Sunila walked out of the debt counsellor's office in a pensive mood. She had accompanied a close friend of hers for moral support. Her friend, Divya, had actually opted for the services of a debt counsellor having run into some financial trouble and some pending loan dues.
After dropping Divya at her apartment, Sunila realised she had to make a fresh start herself to get her finances in order. The discussions in the debt counsellor's office were an eye opener.
Her husband, Shekhar, had gone abroad for a short tour on the work front. After the client visits she knew her husband was spending most of his time indoors as it was pretty cold out there at that time of the year in Switzerland, where he was camping.
She realized 'now' was as good a time as any for him to give this some serious thought.
She decided to send him a mail right away, lest her resolve melted in the rigours of routine daily life. This was what was happening currently: they were living one day at a time, oblivious of what the tomorrow would hold, when the larger picture could prove to be a real shocker, when at the verge of their retirement they discover they do not have the funds to spend the rest of their lives not working!!
Her letter, peppered with the pearls of wisdom that the counselor had given, went thus:
***** ***** *****
I now rue the way we have wasted options.
When we got married, our combined income was Rs 60,000. . . our loan eligibility (if we had opted for a home loan) was around Rs 30 lakh (Rs 3 million) with about Rs 10,000 left to run the home after paying the rent of Rs 7,000.
We could have easily set aside that assumed EMI of Rs 30,000 every month and at the end of 2 years, we would have had around Rs 7.20 lakh (Rs 720,000) as savings or as down payment if we had then opted for a home loan!
However, its never too late to start thinking about some financial goals!
So now we must look at that as a loss that we need to regain in our further investments. So how do we go about doing this? We should seriously consider a 75%-25% ratio in our debt and equity investment ratio.
This is the only way we can catch up on the option we lost out and also gives us the option of making some 'miracle money' while we are young, salaried and fit to face some ups and downs in terms of financial losses.
We can slow down this breathless pace to a gentler walk as we near our predetermined deadline to retire!
Sounds good, right? Let us sit down this weekend to discuss how to plan this. If we put this off now, then it is never going to happen.
Nearly 60 per cent of my income currently has gone into savings these past two months, which I have consciously begun only recently. However, due to unexpected expenses for which 10 per cent has gone, we should at least have the remainder of 50 per cent of the savings .
Let's plan our goals and compare the maps and see how best we can put our combined income to good use.
I would like to start off on:
a. A contingency fund of 6 months' salary -- to offset a job loss -- putting it down to a generous Rs 30,000 expense per month
b. Savings: A small portion of 10 per cent as small savings accessible at the bank account.
c. Investment: Remainder needs to be invested -- 75 per cent of this in equity (stocks), mutual funds and other useful funds; 25 per cent in debt, fixed deposits, PPF, NSC, etc.
d. An infant fund that takes care of all medical costs/vaccinations, clothing, toys for the first two years. Let us draw a rough estimate based on research and arrive at a target figure and target time to save.
Other funds we could include in the list:
a. Medical fund, parents' fund, maintenance fund, entertainment fund, luxury fund, vacation fund and so on. However, the above four are top priority in my financial goals list. Do take sometime to ready a similar checklist. Let us compare notes and arrive at a final conclusion of how we want to take this forward.
Let's discuss, conclude and start swinging into action.
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Take care not to give in to the tempation of your current lifestyle, where everything is screaming 'buy now': a bit of careful indulgence and careful planning could hold you good for the rainy days ahead, when you can sit back and enjoy in peace!