Posts Tagged ‘Life Goals’

“A dream is just a dream; a goal is a dream with a plan and a deadline.” – Harvey Mackay

Each one of us has some dreams which we want to achieve. It could be sending your child to one of the   best universities, taking a world tour, giving back to society, etc.  These will remain just wishes unless we articulate them as goals which we would like to achieve. Each of us is in different stages of our lives. Therefore goals and goal priorities will differ based on your age and circumstances. So how does one go about planning for goals?


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What you need to do?

The first thing that you need to do is to know what you want to achieve. For this you need to articulate your goals well. Know your goals. Write them down. Attach time lines to each of them. Know what it will cost you today to achieve them. Apply inflation to it to know what it will cost you in the year your goal will become due.

How you will do go about doing it?

  • Priorities: Arrange your goals in the order of your priorities.


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  • Review your existing assets and allocate them to your goals: This will help you know how much more you need to invest. In the process of reviewing your existing assets you might want to do away with the assets which have not been performing or correctly understand the reasons for the same. Book losses when required so that you can start fresh new investments.
  • Before starting investment know your risk profile. Do not determine the risk appetite based on your need for higher returns. Decide based on a combination of ability and willingness to take risk. If you are an aggressive investor, do not allocate 100% into equity. Similarly, if you are a conservative investor do not just stick to fixed income investments like PPF and Bank FDs. You need to have an asset allocation in place. The basics of investment like diversification and a need for asset allocation will not change whether you are an aggressive or a conservative investor.
  • Choice of asset class: Have a mix of debt, equity, real estate and gold in your portfolio. Align your investments in line with your goals. Decide based on how far away you are from your goal. For longer term goals allocate higher proportion to equity and real estate. Having more exposure towards debt and other low risky assets could yield returns which may not be inflation beating. Include equity as it will fetch you higher returns if you stay invested for a longer term. Include fixed income as it will provide you safety. Add a small portion of gold for diversification purposes. For near term goals have higher allocation towards fixed income to avoid adding risk of volatility.
  • Choice of product: Within the asset class you can choose products based on your risk appetite and whether the nature of your product matches the nature of your goal. For example you may choose growth option in Mutual funds and cumulative option in FDs in the accumulation stage. On the other hand you may switch to dividend payout options in Mutual Funds and Interest payout options in FDs which will fetch you regular income post retirement. If any product has a lock-in period make sure you allocate money towards it in line with your goals. Keep the liquidity aspect in mind while making choice of product.

If you have not yet planned for your goals, do it now.

“The best time to start was yesterday. The next best time is now.”- Unknown.

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On Valentine’s day, thought I should share a short story with all our readers. Mr. and Mrs. Kapoor were a happy couple, married for over 20 years, when they became our clients.

Mr.  & Mrs. Kapoor were both from the same profession, running successful independent practices, each having their individual incomes. As is usually the case with most couples, both had their own attitudes towards savings, and investments and of course both had their own ideas about their children’s education funding and other goals to plan for.

When they signed on as clients, I realized that just like their thoughts and attitudes, their risk profiles were also very different. Mr. Kapoor believed in aggressive investments, and huge spending. At each occasion (i.e. wedding anniversary, birthday, Valentine’s day etc) he would buy jewellery for his wife. When questioned he would say “Investment bhi aur gift bhi”. On many occasions, I did suggest that it would be a far valuable gift to spend time with your wife to get her abreast of your finances, to create a succession plan and share the same with her. But this was all in vain.

Mrs. Kapoor was more conservative. She would save more and spend almost nothing. Almost all her investments were in bank FDs which were not even beating inflation.

Their financial plan and investment strategy was hence devised after much deliberations and discussions. An important part of their financial plan was to financially coach both spouses to maintain a balance between aggressive and conservative views. It also involved advising the couple about what is discretionary spending and what are investments. This also helped Mrs. Kapoor get savvier about personal finances in general.

And then, one day, the inevitable happened. Mr. Kapoor suffered a cardiac arrest. He didn’t survive the incident. Mrs. Kapoor was shattered emotionally by the loss. Post the incident what followed was a series of meetings with Mrs. Kapoor to help her through the process of streamlining her finances and assets to the rightful holders. In all this, what did come forth is that in the year that went by, the best Valentine gift that Mr. Kapoor gave to Mrs. Kapoor was a succession plan and a detailed understanding of their finances. By investing time in the above, Mr. Kapoor had truly given his wife the best Valentine gift. This gift helped her sail through a mess which could have got created, when a spouse dies leaving a considerable corpus of wealth behind.

What are you gifting to your valentine, this Valentine’s day?

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Siddharth (all names changed) left India for his masters in the US when he
was 21. Whilst he loved the quality of education and the freedom that he
had, he was sure that he would return back to India once he was done with
his education. Whilst still completing his masters, he found a job with a
Fortune 500 company, offering him a very exciting opportunity and an ability
to earn a handsome salary. He decided to take up the offer and deferred his
plans to return to India for another couple of years. One thing followed
another – he started to go out with a colleague at work , Amrita, and before
long, they were in Chennai exchanging wedding vows. Kids followed and Sid
suddenly found himself on the wrong side of 40, living the great American
dream with a nice house, nice car and a happy family. All of a sudden,
whilst speaking to some friends one evening , Sid and Amrita realised that
besides paying down their home loans and cars, they also needed to plan for
the education of their children and their own retirement. Since they were on
their way to India for their holidays in a couple of weeks, they decided
they would discuss it in greater detail once they were in India.

Since I was the financial planner for one of his friends, Sid called me when
he was in India to understand how he could get started with his investments.
As we started to discuss his financial goals, I asked him what his future
plans were.  Was he looking to retire to India or was he likely to continue
to be in the US? Well, well, Amrita and me have discussed this a lot. Its
always wonderful to spend time with friends and family. Life is good in the
US – its convenient, its comfortable and we have a great work life balance.
But if I put my hand on my heart and ask myself where it feels like home,
its when I land back in India. So India it is for us, where we finally wish
to retire.

Thats great, I said. In our experience, this is one of the most difficult
decisions to make for a large number of NRIs, irrespective of which part of
the world they are currently based in. Having clarity on where you are going
to retire to is one of the most crucial decisions to make before you decide
on how your investment portfolio needs to be constructed. Sid was surprised
to hear this and asked me to explain this in greater detail. Why would that

There are two critical reasons for that, I said.

1. Inflation levels in India tend to be much higher than most other parts of
the globe. Whilst the current inflation rates in the region of 10% as per
the consumer price index may be a little higher than normal, they have
ranged between 7.5% to 8% pa over the last couple of decades. Thus, going by
historical trends, portfolios for investors looking to retire in India need
to be designed keeping these high inflation rates in mind, rather than the
low inflation rates that are prevalent in the developed world.

2. Costs of maintaining the lifestyle that NRIs have got used to overseas,
can end up being significantly higher in India. Take for example, the sizes
of homes. An NRI moving from most cities in the US will not only find it
difficult to find houses of the size that he has got used to, but also find
it far more expensive in large cities in India. Thus, he could end up having
to buy more than one apartment and then look to consolidate them, so that he
has more living space. Alternatively, he may need to look at gated
communities in certain locations, that will allow him to get a feeling of
the lifestyle that he has been used to.

So whats a good way to begin, asked Sid.

First of all, its a great idea to get a good estimate of what your
retirement in India are likely to be, as of todays cost. For a lot of NRIs,
this may not be easy to do , as they may not be completely aware of multiple
living costs in India. They may either need to sit down with a close family
member to go item by item in terms of expenses, both recurring and annual,
or sit with a financial planner who can guide them on the various components
and estimates that make up the cost of living for a particular lifestyle in

Once these cost of living estimates have been made, an appropriate
retirement age will need to be established. This choice could either be
driven by the retirement age in the country of residence of the NRI, or by
other parameters such as the ages of children or dependent parents.

Post establishing both the likely costs and retirement age, by using an
appropriate inflation rate, the quantum of the retirement portfolio needed
can be established. Post this,the investment portfolio can be created
keeping in mind the risk profile, expected rate of return,and product
restrictions if any. For example, some investment products are not available
for NRIs or may have restrictions for NRIs from certain geographies to
invest in them.

This portfolio could be a blend of real estate, equities, fixed income and
commodities and could be created using managed solutions like mutual funds
or portfolio management services, or can be created through directly buying
an investment product like a stock, or physical real estate or a bank

There are a few more things to be kept in mind if you are planning to retire
in India

1. Establish the location in India that you would like to retire to, so that
you can start to plan to purchase the ideal home that you would like to
retire to. It is not critical to make the purchase today, if you wish to
retire after 20 years. However, it is crucial to plan for this purchase as
well, so a portion of your investments need to go towards supporting this

2. Start thinking about your plan for some of the assets that you own for example, whats your exit strategy for your current home in Singapore. Its

great for you today because you are working there but what happens to it
when you retire.

3. Different countiries have different tax treatments for global income and
reporting of global assets. Be sure to consult with a tax advisor in both
India and your current country of residence.

4. There may be retiral plans that you are contributing to, in your country
of residence. Please understand how they would work when you would leave the country and go back to India.

5.  Since you will need medical coverage during your retirement, start
buildng a medical corpus or look for a medical insurance cover that will
support medical treatment in India as well.

Sid and Amrita now have their retirement plan in place and are looking
forward to spending their golden years in India. Start thinking about your
retirement location and plan accordingly, if you have yet to decide. I
promise, it will throw up many more questions than I have covered.

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“Jadoo ki Jhappi” gained popularity after its clever use and depiction in the blockbuster Munnabhai MBBS. Medically the benefits of a hug have been well known for a long time with a simple hug helping to lower blood pressure, reduce heart rates and improve blood circulation, amongst other benefits. Just like a hug, some of the simplest things are likely to be the most beneficial for your health-eating well balanced meals in moderation, eating on time, getting adequate sleep, daily exercise and a daily dose of meditation. In much the same way, your financial health can also be well taken care of through the use of some simple steps. These include:

  • Having a contingency/emergency fund of at least three months of expenses to take care of unforeseen job losses/medical emergencies
  • A well controlled expense to income ratio ( ideally less than 65%) and loan to income ratio ( ideally less than 40%).
  • Adequate life insurance to protect your family’s lifestyle in case something was to happen to the primary bread earner
  • Health coverage for yourself and your dependents so that a medical emergency does not derail both physical health and financial health.
  • Insurance for your home that is likely to be your most valuable asset
  • A well diversified portfolio that consists of a combination of investments that have traditionally beaten inflation like real estate and equities, and assets that have fairly predictable rates of return like deposits and bonds.
  • A small portion of your portfolio in gold to act as a protection for the rest of your portfolio.
  • Clearly defined goals for what you want your money to do for you – education for your children, an independent retirement for yourself and your spouse, a larger home,etc
  • A well thought out tax saving strategy that is aligned to your financial goals
  • Undertaking an annual financial health checkup. If you believe you need professional help for this, do not hesitate to seek it.
  • Avoid using products that are too complex and you do not understand
  • Avoid putting all your money into a single investment type or asset class just because it has given the best rate of return in the recent past.


To conclude, the simple things in life are often the most effective and make the most difference, so keep your finances simple and your hug handy. Simplicity should keep you in great physical and financial health.

This article was written by Vishal Dhawan, CFPCM 

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Recent census data seems to indicate that the median household size is now less than four for the first time in urban India. This means that family sizes are shrinking, and over 70% of households are not multigenerational any more. As India as a society becomes more nuclear, planning for retirement becomes even more critical, with children not being a dependable retirement plan any more.

We find that most investors tend to start working seriously on their retirement plans between the age of 35 and 40. Considering that life expectancy in India is increasing rapidly and medical advancements make it very likely that we will live much longer than we currently envisage, creating a corpus that can outlive us can be quite a challenge. To put it into perspective, someone starting his retirement planning at 40 will save and invest for 15 to 20 years till he turns 60, and expect these savings to support him and his family for a 25 to 30 year period.

Most investors have certain investments in their portfolio that are earmarked for retirement. The moot question is – Will those be enough? Since a monthly expense of Rs 40000 per month today would be close to Rs 2.75 lakhs per month after 25 years assuming an inflation rate at 8%, these may just not be enough. So how does one plan to retire rich. Here’s our six step guide:

Step 1: List – Make a list of your current monthly and annual expenses

Step 2: Analyse – Critically evaluate each expense head to see whether these expenses are likely to increase or decrease post retirement.

Step 3: Inflate – Apply an appropriate inflation rate to these expenses to arrive at the likely expenses at retirement age.

Step 4: Estimate – Estimate the corpus required for the inflated expenses to support you during the period of retirement till death.

Step 5: Invest – Evaluate the amount you need to save each month/year to achieve the desired corpus. Invest the amounts in a diversified portfolio that can help you achieve the desired corpus.

Step 6: Monitor – Revisit the plan annually to ensure that it is on track.

Since the rate of return on their investment portfolio is a variable that investors can target to change if they wish to achieve their targeted retirement corpus, we strongly advise that investors look at investment strategies that, although riskier over shorter time frames, have the potential to outperform over longer periods. Investments in asset classes like equities for a retirement portfolio should be looked at very closely for their potential to deliver superior returns over longer time frames.

In addition to the quantitative aspects of retirement, we also urge investors to answer two questions when they plan for retirement

  1. What would your ideal day be like when you retire?
  2.  And will this continue to be your ideal day if you do this day after day?

We find that these answers are also very difficult for most investors to find, as a calculator cannot answer this for them. We urge investors to think deeply about these answers today so that they are prepared for retirement not only financially but holistically.

This article was written by Vishal Dhawan, CFPCM 

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We are now at that critical time of the year, where new year resolutions could be in different stages of action or inaction. Whilst I’m sure that not all of you make new year resolutions ( why should making a resolution in the new year be any different from making a resolution on your birthday, or your wife’s birthday, or in fact any other day), there are probably a large number of you who do. Since losing weight and quitting smoking/drinking are probably the top two resolutions for the year globally, we are simply attempting to create a monthly calendar to simplify the process of managing your money. One of the biggest myths about managing money is that it is all about returns on your investment. Whilst returns are no doubt a critical component of managing money, we believe it is critical to take a more holistic view on finances.

January – Put it all together – There is no point in having made a large number of investments because of the potential for above average returns or tax savings or putting away excess savings and not knowing where the documents for these are or how they are doing. Create an inventory of all your savings and investments – bank accounts, insurance policies, mutual funds, shares, demat statements, real estate agreements, credit card statements, loan documents, amongst others. Whilst this may sound simple, it can be much more challenging than it seems. Whether you wish to maintain a set of files with all these or use software for tracking, it is critical that all the records are well documented and stored so that you or your dependents have easy access to it. Treat it like an ISO certification for yourself whereby you or your dependents can retrieve any document within a maximum of 15 minutes after you realize you need it.

February –  Question what you really want your money to do for you – This could vary from person to person, for some it is retiring at 45, for another sending a child to study overseas, or for someone else, visiting 100 places before he or she dies. As you think deeply about these life goals, you will find monies would have an important role to play in a large number of these. Try to put numbers to each of these goals and estimate how your finances are currently designed to get you to these goals. In case you find this process difficult,you may need to seek the help of a certified financial planner.

March Keep what matters, let the rest go – This is one of the most challenging parts of managing money, since you may have to admit to mistakes that you made in the past. Past performance should not be the only factor driving this decision. For example, if you have a large number of small value insurance policies that do not give you substantial life cover, it may be better to surrender these policies and buy a term insurance cover that will allow you to cover the risk to your life meaningfully for your dependents. Or equity investments made in the past that have not delivered for more than 7 years, may need to be substituted with better equity investments. Remember to separate underperformance of equity markets from underperformance of specific stocks or equity mutual funds in your portfolio.

I will endeavour to continue with this calendar over the next few columns as well. I look forward to hearing from you on what you believe is an ideal calendar for the second quarter of 2012. You can write to me with your wishlist on vishal@planaheadindia.com or by leaving your comments.

This article was written by Vishal Dhawan, CFPCM 

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Its that time of the year again – to pat ourselves on our backs for  all the things that we did better than we had ever imagined, be thankful that we did all right on some of the things that we wanted to and of course, think deeply about all those things that we were unable to do and the reasons for the same.

Whilst each one of us will have our own set of things that we wish to achieve in 2012, we thought it may be a good idea for us to share our thoughts on things to do in 2012 regarding your finances.

Whilst I started writing this column as ” 12 resolutions for 2012″ since it sounded much nicer, I realised very soon that 12 resolutions  are just too many.
So here are the top 3 things we believe all investors should be doing in 2012.

1. Think deeply about your life goals – Remember that your monies and your finances are a part of the larger canvas on which your life is being painted. Think about what is truly important for you in your life and list it out. Don’t be Hritik Roshan in the movie Zindagi Na Milegi Dobara chasing your retirement at 40 without understanding what you are going to do for the 40 years after you retire.

2. Protect what really matters – Your health, your life, your home and your personal time are most precious. Ensure that you have the first three well protected through insurance and your time protected by putting off your smart phones every once in a while.

3. Don’t chase the next big thing by looking in the rear view mirror– Empirical evidence proves that most often, the best returns on portfolios are generated not by identifying the next big opportunity but by ensuring that you don’t make big money mistakes. Thus it is critical that you allocate monies across multiple asset classes – real estate, equities, fixed income and gold rather than only one or two of them.  Whilst it would be great to be invested in that one thing that delivers the best returns year on year, and go in and out at the perfect time, I’m yet to meet anyone who has done that.
Have a great 2012. Spend time with your family, do the things that really matter and take care of your health and wealth.


This article was written by Vishal Dhawan, CFPCM 


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