This is a guest post by one of the earliest freefincal readers, Anish Mohan. In 2001, Anish, a profound believer in Swami Vivekananda abandoned his romance for communism and took up a job in the Indian software industry, where he witnessed the good days of post-liberalisation era, punctuated with events of the 2008 global crash. In this candid and heartfelt memoir, Anish shares the ups and downs of his money-management journey.
When Pattu-Sir first asked me write this blog, I was overwhelmed. I had no idea where to start and wrote few pages, deleted them all together and then re-wrote, only to find that I was not writing anything new. I realised that writing on Personal Finance is no easy feat. Suddenly I remembered my profile picture in Facebook was posted few years ago, it does not even reflect my growing age and oddly, I never bothered to update it! So, If I could post a picture in Facebook few years back and never bother to update it, why could I not exercise the same practice when it came to Personal Finance?
When I passed out Engineering in 2001 and straight away joined the largest software company in India, I was posted in Trivandrum. I was less interested in work and more in travelling God’s own country. I abdicated my Personal Finance thoughts to my dad who would scoff at me for spending more than what I was earning! I feared to go to the STD phone booth (those days, there would be long queues since mobiles were not so affordable) and felt remorseful talking to him since he would keep harping on my deficit budget and warn me against living on credit.
After my brief stint, I decided to come back to Calcutta already missing my Fish, Rasgullas and Mustard oil (and tired of coconut oil). I started my tryst with investing by buying NSC certificates and claiming 80C benefits. I thought that investment is all about saving tax and that’s it.
In 2003, I decided to get married to my colleague turned girlfriend from my Kerala days. She was a staunch vegetarian Tamilian Aiyer (quite opposite to my non-vegetarian Bengaliness) and it was an eye-opener for me when it came to marriage costs. I made a short consulting stint to the UK that cushioned my financial grief, but that made me wiser. My dad, tired of my frivolous lifestyle, decided to lock me into a financial matrimony with real estate, taking good opportunity of my abhorrence to a joint family jostling in a small 780 sq. ft. flat which suddenly started to look small. He made me book an apartment which was 8 or 9 times my Annual Salary, forbade me to take a loan and assured me to help with his superannuation funds if I get into trouble. The financial crunch started. I was forced into frugality since if I would overspend, my EMI would surely slip out and I would dip into my father’s nest egg which I detested.
My company deputed me back to the UK along with my wife within months of our marriage. I made every penny count and tried to live frugally beyond my means. I rationed everything. By 2005, my company went with IPO and the office was buzzing with discussions on Capital market and Demat accounts. I was hearing the “noise” and trying hard to understand it. I missed out the IPO since my dad said; share market is gambler’s market. Vajpayee-ji lost the 2005 elections and pundits started to sell their stocks. I came across my first research website, Value Research and started reading them voraciously. Then decided to take the plunge in the Mutual Fund route. But, some website caught my attention of Markets being overvalued and it seemed forever when the markets will come to a “reasonable” value. As I said, too much reading was making me confused.
Then one day in May 2008, when I was walking through the British countryside, the other part of the world was witnessing mayhem at the collapse of Lehman Brothers. I though it is my moment and decided to give my investment journey a kick start. I made lump sum purchases of my MF schemes. No goal in mind, no return in mind, just a mindset to get into the markets. I started reading Value research all the more and never looked back. UPA 2 came to power in 2009 and all my investments were back with great returns and made me even more optimistic.
Alas! My obsessions with Star ratings made me switch, redeem, and churn so often that I lost on exit load, short-term capital gains and meagre returns. I slowly abrogated lofty wishes, prayed for my capital remains intact and started venturing out into thematic funds, gold funds in search of “good” returns. I had no idea what is an ideal return figure and naivety to every sundry advices from friends, colleague or news anchors influenced me to make scattered investments with no specific purpose. Again, too much reading was taking its toll!
Then, in June 2012, one colleague gave me freefincal to read. For one long year, I started to read all of his old and new posts and the entire treasure trove of knowledge overwhelmed me. I had to undo everything I learnt, break every thought process and re-learn the basics of financial understanding. I started afresh and threw all the garbage that I had in mind. The mathematical insight at freefincal stirred my engineering and rationale mind; And this time (and first time), too much reading made me wiser and gave me light!
Therefore, I must admit, much of my financial planning started from 2013. I began with fortification. I used the life insurance calculator and took a term insurance as per the calculated value. I then took a health insurance cover, critical illness cover and personal accident insurance.
Then, I looked into the Integrated Financial Planner. In a word, I believe this is the best, comprehensive and most innovative tools that Pattu-Sir has built. I started to design my goals, assign values to goals and finally started to get enlighten. I framed the first baseline “It is not important how much return your portfolio earned, what matters is, can you reach your goal with the return the portfolio is currently earning?”. If the amount to invest per month is within your investment budget, then the answer is yes. Since the Integrated Financial Planner factors in inflation, hence till the time I would find my SIP amount is equal or greater than the SIP amount suggested by the tool, I can safely assume that I would meet the target someday.
Later, I decided to manage my monthly budget in an inverted way. Initially, I used to spend and then invest. Now I do the opposite. I make sure that SIP amounts are first removed from the salary and parked somewhere else. Then I pay off the utility bills from the bank account and avoid using the credit card in this purpose. I keep a strict eye on the consumables. I buy the groceries and use the loyalty card and redeem them very often. I use credit card to buy the groceries to get 5% cashback. But I settle the credit card dues sharply without fail on 30th of the month. I would also use opportunities like Big Bazaar Profit Club that gives you Rs.2000 for every Rs.10000 (and think it as FD giving me 20% returns.) In this way, I make a fixed monthly contribution to the home budget. In some months, some discretionary expenditure will cause deficit budget and I always try to make good of the budget deficit in next month.
My annual planning would start with Section 80C contribution by start of financial year. Section 80C declaration, for me, must finish within one month of the start of FY. Then I would concentrate on Section 80D and that has to finish within 3 months of start of FY. My Life Insurance premiums will be kept aside every year in a corner in the savings account which I shall conveniently forget. I will plough it when Premium reminder will come. Also, I replenish an equivalent amount in that corner of the Savings bank for next FY. That is expenditure for me. Car insurance is next and that will be an expenditure which will come from capital expenditure account. All AMC’s will be renewed and premium will come from capital expenditure account.
On Mutual Fund selection, I use the Mutual Fund Screener. More importantly I study the downside protection sheet to see the downside and upside capture ratios. I keep my vigil on the Morning Star analyst ratings and read Mutual Fund Insight from Value Research. My decision swings are far too less now and keep the reads for information and awareness purpose. My latest ambition is to move to Direct mode completely which I have not yet done since I wanted to make sure that my nominee finds it easier to navigate through the subterfuge of financial instruments.
Every year, I visit multiple engineering colleges to recruit young engineers for my company through campus interviews. I must say, every year, it is an experience. Some young engineers would brazenly ask compensation structure, overtime and weekend working and sabbatical at their own whims and fancies. Some will simply ask no question and take anything that comes their way. But, almost all of them who would join will have the same syndrome within 1 year. They will start enquiring if they will be H1B visa holders that take them to the faraway land of opportunities. Facebook and WhatsApp rub salt on these wounds when people post photos of being in Las Vegas and riding fifth-hand BMW. And the new ill of them is “Loan”. Either their parents have taken a huge loan to educate them. Or they themselves have fallen in the plastic currency trap with huge debts piling up. Some will buy an expensive car or bike, flash a Gucci watch and give you a scornful look if you enquire about the awareness/stability/planning of their personal finance. You have become the villain as if the company derives sadistic pleasure by paying “decent” salaries and depriving them of obnoxious salaries like McKinsey or Gartner.
I must say, today’s compensation structure is matured and very little room exist to expect astronomical figures for the average engineers churned out every year from every nook and corner of India. It is us, who need to be matured and self-reliant to handle personal finance. Blogs like Freefincal and AIFW give you that guidance of how they should approach this subject. Please start with Ebook: Starting Early and Starting Right from freefincal. More you read, more would be your resolve to act on it.
Today, 12th Jan is the birthdate of Swami Vivekananda. I have tremendous reverence for his message “Arise, Awake and Stop not till the goal is reached”.
I take this day to give a call to all young Indians to come out of the hypnotized world of consumerism, the euphemism for “All is well”. It is you, who shape your destiny through relentless pursuit of knowledge. You can be romantically communist but need to be pragmatically capitalist when it comes to Personal Finance.
The profound impacts that communities like freefincal or AIFW has on my finances are enormous. I feel blessed that they have imparted precious financial education that I am able to judge between right or wrong financial advice, maneuver my way out of mis-selling traps that are ubiquitous in our everyday life. To quote Swami Vivekananda again, “Education is the manifestation of the perfection already in Man”.
I end my note with a thank you to Pattu-sir for giving me an opportunity and allowing me to share the immense benefit I have procured from your relentless pursuit of disseminating knowledge.
This is the second reader story published. The first is here: Reader Story: A Force Awakens!
I invite interested readers to share their money management journey either here as a guest post (please email me or leave a comment before writing) or you could join DIY Investor's Forum and post it straight there from time to time, updating your progress. It will make a difference -trust me!
The aim of this series is only to share experiences and motivate each other. While I am delighted to have played a small role, this series is not meant to be self-indulgent.
Please join me in thanking Anish for sharing his journey with us.