Millennials are known to splurge on lifestyle expenses. Hyderabad-based Prashant Thakur, 37, a software engineer by profession, was no exception. Till a few years ago, Thakur was guilty of spending big on latest gadgets and trends. Now both he and his wife, Disha Verma, 35, a soft skills trainer, try to keep a check on their expenses. They also ensure that their investments are in line with their goals, which include creating an education fund for their sons, Lakshya and Viraj, and a retirement corpus for themselves. Before meeting their financial planner in February last year, the couple had an over-diversified investment portfolio. “I’d invested in as many as 28 mutual funds among other investments, and would time the market and change my investments at the smallest trigger," said Thakur. The need to consolidate their investments pushed the couple to consult Melvin Joseph, a Sebi-registered investment adviser and founder of Finvin Financial Planners. “Thakur was quite financially literate and had all the basics in place. He wanted a financial planner to confirm whether he was on the right track," said Joseph, who helped the couple consolidate their investments into 6-7 schemes based on their goals.
The couple moved to India close to three years ago, after spending nine years in the US. “After we got back, I started exploring different avenues where I could invest my money. The only investments I had at the time were the ones I made before moving to the US," said Thakur.
Thakur’s initial plan was to buy a house, but he later decided to gradually start investing in mutual funds. “Banks would keep trying to push Ulips and funds managed by their asset management companies. They’d ask me to invest in their funds, which I didn’t like so I started researching online," said Thakur. Eventually he realised that he may have accumulated more funds than he needed.
Joseph’s role as a financial planner was limited in Thakurs’ case because the couple already knew what their goals were and had begun investing in equity mutual funds for their goals. “Since most of their goals were long term, I suggested a high exposure to equity. They are investing in liquid and debt funds for short-term goals like vacations and buying a vehicle," said Joseph.
Thakur’s proactive approach towards money management comes from his past experiences. He belongs to a business family and when he was still in school his father had to deal with losses in his business. “At one point, we were barely able to make ends meet and that’s when I learned the value of money and the importance of financial planning," said Thakur. He stayed focused and worked hard to change his circumstances and to make sure that he and his family don’t have to struggle for basic necessities ever again. To this end, the couple now invests as much as 60% of their total income. “I think I’ve been able to manage my expenses fairly well. I have never taken a single loan," said Thakur.
Thakur has sufficient insurance cover in place to ensure his family doesn’t deal with any financial stress in his absence. According to Joseph, young couples should purchase high value term policies by using the expense replacement method of calculation. “This will ensure same standard of living for the family in the absence of a breadwinner. It’s also necessary to purchase a decent health insurance policy, as an addition to the corporate cover that you get from your employer. Supplement this with a personal accident policy which offers disability benefits," he said. He added that young couples should focus on having a healthy mix of equity and debt products in line with their risk appetite.
Over the years, Thakur has brought about significant changes in his investment and spending behaviours to make sure his financial life doesn’t go off track. He has made changes like stopping the investments he used to make in gold every year. His affinity for fixed deposits has also been curbed after he learnt he could get better returns from other investment products. “I used to track the stock market closely and try to time it. It would make me impatient and impulsive. But now I’ve learnt to be patient with my investments," he said. He hopes to teach his children to try and invest as early as possible and understand that investments should be made before one starts spending their money.
Mistakes I won't repeat
1. Splurging on gadgets and latest trends
2. Going overboard with gold investments
3. Trying to time the market and making impulsive decisions