insurance—is critical and so is planning for retirement," said Govila. The planner also explained the basics such as the concept of compounding and how it works best if you start early, and the concepts of inflation and taxation and how they can hamper the achievement of goals by eating into the returns.

Mittal was told that he needed to invest in mutual funds for his savings to grow, and merely parking the funds in the bank wouldn’t help him achieve his goals. He was introduced to systematic investment plans (SIPs) for his long- and short-term goals and for the creation of his emergency corpus.

Another task was to curtail his tendency to take personal loans at the slightest pretext, said Govila. “We used to remind him to use a small part of his accumulated corpus to buy small things like gadgets," said the planner, adding that this helped inculcate financial discipline in him.

Mittal caught on to the concepts fast and soon decided to fund a substantial part of his wedding expenses himself, even though his family was ready to support him. “He saw the biggest advantage of financial planning when he could muster up enough money for his own marriage," said Govila.

Once Mittal was married in 2015, he was able to increase his savings as the family had two incomes now. His wife Neha Garg, 33, is a senior lawyer, and the couple invest jointly.

He also decided to make a contribution to fund a larger house in which they now live. Another short-term goal was to buy a car. “I wanted to contribute a substantial amount for the house. We also wanted the loan to be as little as possible and needed to save for that," said Mittal. He takes pride in the fact that he has already achieved his primary short-term goals with the help of the planned investments of his own.

Mittal believes that the fact that he started saving early and went for a financial plan well in time helped him do that. “The trick is to recognize that ultimately small droplets will make the mighty ocean. Hence, start early and start with what you have right now. The rest will be taken care of by the power of compounding," said Govila.

Achieving the short-term goals early on has helped the couple focus on their child’s goals and retirement, which are their primary long-term goals. “Though we started saving a bit more before we planned the child, it was thrashed out in detail after he was born in 2019," said Mittal.

He is now confident of achieving his long-term goals as smoothly as he was able to meet his short-term goals. “We started off with investing in large-cap and hybrid (erstwhile balanced equity) funds for him initially since he had never invested in equity earlier, though his age demanded a major equity allocation for the long term. As he got more confidence, we introduced him to multi-cap and a bit of mid-cap funds. Right now, we are managing his portfolio with a shift to index funds and dynamic asset allocation funds for long-term goals," said Govila.

Mittal has not forgotten the lessons the financial setback early in his career taught him. Now he makes sure that he has six months of emergency funds at all times and with the covid situation, he plans to increase it to a year of expenses.

He is also very careful about his job now. He keeps upskilling himself by taking up different courses. “In my industry, a lot of automation is happening, so it is very important to be up-to-date or there is the risk of becoming redundant," said Mittal.

Mittal now feels fully prepared to take life and its challenges head on. Do you?

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