Natty, well-travelled, social—Ashok has a great lifestyle, but not very great savings. A medical epiphany makes him take a critical look at his financial health, and he decides to change his lifestyle for the sake of his family and future
Amit Trivedi
Ashok had a long day at the office, and was driving home to Santa Cruz from his office in Andheri East. It was a day like any other—hectic at work, busy Mumbai traffic, humid weather. But the way Ashok was feeling wasn’t normal at all. He felt dizzy, and was sweating profusely. His pulse was racing. He knew he needed to see a doctor. So instead of heading home, he went to his family doctor. At the clinic, he learned that his blood pressure was very high. The doctor warned him that a heart attack could follow if the blood pressure didn’t drop soon. The doctor prescribed a few days’ rest, and also a change in lifestyle and food habits. Ashok would have to stay away from alcohol and cigarettes. The doctor also asked him to consult a dietician. The visit concluded with a long list of medicines that Ashok had to take. As you can imagine, this was a rude shock. At 43, Ashok was rather young for a serious illness. Hard-working as Ashok was, he was no drudge. Mumbai-born and - bred, he loved to throw parties, and his friends loved going to them. His soirees were so grand that they were the subject of discussion weeks later. The dapper Ashok was among the best-dressed people in his workplace. He loved gadgets. He took a vacation abroad every other year. In short, his lifestyle was luxurious. Diagnosis Ashok maintained that investment in relationships yields the maximum interest. His philosophy was reflected in his parties and his lifestyle. He had his forced savings in the Provident Fund, but had never given much thought to additional financial investment. However, like any normal human being, he also hated paying taxes, and had therefore made some investments in tax-saving instruments. But the total value of these investments, accumulated over a few years, was less than Rs 5 lakh. This was not enough to support his lifestyle for even a year. At least his aversion to paying tax had spurred him to buy life and health insurance. The cover was adequate for his basic needs. But his life insurance cover would likely be insufficient for his family to sustain their current lifestyle. The problem would be especially severe because his wife, Rajani, was a homemaker, and it would be many years before Varun, their 12-year-old, could earn anything. Ashok’s bank had rewarded his loyalty by offering him a platinum card, which had a very high credit limit. He had used this limit liberally, with the result that he had revolving credit of Rs 1.15 lakh on the card. Varun’s higher education is about five years away. Ashok’s retirement is around 15 years away. He lived in a house he inherited from his father, so there is no home loan for him to worry about. Recommendation As it turned out, some of our recommendations ran parallel to Ashok’s doctor’s advice. The doctor had asked him to change his food habits; we asked him to change his spending habits. Both changes required reducing unhealthy excesses. The doctor advised him to cut back on the parties, and we advised him to cut up his credit card and surrender it to the bank. The changes were bitter medicine to swallow, not just for Ashok but also for his family. But his medical condition was perhaps a timely warning, and a blessing in disguise. It helped his family appreciate the good sense in a lifestyle change, and freed up some money for savings. We suggested starting a systematic investment plan (SIP) in a balanced fund, to save for Varun’s higher education. We suggested he increase the SIP amount over time, as his income grows. We chose a balanced fund, since it was Ashok’s first investment, and since the the time horizon was five years.We recommended a second SIP in a diversified equity fund, for retirement savings. This would be in addition to the money he accumulated in his PF account. The money that Ashok had invested in tax-saving instruments would be invested in equity as and when the tax-saving schemes matured. The investment options for this would be decided when the money came in. For the moment, Ashok need not invest anything to claim benefits under Section 80C of the Income Tax Act, as he already exceeds the limit through his PF deduction and insurance premiums. Travelling abroad is a passion for Ashok, and he said he would like to continue his vacations if the doctor permitted. We asked him to allocate a small sum every year towards the vacations he took every alternate year. We advised him to utilise fully the Leave Travel Allowance offered by his employer. We also recommended he do regular portfolio check-ups, just as he did medical check-ups. At that time, we would review the portfolio’s progress, as well as the family situation. These reviews would help us fine-tune the investment portfolio, if required. A family decision The biggest change we made in the investment process was to include Ashok’s wife Rajni in all the discussions. We ensured she understood financial planning generally, and in particular, the Guptas’ plan. This is important, because in many Indian families it is the men who are in charge of finances, especially investments and insurance, although women, many of whom manage the household, are equally affected by all decisions. Amit Trivedi runs Karmayog Academy MEET THE FAMILY Ashok Kumar Gupta, 43, lives with his wife Rajni, a homemaker, and their 12-year-old son Varun, in Santa Cruz, in a flat inherited from Ashok’s father. Ashok earns well, but spends well, too. His savings amount to Rs 5 lakh, which would not sustain the family’s lifestyle for even a year. The Guptas need to plan for Varun’s education and Ashok’s retirement
Amit Trivedi
Ashok had a long day at the office, and was driving home to Santa Cruz from his office in Andheri East. It was a day like any other—hectic at work, busy Mumbai traffic, humid weather. But the way Ashok was feeling wasn’t normal at all. He felt dizzy, and was sweating profusely. His pulse was racing. He knew he needed to see a doctor. So instead of heading home, he went to his family doctor. At the clinic, he learned that his blood pressure was very high. The doctor warned him that a heart attack could follow if the blood pressure didn’t drop soon. The doctor prescribed a few days’ rest, and also a change in lifestyle and food habits. Ashok would have to stay away from alcohol and cigarettes. The doctor also asked him to consult a dietician. The visit concluded with a long list of medicines that Ashok had to take. As you can imagine, this was a rude shock. At 43, Ashok was rather young for a serious illness. Hard-working as Ashok was, he was no drudge. Mumbai-born and - bred, he loved to throw parties, and his friends loved going to them. His soirees were so grand that they were the subject of discussion weeks later. The dapper Ashok was among the best-dressed people in his workplace. He loved gadgets. He took a vacation abroad every other year. In short, his lifestyle was luxurious. Diagnosis Ashok maintained that investment in relationships yields the maximum interest. His philosophy was reflected in his parties and his lifestyle. He had his forced savings in the Provident Fund, but had never given much thought to additional financial investment. However, like any normal human being, he also hated paying taxes, and had therefore made some investments in tax-saving instruments. But the total value of these investments, accumulated over a few years, was less than Rs 5 lakh. This was not enough to support his lifestyle for even a year. At least his aversion to paying tax had spurred him to buy life and health insurance. The cover was adequate for his basic needs. But his life insurance cover would likely be insufficient for his family to sustain their current lifestyle. The problem would be especially severe because his wife, Rajani, was a homemaker, and it would be many years before Varun, their 12-year-old, could earn anything. Ashok’s bank had rewarded his loyalty by offering him a platinum card, which had a very high credit limit. He had used this limit liberally, with the result that he had revolving credit of Rs 1.15 lakh on the card. Varun’s higher education is about five years away. Ashok’s retirement is around 15 years away. He lived in a house he inherited from his father, so there is no home loan for him to worry about. Recommendation As it turned out, some of our recommendations ran parallel to Ashok’s doctor’s advice. The doctor had asked him to change his food habits; we asked him to change his spending habits. Both changes required reducing unhealthy excesses. The doctor advised him to cut back on the parties, and we advised him to cut up his credit card and surrender it to the bank. The changes were bitter medicine to swallow, not just for Ashok but also for his family. But his medical condition was perhaps a timely warning, and a blessing in disguise. It helped his family appreciate the good sense in a lifestyle change, and freed up some money for savings. We suggested starting a systematic investment plan (SIP) in a balanced fund, to save for Varun’s higher education. We suggested he increase the SIP amount over time, as his income grows. We chose a balanced fund, since it was Ashok’s first investment, and since the the time horizon was five years.We recommended a second SIP in a diversified equity fund, for retirement savings. This would be in addition to the money he accumulated in his PF account. The money that Ashok had invested in tax-saving instruments would be invested in equity as and when the tax-saving schemes matured. The investment options for this would be decided when the money came in. For the moment, Ashok need not invest anything to claim benefits under Section 80C of the Income Tax Act, as he already exceeds the limit through his PF deduction and insurance premiums. Travelling abroad is a passion for Ashok, and he said he would like to continue his vacations if the doctor permitted. We asked him to allocate a small sum every year towards the vacations he took every alternate year. We advised him to utilise fully the Leave Travel Allowance offered by his employer. We also recommended he do regular portfolio check-ups, just as he did medical check-ups. At that time, we would review the portfolio’s progress, as well as the family situation. These reviews would help us fine-tune the investment portfolio, if required. A family decision The biggest change we made in the investment process was to include Ashok’s wife Rajni in all the discussions. We ensured she understood financial planning generally, and in particular, the Guptas’ plan. This is important, because in many Indian families it is the men who are in charge of finances, especially investments and insurance, although women, many of whom manage the household, are equally affected by all decisions. Amit Trivedi runs Karmayog Academy MEET THE FAMILY Ashok Kumar Gupta, 43, lives with his wife Rajni, a homemaker, and their 12-year-old son Varun, in Santa Cruz, in a flat inherited from Ashok’s father. Ashok earns well, but spends well, too. His savings amount to Rs 5 lakh, which would not sustain the family’s lifestyle for even a year. The Guptas need to plan for Varun’s education and Ashok’s retirement
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