Lavish Sahni has had an illustrious career: the 33-year-old has been with the merchant navy since he dropped out of school and rose through the ranks to become captain this year. Nevertheless, the long years spent away from his family made him realize that he needed a financial advisor. In 2016, when he finally decided to hook up with one, the idea was to have an emergency liaison his family could contact for financial details when he was not around. “I realized that there had to be someone I could trust to take care of myself. finance And also get in touch with my family in case of any emergency,” Sawhney said.
Gradually, he also decided to seek advice on building wealth to meet his various financial goals, Over the years, his plans kept changing, and so his financial plan also had to adapt to these changing needs. “My financial goals are a bit dynamic. I’m not sure if this happens to other people as well. I am a bit restless on that front as I change my mind every six months depending on the situation around me.”
Mint spoke to Sahni and his Financial Advisor – Anupama Agarwal, Senior Vice President – Advisor at International Money Matters Pvt Ltd to understand their personal finance journey. Specifically, we see how Sahni’s financial plan to finance higher education plans changed over time.
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education goal
Sahni dreamed of pursuing higher education for many years to pursue himself. In 2016, he decided to start building a fund to fund his education: it would cost him. 50 lakhs for two years. Noting that there would be no income during the two-year period when he planned to take a sabbatical and meet expenses related to cost of living, course fee and family support, Agarwal estimated 40% of the education cost. Was to be funded through % one. loan, and Sahni agreed to it.
Since the investment horizon was short-term (just two years) to build the corpus for this target, Agarwal suggests parking the fund in liquid assets (like FDs) with almost zero exposure to equities to avoid exposure to market volatility. can be reduced.
While everything went according to plan, in 2018, Sahni realized that he was not comfortable taking loans. He decided to opt for self-financing and postponed his studies for around 3-4 years. After discussions with Agarwal, he revisited the cost of education and reduced the allocation/investment for other financial goals such as purchase of property and expenses for his marriage.
Agarwal suggested that Sawhney transfer a part of his corpus to equity. Their total equity exposure had increased from about 20-30% in 2016 to 40% in the next two years.
In 2020, Sahni canceled her education plan when she decided to move in with her family. “I was away from my family for the last 15-16 years; Getting a degree was an ambition that would come at the cost of being away from home again for the next 10-12 years. So, I decided to drop that plan. Now the amount deposited for that is being transferred to meet my other financial goals such as capital required to set up business in Delhi and acquire assets in future,” he said.
room for error
The highlight of Sawhney’s personal finance journey is that segregating the portfolio for each financial goal provides ample flexibility in managing finances. This will help in deciding the right asset allocation and investment product based on the risk appetite and duration of investment for each target. But note that good financial planning may not always produce the desired results due to market conditions or errors in human judgment.
For example, Agarwal said they missed out on investment opportunities in equities in 2020. “While we have sufficient liquidity in 2020 for Sawhney’s goals, we have missed opportunities in equity markets for most of the year.” She said they could have done less too. Tax implication on one of the investments taking into account their NRI status without any income in India. However, Sawhney said, “I appreciate the flexibility in financial planning compared to the return generated on my investment.” He added.
Another thing to note from his financial journey is to set aside enough money for emergency and medical needs before making any investments.
Based on Agarwal’s suggestion, Sahni maintains an emergency fund of about six months of his monthly expenses. In addition to the health cover provided by his company, he has an individual health insurance cover for 3 lakh, taken in 2016, and a life insurance cover 1 crore. Talking about her finances after her marriage, she said, “I have found a life partner who is more capable than me to take care of myself and family too.”