By starting with a goal-based approach to investing, the Upadhyes are on track with their future
The Upadhye family has 41-year-old Mahaveer, his wife Samata and their two daughters Anushka (11) and Anvika (6). Mahaveer works in the marketing role at a leading telecom company with a very active work life. The doting father makes up for the lost time with the family by ensuring that the weekends are spent with all the three ladies. Like several others from his generation, he is pretty clear with what he wants for his family—quality education for his daughters, money for their marriage and a secure retirement.
A firm believer in making his money work for him, he has parked his money in mutual funds and insurance policies, and clearly listed out the money he would need for each of his financial goals. The meticulous planner has also listed out the need to plan for vacations and consumer good. So, when he posed his financial goals and aspirations, I was happy to be of help to someone who had done the basic homework.
With a savings rate of 20 per cent, he is cognizant of the rising cost of education and increasing cost of living. Apart from his investments and income, he also earns Rs 30,000 a month having let out one of his homes. Although he has his EMI commitments on the home loan, it will terminate in 2019.
Like many enthusiastic investors, Mahaveer has also put his money into several mutual fund schemes, without realising the overlaps in doing so. He has also taken a few insurance policies, which thankfully do not have huge commitments from him. Having taken term insurance for self, he has again shown prudence in handling his finances. My role as a planner is mostly limited to helping him streamline his finances and investments so that he has the money when he needs it for the goals that he has listed.
A word of advice, he should take a medical insurance for his family in addition to the one provided by his employer. He should also create a contingency fund for any unforeseen circumstances. He could achieve both these with the yearly bonus or sudden lump sum gains, which should ideally be used to create the contingency fund.
The goal-based investments has been a good start, and some redemptions and merging of investments in mutual funds will help him consolidate his investments in a manner that they will be linked to the financial goals he has listed. My advice to him would be to close his home loan as early as possible, because once the liabilities are addressed, he would have additional surplus to increase his monthly SIP investments in mutual funds.
The selection of balanced funds to invest for some goals and well diversified equity funds for the very long-term goals will surely work well for Mahaveer. He should review the performance of the funds he is investing in and taper the investments into debt as he starts approaching the goals. More importantly, he should write a Will and get it registered, so that his assets are protected. I am confident that disciplined approach to investing is what makes him different for his age, and this is the one trait which will go a long way in achieving the financial goals he has listed.
Co-founder, Complete Circle Consultants