How financial planning helped this Mumbai family

In India, where the traditional joint family system is evolving, and the burden of elderly care is increasingly shifting to individuals, retirement planning has become even more critical.

Yet, many Indians remain unprepared, prioritizing current expenses over future security measures. A 2020 survey by PGIM India Mutual Fund revealed that the majority of Indians prioritize immediate spending over long-term safeguards like retirement and health insurance.

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The report highlighted a troubling reality: more than half of the urban Indian population is unprepared for retirement. Cultural factors contribute significantly to this oversight. Many Indians rely on their children for support or assume their inheritances will suffice, often underestimating the potential for unforeseen expenses and inadequate savings.

A different approach

Sushant Navale, a Mumbai-based IT professional, stands out as someone who proactively planned his finances without assuming support from his parents.

Navale’s portfolio was heavily weighted towards real estate—about 70%—a common investment choice but not always the best for retirement planning. Realizing the potential pitfalls of relying solely on property for future security, he sought professional advice from financial advisor Harshad Chetanwala in 2021 to craft a comprehensive financial plan. This decision prompted Navale to diversify his investments, ensuring a more balanced portfolio for a comfortable retirement.

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“Many times when we interact with families, they tell us about possible inheritance they expect in the future. Our suggestion is simple: we should not consider it in the plan at present and add it when such an event takes place," said Chetanwala, an investment advisor registered with the Securities and Exchange Board of India, and co-founder of Mywealthgrowth.com.

Initially, Navale managed his finances independently, with most of his portfolio in real estate. The family made a significant investment in commercial real estate in 2014-15 to start a healthcare facility business, but eventually rented out the property instead. This investment formed a major part of their portfolio, almost 70%.

“Before seeking help from a professional advisor, we were making haphazard investments, especially in real estate," said Navale.

From real estate to mutual funds

Recognizing the need to align his investments more closely with his long-term goals, Navale began allocating a greater portion of his funds to equity mutual funds. Earlier, his portfolio consisted of 70% real estate, 17% equity, 10% gold and 3% bonds.

He realized that his previous conservative approach needed diversification for better long-term returns. Navale’s allocation in real estate is now reduced to 60%, and his investment in equity mutual funds has increased to about 30%. He also plans to sell off the real estate on finding a suitable buyer.

“If we get an opportunity, we would like to move out of that. Our plan is to invest 25% of that amount in FDs (fixed deposits) to plan a bigger home, and the balance 75% of that amount we would like to reinvest into equity MFs," said Navale.

This transition involved a careful selection of funds that matched his risk tolerance and financial objectives. “Initially the market cap allocation was mostly large cap, now it has shifted more towards midcap and flexi-cap funds," added Navale.

Financial goals

After Chetanwala’s advice, Navale decided to build a corpus for each financial goal. The family plans to accumulate a corpus of ₹10 crore for a comfortable retirement, 17 years from now.

For his children’s education, Navale aims to accumulate a sizable corpus for Shomili, his elder daughter, to meet her higher education expenses in medical school, and for his son Shamit’s future studies.

Apart from this, the family plans a vacation once a year, usually investing in short-term bank deposits for this goal.

Strategic approach

Previously, the family lacked a structured approach to their financial goals. However, after receiving Chetanwala’s advice, Navale and his wife Snehal made a conscious decision to allocate a fixed amount every month towards their goals. Both initiated investments through systematic investment plans (SIPs), marking a significant shift towards a more organized and goal-oriented financial strategy.

“Earlier, there was no planning per se. There used to be anxiety about whether we were saving enough. Given that this is all goal-based planning now, that anxiety is no more there," said Navale.

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“We now set aside a certain sum monthly, calculated as income minus investments, before allocating for monthly expenses at the start of the month. This approach brings us a lot of peace of mind. Together, we invest around 30% of our monthly income. Additionally, whenever I receive bonuses, which are half-yearly or yearly, we invest that additional corpus into mutual funds," he said.

Safety and protection

As both Navale and Snehal are earning, they decided to ensure they have sufficient life cover. Navale pays a premium of ₹55,000 a year for a cover of ₹2.5 crore, while Snehal pays approximately ₹45,000 annually for a cover of ₹2 crore.

Regarding health cover, until the last financial year, Navale primarily relied on corporate health insurance. Now, both have separate health covers of ₹10 lakh each, in addition to the corporate cover, following Chetanwala’s advice. Previously, this cover was ₹5 lakh each.

Navale and Snehal also opted for an additional critical illness cover, providing ₹10 lakh for serious health conditions. The annual premium for this cover is ₹2,700 each.

The family has also set aside a six-month emergency corpus of about ₹15 lakh, invested in FDs. This corpus was about ₹7-8 lakh four years ago.

Lessons learned

Navale emphasizes that people should start planning their finances early in life to minimize uncertainties and invest more effectively.

“One thing always at the back of our mind is that maybe we could have planned this a little earlier. So, maybe at the age of 35 or between 30 and 35, as a family, if we could have planned this, probably we would have invested more," he said.

“I advise all the youngsters in my family to start investing early because it reduces uncertainties or anxieties about where you will finally reach. Today’s generation often makes impulsive decisions, and a bit of planning will certainly help," he added.

Navale stresses the importance of having adequate cover. “I think having adequate cover is an absolute must. Knowing that we are sufficiently covered in terms of life and health gives us a lot of comfort," he says.

“For the success of any financial and investment plan, the key is the sincerity and commitment of the investors and their families. Both Sushant and Snehal have been absolutely committed to their plan right from the beginning, making the overall journey much easier for them and us too. They will achieve their financial goals mostly because they value their money and investments a lot. They strike the right balance between enjoying their present and investing for the future," said Chetanwala.

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