Start with monthly budget, expense sheet and bring liabilities under check
When Mumbai freelance copywriter Sanhita Paradkar and sales executive Alok Chitre, both 28, decided to marry, they thought their expenses would reduce, as a lot of it would merge. The wedding was in May but the expenses haven’t gone down.
They had liquidated their investments of Rs 7 lakh for the wedding and honeymoon. And, paid for the deposit (Rs 1.75 lakh) for their rented apartment through cash. In effect, the two now have to begin their financial planning from scratch. The good part is, they don’t have any liabilities or dependants.
| SANHITA PARADKAR & ALOK CHITRE | ||
| Total income: | Rs 1.8 lakh | |
| Savings: | Rs 1 lakh | |
| Investments: | None | |
| Financial goals | Monthly Savings Needed | Investment instruments |
| Car purchase (six months hence) | Rs 37,500 (for down payment) | Short-term fixed deposits or debt funds |
| Home purchase (three years later) | Rs 50,000 (for down payment) | Mix of debt and equity instruments |
| Retirement | Rs 10,000 | Equity-diversified funds |
| ANIL & POORNIKA MEHRA | ||
| Total income: | Rs 2.0 lakh | |
| Savings: | Rs 1.25 lakh | |
| Investments: | Ulip (Rs 15,000 a month) and SIP (Rs 40,000 a month) | |
| Financial goals | Monthly Savings Needed | Investment instruments |
| Home purchase (8-10 months later) | Saved for down payment (Rs 30 lakh) | Short-term income funds; Save extra via short-term FDs for home loan repayment |
| International holiday (8-10 months later) | Rs 22,000 | Short-term fixed deposits or income funds |
| Retirement / Children | Rs 55,000 | Continue with equity funds; stop contributions to Ulip |
The couple together take home Rs 1.8 lakh a month. Apart from mandatory expenses (worth Rs 55,000), the couple spends Rs 25,000 on lifestyle needs. Saving = Rs 1 lakh.
For starters, this duo needs to plan its monthly budget. Currently, they are spending in an ad hoc manner.
Certified financial planner Sadique Neelgund thinks it would take them at least six months to stabilise expenses and get an idea about income and outflows. One way is to maintain a detailed expense sheet, to identify unnecessary expenses.
Newly-wed couples tend to have high lifestyle-related expenses, says financial planner Suresh Sadagopan. These should be cut first. Paradkar and Chitre could do away with this till they build a substantial corpus.
Client servicing professional Anil Mehra, 31, and his wife, Poornika, 29, a public relations professional, decided to get rid of all liabilities when they started off together. Married for six months, they curtailed expenses and diverted excess funds to repaying debt (credit card bills and personal loans of Rs 4-5 lakh). Unfortunately, they had to discontinue their investments for a brief period. The Mehras’ total income is nearly Rs 2 lakh and expenses (Rs 75,000) are paid through credit card. But they make it a point to clear their bill(s) on the first of every month.
Both couples want to buy a house and a car, save for children and retirement, and go on a holiday. Paradkar and Chitre plan to buy a car in six months and a house in three years, both on loan. Their car would be priced at Rs 8-10 lakh and they would need to pay Rs 2-2.5 lakh for as downpayment. Saving required = over Rs 35,000.
Given they have only six months to go, the couple should invest in bank fixed deposits (SBI six-month deposit at 7.25 per cent) or debt mutual funds (six-month returns at 4.6 per cent). Tax-efficient fixed maturity plans can earn nine per cent.
For the house, Paradkar and Chitre don’t have an area or a budget in mind, as they want to invest in property and not stay there. Experts advise they invest up to Rs 50,000 in a mix of equity (20 per cent) and debt (80 per cent) instruments. Reason: Given the high property rates in Mumbai, two-three years is a short period to save for the downpayment (easily Rs 6-7 lakh). Closer to the date (six months earlier), they can shift to debt.
On the other hand, the Mehras are investing for their retirement life, through a unit-linked insurance plan (Ulip, premium of Rs 15,000 monthly), purchased three years earlier. Neelgund does not recommend Ulips for retirement, as older Ulips had high charges. He feels diversified equity funds are best for the long term (30 years).
The couple also plans to take an international holiday next year (April/May). They should save Rs 22,000 over the next nine months via debt instruments for a requirement of Rs 2 lakh.
The couples should also open a joint bank account and contribute a specific amount to it every month. This should cover household expenses, investments and an emergency fund (three- to six-month expenses).
