by There is one thing common among all human beings – that is that they’re all different.
It’s the same with our aspirations, beliefs, and circumstances. They’re very different even when we’re in the same age group, or if we studied in the same college.
That’s what makes financial goalsetting a rather unique planning with no one size fits all solution.
Here’s Mr Bean’s journey, his situation but the process he followed could benefit others as well.
- Confide in someone who knows: There is a concept of a sniper approach versus a machine gun approach in management. A machine gun approach would be to keep discussing with every one and any one would your problems It doesn’t help you one bit and leaves you more confused. So, decide who are those knowledgeable people in your circle who would be willing to help, and then confide in them.
- One such set of people I kinda trust is the bank I have been using for over 15 years and so, as a starting point I had a discussion with them with an open mind.
I am sharing the key points from the first (sensible) discussion I have had with them on the subject.
Major gaps in my portfolio identified:
- Term plan for myself and my wife in accordance with your age, income, lifestyle. In their view mine should be at least doubled and ideally tripled in terms of the cover. Wife doesn’t have a major one, so that should soon be added.
- Post you’re 43, a life insurance would require a full body check up and would substantially increase the premium, so go for it before that age.
- Son’s Education Cover: Key points we discussed were the corpus needed by the time he’ll be in undergrad and post grad, the current and expected college fee when he gets into college. Current according to them being INR 10-15 Lacs INR for Grad and 20-25 Lacs for Post grad. This is assuming the education happens in India, and abroad would be much more expensive. My first reaction was, “It can’t be that high!” But a simple google search convinced me that they weren’t wrong.
- Daughter’s Education Cover: In addition to the above, we also discussed that the Sukanya Samriddhi Yojna which I already have for my daughter, is indeed a good investment.
- Retirement: Although that might be relevant but for the time being, I prioritized the Education goals as the top ones, and agreed that the Term Insurance may be a good idea as well.
What’s Your Risk Appetite?
They have a clear idea about my risk appetite – Conservative and Investment Protection are my personal risk scores. Coming from a middle class Indian family, I’d consider safety of principal over the lure of high returns hands down.
Narrow Down Your Options
They have suggested two options for my goals:
- Short Term Debt Funds with underlying assets being Bonds which could be Government or Corporate bonds. Given my low risk appetite, they would go for AAA rated bonds to ensure my credit quality.
- Guaranteed Option with underlying asset as Government securities and Bonds. There is zero equity exposure which makes is a predictable commitment that comes through a contract. the returns from this option are also tax free.
Of course even within these there are multiple options available, but the subject matter experts made it customized for me to offer me what I would need instead of offering everything and leaving me confused and frozen.
We ended with two next steps, for me to decide the corpus needed for my son and daughters education when they reach that stage, and one for them to share with me the details of Guaranteed option. After all, I must be 100% clear with what I’m signing up for, even before we meet.
I requested to keep the Short Term Debt details on the back burner for now, so that we could go step by step on this rather educational journey for me.
I’ll now go over what they’ve sent me and meet with them again to clarify any doubts I have.
Well, that’s my approach. And how do you define your financial goals? Do you even define them at all. Would love to hear more from you.
Until next time, this is Mohit signing off.