Why my investments are still on track in spite of job loss and lower income

Published: February 14, 2021 at 11:07 am

Last Updated on February 14, 2021 at 11:07 am

In this episode of ‘reader audit’, Nathiya shares how her approach to investing has evolved, guidance from Ashal Jauhari; why she sold all her shares and how her family could cope with job loss and reduced income still managed to keep their investments on track.

As regular readers may be aware, we publish a personal financial audit each December – this is the 2020 edition: How my retirement portfolio performed in 2020. This time, we asked regular readers to share how they review their investments and track financial goals.

Every year twice, I used to receive emails on investment types and tax benefits in my company. I used to read them and ignore it by thinking that it is not safe. I had studied mutual funds as part of my MBA course and always remember the wordings “investments are subject to market risk” hence I should avoid it! Though I was not a spender, neither was I an investor. 

There was a change in my life when I listened to FIRE video by Pattu sir shared by Va. Nagappan sir on his Facebook page. Somehow, I was convinced by the way sir was explaining and felt that I could no longer ignore the markets and its risk. 

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My investment journey started with NSC bonds three years back right after my marriage for myself & spouse for 80C in Feb 2017. Then again in Jul 2017 NSC was the option for us for the next tax year. We chose NSC as my husband had invested a few thousand due to a friend who was an Agent. As with any frugal spender, I had saved around 15lac and was planning for a piece of land. However, my husband chose to purchase a two-bedroom house in an apartment due to family pressure. Though I never liked to own an apartment, we bought it with a housing loan from SBI. This is our first liability, and it is a joint loan. I tried to check on the tenure and EMI and choose ten years because the EMI was within 30% of the take home. 

Please be careful in buying decisions when the brother or sister is constructing a home. That makes the parents and in-laws push the other son/daughter to buy themselves and end up in liability. 

 When I was interested in investing in Mutual funds, I asked my friend Rajesh and shared the funds’ names and opened an account with Aditya Birla Money. Stared with two funds and three months later added four funds. 1500/month in each fund was my investment for about eight months. Also got to know about Zerodha and opened a Demat account. Purchased five stocks for 50K and sold within a month. Landed with 2500 shares of Vodafone (Rs 20)and 20 shares of yes bank (Rs139). 

After having started reading freefincal.com, I got to know about Asan Ideas of Wealth and joined there. The “BASICS covered” question is as simple as possible, but not everyone executes it immediately. It took three years to do one by one for me.

Jan 2019, I purchased a Pure term plan from Aegon life for 75lac up to 55 years. I chose Aegon since it was low cost. I chose up-to 55 since I thought I would be financially independent by that time.

Did not buy Health insurance since my husband was in PSU and I had health cover provided by my employer at that time. Now finalised the policy and might have purchased when this article gets published. I am using Star Health Optima plan since most nearby hospitals are a network hospital with this insurer. We are the family of 3 and decided with 10L deductible and 50L super top-up. Beyond this, we may not be able to afford insurance costs and increase based on future need.

 After reading about the Fee-only planner list from freefincal.com, we met the independent financial planner (Fee-only) to get the idea of financial planning and drafted the plans with numbers. We had drafted seven goals (Child Education-15L, Child Marriage-10L, Retirement(monthly income 45K, Family weddings(6L) Farmland purchase-35L, Starting own business-10L, Home renovation – 2L every six years). After the plan got drafted, the planner suggested one AMC  for each goal with debt and equity funds separately hence tracking the goal is easier.

He introduced Kuvera, and that is when I was reading freefincal extensively and got to know I was investing in regular plans. Stopped all the SIP with Aditya Birla Money and started with just one goal re-alignment from existing funds. I had four tax saving funds and could not withdraw as it was with-in lock-in period. I have been listening to many freefincal You-tube channel videos though I did not understand all the videos 100%.

 I got to know my job loss in Nov 2019. I was completely broken since I thought I was in a good job and could achieve financial freedom in 10 years for all the above goals. Also, I was the bread-winner in my family. The EMI was looking like a burden in my eyes, and I even thought if I had put the savings in FD, I could earn a spare income to support daily chores than buying a home which we don’t live in. It needed a lot of strength to come out of the depression and look for a job. I live in Coimbatore, and getting a 5-day job is a nightmare here. This was when frugal living helped us think about our financial position, and we both discussed how we would manage without an appointment and with a low pay job. We were clear that without me working, it will be impossible to save anything.

 With God’s grace, I got a job near home, and it was with 60% of my salary. I did accept since it offered a general shift and five days of work. We did plan again and re-looked the goals. We decided to stick to major goals and choose four listed in their priority viz Child Education-15L, Child Marriage-10L, Family weddings(10L) & Retirement 65L. Child education and marriage are just name shake, and I thought to keep 2 with the same term as 15 years since the child is 3-year-old. I would pull from the marriage fund to education if needed. With these two goals together, I can guarantee an Engg degree in my city /doctorate in science. I felt this would be a fair play within our means. I know that my retirement plan is not adequate, but I cannot do more with my income limitations.  This is 16 times of annual expenses at current. I can add up to this kitty more only when I fulfil all other goals as those are my top priority.

 No longer availing Fee-only advisor services as my idea got shifted due to job loss and learning a few things by self-study. Interacted with Ashal sir and felt I could go for index funds rather than worrying about performance. I chose the Nifty 50 index from UTI in June 2020. Choose to sell the two stocks and own no shares now. I choose to invest from AMC websites directly. Thanks to Ashal sir for being kind to me for my novice questions. 

 The plan review

We created an Emergency fund for 5L. This fund is split into two parts. 60% in SB account as online FD. 40% in arbitrage fund. EMI is running parallelly and two years are completed. 2035 is my target year. The assumed rate of inflation is 8%. Fixed income post-tax expected in 7.5% and the expected return from equity is 12%. I am aware that anything above 10% is not predictable, but this percentage gave me the confidence to achieve the goals with 60% equity & 40% debt.

The additional investment is planned at 4% with no decreasing equity at this point. I have a placeholder on the two goals(family weddings & retirement) for more time and keep them with the same equity exposure. I think to pull the money from 2027 for education 10% each year. By the time, I will probably know what course my child will be doing and hence pull out the fund saved for marriage. 

My entire debt is in PF, and it stands at 59%, and my equity is at 41%. My NSC investments mature in 2022, and with that, I can bring it to 60% in 2022. I can only create a debt fund when I achieve the desired ratio of asset allocation so expecting no rebalancing till that time. I have achieved so far, 10.2% of my desired target corpus.  My sincere thanks to Pattaibiram sir & Ashal sir for their guidance. 

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About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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