I always wonder why it is so difficult to talk about money even with your spouse. You are comfortable talking about almost anything under the sun, but talking about money seem petty and crass. To my surprise some women refuse to do it even when they have a gun to their heads.
Why should you wait to be pushed against the wall to have a conversation? Marriages are meant to last a lifetime and it is impossible to traverse this journey without discussing money. At some point of time in a relationship one needs to move from Mine to Ours.
Read our latest article, published on Moneycontrol.com
The year seems to have flown by quickly, with less than 4 months left for it to end. As I look back at the things I planned to achieve, one stands out – getting fit! This has been on the list for nearly a decade and this year, I finally managed to get somewhere close. This journey of mine towards fitness, has many parallels with people trying to get financially independent and this has helped me understand and empathize with customers better, by looking at the need for financial planning, being in their shoes.
Phase 1 – It’s a breeze, I can do it myself. I don’t need a trainer
When I decided I wanted to get fit, I thought it would be a breeze, and now that I had decided, all I had to do was do a bit of exercise and eat smart. I could not understand why people engaged with a nutritionist and trainer. What a waste of money and time, to do something as basic as getting in shape, I thought.
Armed with the newfound motivation to get fit, I did a bit of walking, changed my eating habits very slightly and looked at the weighing machine with hope every few days. It just refused to move. This whole phase lasted a few years. There was no consistency in my effort, and though the intent to do it right was very much present, it always kept getting pushed to “tomorrow”, which obviously never came.
I see many parallels to this in the journey of people trying to achieve financial independence. Many of them start out saying this is common sense, just save every month and very soon you will have a good corpus. The amount they save has no correlation to the goal they are trying to achieve. The investments are dipped into at the slightest of provocations. The newly launched phone, a lavish birthday planned, are all legitimate reasons to put the savings on hold.
I often tell people – don’t kid yourself by starting an SIP for a miniscule amount, its only a tick mark activity, and unlikely to ever take you anywhere on your path to financial freedom.
Phase 2 –I need a bit of motivation and help, nothing personalised, let me join a group
It took me a few years to wake up to the fact that my walking and working out on an irregular basis was not going to deliver at all and I did need some help. I decided to be smart and achieve the target by joining a running group. It was of course better than phase 1, and since I had paid up, I did manage to train 3 times a week and made some fabulous friends. It was also a good point of discussion in many social gatherings on how I trained for marathons. Yes, I did manage to do a few marathons. Neither did my timing improve nor did I lose any weight or inches. I can now honestly say that I was nowhere near my definition of fitness.
Again, in their financial independence journey, I see that most DIY people at some stage, sufficiently alarmed by the years passing by and the savings pot not growing in tandem, move to seeking advice from some form of website or robo-advisor or even “tips from knowledgeable friends” where they get advice instantly on where to invest and how much. There is a sense of achievement on being more systematic with investments. There again, they may end up saving more than they did previously but are they really taking their entire unique situation into consideration and moving comfortably towards their financial independence, is something they need to ponder on.
Phase 3 – I need proper personalised guidance to help me get on track and stay there, let me engage with a professional
I finally realised that if I seriously wanted to get fit, I would need to engage with a professional who knew his job and so, I enrolled with a personal trainer. I now realised the difference between what I was doing in the name of exercise and what it really meant to exercise. I was consistent and trained 3 days a week without fail. I started to lose inches and feel more energetic. The weight wouldn’t budge. I realised that I would not only need to exercise but also ensure that my nutrition was right if I were to get anywhere close to being future-fit from a health point of view. I then visited a naturopath to get rid of some of my niggling health issues. My stated objective was to get rid of allergies, my secret hope was to lose weight. Major lifestyle changes were suggested by her, give up on sugar, no processed food and a lot of other changes. I followed advice strictly. The initial few weeks were very difficult. Despite giving up my favourite food, there was no improvement. It took few months for the changes to be seen. And a few more for people to comment on it.
A journey towards financial security and independence is similar, your situation, goals and aspirations are unique and hence advice that is personalized keeping those in mind will hold you in good stead. Similar to the above story, just concentrating on one thing, investments, is not going to be sufficient to get you to your destination. Apart from investments, you would also need to look at your spending and income. Like with my weight, you may secretly aspire for a certain return. You may peg it to the best return you have got over a life-time and evaluate your investments against your benchmark. Your planner will not even be aware of what you are anchoring your expectation to.
Financial planning requires you to see much beyond returns and wait patiently without losing faith during turbulent times. At least in the above case of my health, results started showing in a few months post engaging the right professionals. In case of your finances, it may take a few years for you to see meaningful results. In the interim there is only pain, since you will need to cut down on unnecessary expenses, ensure you invest smartly and stick to it even when you see you are getting unsatisfactory, maybe even negative returns.
Again, unlike the fitness story, there is no before- and after- picture to flaunt, all you will have is peace of mind that you are well prepared for your future. No one is going to compliment you on your financial health, unlike your weight. What you will see though, is that you are inching closer to your life’s goals, sometimes because of your returns and sometimes despite your returns. Either ways, having someone who has your back through the journey and motivates you to stay the course and steer you clear of some impulsive emotional actions can be invaluable!
Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.
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“If you don’t know where
you are going, you will probably end up somewhere else” – Laurence J. Peter
are two reasons why people don’t achieve financial
independence, despite being able to. I have earlier written about one
reason, which is the importance of “understanding (as against
underestimating) the long-term”. Today, let us talk about another, which I have
termed (a bit simplistically) as “lack of direction”. Lack of direction here
pertains to 2 important aspects of our personal financial “kundli”, which is
unique to each one of us.
The first is about knowing how good (or bad) is our financial situation with respect to the quality of life that we are leading currently. As a people, we are savers, and most people we meet usually show fair diligence in terms of managing their personal “fiscal” situation. A few times though, we do come across clients who need help in managing their “personal budgets”. Where this goes awry usually is in terms of either having excessive debt, especially of the wrong kind (to fuel a lifestyle which threatens to become unsustainable) or being prone to impulse big-ticket purchases – either for unplanned holidays or gifts or expensive goods to add to their home.
situations are relatively simpler to address, since all it requires is enabling
people to “allocate” their incomes to different “wallets” and to have the
discipline to do this consistently, month after month. There are easy tools
that do this such as maintaining separate accounts for incomes and expenses,
using pre-set sweep-outs to ensure regularity, maintaining the savings in a
not-so-accessible demat account, and having a monthly income-vs-expenses check.
second aspect is about how well are we preparing to face our future financial
needs. While most people have a handle on their present financial situation,
when it comes to knowing how prepared they are for their future, most are fairly
unprepared. Here, what’s interesting to note is that while we are good savers,
we aren’t necessarily good investors. This could be because our investing
decisions are usually ad-hoc, driven by what friends and acquaintances tell us
or to meet our aspirations.
a few clients we meet don’t necessarily know what they are investing for (except
that it seems to be a “good” avenue for “returns”) and what is the “outcome”
that they desire from this investment. A key “minimum qualification” to become
a good investor is to know what one’s financial goals are, which part of one’s
investment portfolio addresses which goal, and with what compatibility.
easy tool for this is what is simply called a “personal financial plan” which maps
your savings and future investments to your goals, and also recommends the best
investments to achieve the goals in the most effective and optimum-risk manner.
A good financial plan ensures the right mix of asset classes to provide both
liquidity as well as stability, the right priorities in terms of goal-funding
and the right amount of risk taken to generate the best return, depending on
the time-frame of the investment and the risk-profile of the investor.
financial freedom (or even getting on the road to it with an even chance of getting
there) requires you to know what your future financial goals are, and put in
place a good plan to fund them from your savings today, thereby giving you the
peace of mind that you are not compromising your tomorrow. A good financial
planner, whose interests are aligned to yours, can help you put this together
for a reasonable fee, while taking the load off you entirely in terms of
monitoring and course-correcting, allowing you to live your life fully in the
Finwise is a personal finance solutions firm that helps individuals and families plan for their financial goals, follow their passions and achieve financial independence. For consultations, please reach us at email@example.com or +91 9870702277/9820818007.
Our fifth Finwise Woman is a someone who has lived life on
her terms, and built financial security for herself through sheer perseverance.
Kavita Krishnamurthy is a successful executive, working as a General Manager in
a logistics firm, and a mother of one.
“As a senior executive, and parallelly an independent mother, I have learnt to be cognizant of managing my funds well and conserving my resources optimally. Without any such backing and support for my future, some far sight and advice taught me well to keep my future secure and dependable.
Financial awareness and the right investments have been largely catalytic in helping me manifest these goals. It is indeed a matter of pride to reflect upon how far I have come in life thanks to my prudence and ability to take anything thrown at me and make something worthwhile out of it.
Being on top of your finances is not a choice, it is a compulsion, especially so for us women!”
Our next story is about another doctor, a scientist from the
reputed Tata Memorial Cancer Hospital, Omshree Shetty.
Dr. Omshree says,
“Come to think of it,
how many women have access to top class education and circumstances
conducive to building a career? Given the opportunity it is important to make
the most of it and build a strong and independent financial base. It is a
non-negotiable step to be able to have choices in life and exercise them.
Being a professional myself, I am a strong advocate of seeking professional help in areas outside one’s expertise to help one live a fulfilling life.In this era of women empowerment, the true sense of independence that women can enjoy is financialindependence and that can be accomplished with careful planning and smart investment. So be wise, invest smartly and live with peace of mind and happiness.”
Today’s first Finwise Woman story is about another strong
woman, who, in an era of male dominance, has been an inspiration for many other
women. She is Dr. Neela Dabir, Dean, School of Vocational Education at the
internationally reputed Tata Institute of Social Sciences.
Incidentally, while her spouse is a very successful surgeon
in his own right, she is usually the one involved in the finer details of their
Dr. Neela says
“I have always been
interested in money matters, and I go the extra mile to keep myself updated
with the latest information and trends. In fact, my CA appreciates that I
understand the financial matters for both of us. Being on top of things and
constantly monitoring the how and why are important to me and give me a lot of
I truly believe that it’s important for financial decisions to be joint, failing which, one must at least be informed of where the money is being spent or invested. Every one learns to cope when forced to, but doing so voluntarily can take away a lot of unwanted stress and mistakes when you can least afford it.It is equally important to hire the right professional who places your interest on top and I have Prathiba and Finwise doing that for me by bringing all our finances together meaningfully and helping us live our dreams, while knowing that our financial future is being secured.”
The interim budget was presented on 1st Feb 2019 and has already receded to the background in most conversations. Now that the dust has settled as well as clarity obtained on a few new proposals, it is a good time for us to look at and quickly recap how this year’s interim budget weighs upon our personal finances.
The one thing which is usually on every salaried person’s wish list from the budget year after year is tax breaks, and this time we did see some welcome changes. A lot of positive moves for those in lowest tax bracket and some for the mid and high-income category too.
No tax if taxable income below Rs. 5 Lakhs, standard deduction raised from Rs. 40,000 to Rs. 50,000
Rebate of Rs. 12,500 has been given to people with taxable salary of upto 5 lakhs, thereby ensuring that people belonging to this group will pay zero tax. Note that if your taxable income is higher than Rs. 5 lakhs you will continue to pay 5% tax for income from Rs. 2.5 lakhs to Rs. 5 lakhs.
The key word here is taxable
income, meaning income after considering all deductions. This means
that people with gross incomes higher than Rs 5 lakh, in fact upto Rs 10.35
lakh can end up paying zero tax, assuming the person has made maximum
investments basis eligibility.
The attached table clearly
illustrates how a person with gross income of 10.35 lakhs will still avail of
the rebate and end up paying no tax. This is for someone with no HRA, donations
or education loan, a person having any of the above will end up paying no tax
on even higher incomes than Rs 10.35 lakh. The fact that a person earning close
to Rs 90,000 a month can end up paying zero tax if she plans her investments is
a huge positive.
The standard deduction which was at Rs 40,000 has now been increased to Rs 50,000. This benefit is available to people across all income slabs and not just < Rs 5 lakh pa.
Limit for deduction of tax at source (TDS) for interest on FD has been raised from Rs 10,000 pa to Rs. 40000 pa
This will come as a relief to
many pensioners as well as people having FDs as a contingency asset. With lower
limits of TDS, one needed to fill forms and submit it on time to avail of non-deduction
of TDS. This will be a welcome change making the process hassle free.
No tax on second self-occupied house on notional rent
People having two houses were
required to pay tax on notional rent on the second house, even when they choose
not to rent out their premises. This is a very thoughtful benefit and has been
extended given the fact that the number of working couples who are forced to
work in different cities to pursue their careers and build their lives is
increasing. Hence going forward, people who have two houses due to various
reasons can now breathe a sigh of relief.
You can reinvest your long-term capital gains in two houses instead of one.
If long term capital gains
accrued on sale of a house does not exceed Rs. 2 crores, then you can avail
capital gains re-investment benefit across two residential houses instead of
one under section 54. This benefit is available to an individual only once in a
lifetime. This again is a thoughtful benefit extended, keeping in mind inter-generational
purchase of houses, due to greater nuclearization of families.
However if the capital gains exceed
Rs 2 crore than old rules will still apply and to avail of the benefit you will
have to invest in 1 residential house.
In our opinion though, in case
one is not obliged to re-purchase a house (to meet familial needs), it will
make better sense to invest capital gains in Sect 54 EC bonds for a period of 5
years rather than locking up capital in in low-yielding real estate. Post the
lock-in period, one can look at financial assets which have potential to make
much higher returns.
Pension for unorganised sector workers
In our opinion one of the highlights of the budget was the pension scheme announced for unorganised sector workers. We all see our maids, drivers and numerous other people struggling to make ends meet and retirement is definitely not on their priority. Pradhan Mantri Shram Yogi Maandhan Yojana promises a minimum pension of INR 3000 pm at age 60 on minimum monthly contributions. A 29 year old, will need to deposit INR 100 a month to avail of this pension. This scheme now provides a much needed social security net for the huge number of unorganized sector workers across the country and each one of us should ensure that our safety nets ie. our domestic helps avail of this scheme so that they too can have their own safety nets.
Finwise is a personal finance solutions firm that helps both residents and NRIs plan for their financial goals, follow their passions and achieve financial independence. For consultations, please reach us at firstname.lastname@example.org or +91 9870702277/9820818007.