His Qualification Got Her Education

Recently I went to my childhood friend Gitika’s home for a long due catch up. Actually, celebrations were in order since her husband Deb had bagged a coveted assignment in Hong Kong for 2 years, upon his graduation from Indian School of Hyderabad, Hyderabad.

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I knew it would be a long evening of chatting up – everything from last one year’s sabbatical to plans of working out the next 2 years of Deb’s international stint. I was worried for my friend who would have to take charge on many fronts especially with her preschooler daughter. To my surprise, she seemed smug and confident of pulling it off. I knew there was lots to talk 🙂

The Background

Both Gitika and Deb passed out as Finance majors in MBA. Gitika stuck around with her company as a Senior Analyst pre, during and post pregnancy and is blessed to have flexi hours at work. This gave cushion to Deb to pursue his second masters, despite them being new parents.

Gitika for one, had always been phobic of finance and completely depended on Deb. But after his first month at B-school, Deb was in an intensive environment to make any time for family matters. Completely on her own, Gitika did struggle but slowly realized there was nothing difficult about managing money.

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How Gitika got a new Avatar?

Managing single income, motherhood and office was getting overwhelming for Gitika once Deb was gone. She tried to put a calendar for all to-dos, but money was still out of bounds for her since it was Deb who always managed it. On a chance, she met a professional investment adviser and that became a turning point for her.

The Action Plan

Over a skype call with Deb, she and the adviser took notes of all their current investments, expenses and their money needs over short and long term.

The adviser told Gitika that the way to approach financial planning is securing an Emergency Fund first, setting your financials Goals, Protection by way of Insurance and finally making Investments.

Since Deb was planning a break for a while, he had kept aside funds to fall back on. He had taken adequate protection plans and Gitika’s office had a great Health plan to cover all three of them. So, the all-important Emergency and Insurance was taken care of.

Gitika had access to Deb’s bank accounts. With the help of adviser, Gitika moved surplus funds from bank account to a liquid fund which also funded Deb’s living expenses through a Systematic Withdrawal Plan.

In addition, Deb exited all his shares that he could not track anymore and invested in an Equity Mutual Fund. The adviser also started SIPs for Gitika in a Balanced Fund and ELSS for tax saving. A special investment for their daughter was done in the form of Sukanya Samriddhi Yojana.

Gitika made sure she met up with her adviser once every quarter and this continued her learning process. Once Gitika got into the groove, she knew that she was doing a better job than Deb too.

My Friend, My Hero

I have to say a bold move by the couple to opt in for studies. But an even bolder move by my friend to overcome her phobia. The inhibitions about money are common. But like every other challenge, all it takes to overcome is a Resolve to #BreakTheMould.

 

You Live Only Once, Keep it Stress free

Being thankful for what we have is one of the most beautiful feelings. But we often take this positivity too far. Very recently, I was talking to a friend about getting our residential complex insured against Fire. The friend dismissed my concerns saying that I am fretting for no reason and even her building is not insured. At the end of it, I felt like the pessimist in the argument, over-worrying as if hell is just waiting to break on us.

That evening, I read about fire in this high-profile high-rise and immediately called up my friend. It was my turn to make even. Well, not really. The friend conceded to my concern. She said that had it not been for our little chat, she would have brushed aside this news. But not now. She is going to press for fire safety & insurance to be followed to the T in her building.

Great! I thought as I hung up the phone and started reading about why we overlook Contingency Planning. I came across this interesting interview of Author Robert Meyer of the book The Ostrich Paradox – Why we underprepare for Disasters. He called optimism pretty dangerous – “excessive optimism is probably the most damaging one. The idea that triggers action is worry or fear over something bad happening to us, and if it never hits the radar screen, we’re not going to prepare for it. And so the more we ignore worst case scenarios, the more we think that bad things are things that happen to other people & not to us, the less able we are to prepare’’. (Read the full interview here: http://wwno.org/post/why-arent-humans-better-prepared-natural-disasters)

True said the author. We always assume that a calamity won’t hit us. If there’s fire, it would be in another building. If there’s theft, it would be in neighbor’s. If there’s accident, it would be another guy on the road, not us. Due to this, we never equip ourselves financially for the emergencies. However, there won’t be a sane financial plan, unless it accounts for an Emergency Fund.

What is an Emergency Fund?

A Girl Having an Accident

An Emergency Fund is the pool of money that we keep aside for unannounced large expenses so that we don’t have to compromise on living expenses. Emergency could knock in any form like loss of job, major house repair, sudden ailment in family, unexpected travel. The fund should be easily accessible almost like cash since you may not have the time to access investments.

The fund should be 3 to 6 months of your monthly running expenses. For example, if your monthly expenditure is Rs. 1 lac, then Emergency fund should be between Rs. 3 to 6 lacs. Having said this, it is not easy to set aside a large sum just like that. It requires a bit of planning.

How should you create an Emergency fund?

To create an Emergency Fund, you have to do some math. A quick step by step will help here.

  1. Chart your monthly income and expenses: This must include the essentials like rent, fees etc. plus other discretionary expenditures like shopping, movie, eating out.
  2. Set your amount for the Fund:Consider the total of all essentials in a month. That total will give you a sense of how much you need to keep afloat in case of any emergency.
  3. Work out a Saving Plan: To accumulate a large sum, you need to work out a strategy. Evaluate how much is ok to keep aside every month and how long you need to keep saving to achieve the set amount.
  4. Put Emergency Fund in accessible place: The money should be available even at mid night if required. So you can partly keep it in cash, partly in a bank and some in maybe a liquid fund (more on Liquid Fund later).
  5. Stay on Track: You may have a festive month or new (school) session month which may prevent putting money aside but ensure that you are back to saving from next month on. Discipline is key in securing yourself.

I am doing Emergency Fund building for myself and can vouch for the peace of mind I have had lately. After all, it’s one life & those gloomy skies are better off at bay.

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Why should you think hard before buying a car?

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A few years back, a very dear friend had fondly named her red car – ‘Ms. Polo Pandey’. Her love for the car was phenomenal. It wasn’t just her. Everyone loves their wheels, almost as if their dreams are made of just cars.

Times have changed for many of us. We are wiser with age and experience. Habits have changed so much. The millennial wave has caught up, and we are talking experiences more than possessions. We are trading big purchases in favor of Living-Your-Now. A car too, is a hefty buy that can rob bank balance very easily – and one of the reasons, millennials are not big fans of owning a car.

Momeys, whether you think the millennial way or not, but there’s serious thinking required before buying a car. Living in a metropolis (I live in Mumbai), the thrill of driving one’s car can easily give way to backaches and headaches. These are a few things I remind myself, every time I have pangs to get behind some big wheels.

  1.  It is a depreciating asset: A car is a consumable and the minute you have driven it out of the showroom, its value has depreciated. No matter how well maintained is the car, it loses value rapidly. So, don’t bank a lot on the resale value.
  2. Expensive financing:Car loans are expensive unsecured loans, and they don’t get any tax rebates either. A hefty EMI can be a real burden. If you are in a situation that driving your car is the only option for your mobility, then keep your loans to least possible. You could opt for a smaller car and pay up maximum available cash as down payment.
  3. Cabs are convenient:For occasional travelling, consider cabs. I have done the math for myself and found that using cabs for all my travel will cost me around Rs. 10000 per month, which is still lower than the EMI I would pay.
  4. Servicing & Maintenance:It’s never a happy situation paying up fat bills at the servicing center. Every time a servicing is due, don’t we feel it’s too soon?
  5. Traffic sucks:Getting anywhere by road is a test of patience in over-crowded metros. Add to that, nagging health issues that come with long hours of driving. Having a driver comes with added costs. From my experience of keeping a driver, I had to pay overtime to him every single day over and above his salary. To avoid getting stuck in traffic, I would have to start early and leave office late.
  6. Finding Parking is a nuisance:Driving towards city center for a meeting? You must wish good luck to yourself with finding parking. Do you also feel parking charges are getting exorbitant these days? It is one of the reasons cabs are a lot more convenient I feel.

Everything has its pros & cons, and each one of us is in a different situation. All I can say is assess your situation and do think hard before buying a car. A little mind over matter can make you laugh to the bank.

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