How an RIA set right this Mumbai family’s finances
Balpreet Singh sought the services of a fee-only registered adviser to meet his financial goals
Awell thought-out financial plan plays an important role in achieving your life goals, be it buying a house, saving for your child's education, or even planning for retirement. It is easier planning for such financial goals, one at a time. For instance, by planning your vacation in advance and saving up for it rather than taking a loan, you can enjoy your trip stress-free and avoid the financial strain of loan repayments. But how does one plan for multiple financial goals at the same time? That is where a financial adviser comes in.
Choosing the right financial adviser is pivotal in managing one's finances effectively. And Mumbai resident Balpreet Singh decided early on that he would need the help of an adviser. He then sought the services of Abhishek Kumar, a fee-only Sebi registered investment adviser (RIA) based in Bangalore. Kumar analyses Singh risk appetite and tailored a personalized portfolio with the right asset mix to meet multiple financial goals at different points in time.
Singh's financial planning journey was spurred by the realization of the need for a retirement corpus, alongside funds required to meet various financial goals. “Most of us got to know a little about financial planning from our parents or elders. Almost 18-20 years back, there wasn’t too much know-how on personal finance. I kept doing things in bits and pieces. There was no structured planning of my finances,” says Singh.
Later on, Singh found that his traditional approach to financial planning was no longer sufficient and also realized the need for personalized guidance. “I had bought some insurance money back plans and unit linked insurance plans but there was no systematic investments. I felt the need to plan my finances better and decided that I should have a trusted adviser who could help me pursue my financial goals. I connected with Abhishek Kumar in early 2019 and we started planning things out in early 2020,” says Singh.
Meanwhile, his wife Chanchal Kaur took a major decision to step back from her academic career to devote time for their daughter's crucial educational years, leaving Singh as the primary earner. This shift naturally led to a decrease in the family's income, necessitating a reevaluation of their financial strategy. Kumar's guidance was instrumental in creating a financial plan that addressed this income gap, ensuring that their financial goals remained on track despite the change in circumstances.
Portfolio rejig
Reet Kaur (15) alpreet Singh (45)
Financial goals
Daughter's education Timeline: 2 years
New house Timeline: 2 years
New car and trip abroad Timeline: 1 year
Family risk appetite - Aggressive Portfolio allocation 60
Equity Ulips
40
Traditional insurance, PPF/EPF, Debt MFs
Debt MFs, EPF, NPS
What changed after RIA’s advice?
Covered 10x of their annual post-tax income
Family floater policy of Ŕ15 lakh, with Ŕ25 lakh super top-up 50
Ŕ50 lakh covers accidental death, disabilities
Built asset mix based on risk appetite and financial goals
Plan
Budgeted Ŕ15 lakh and Ŕ30 lakh for their daughter's graduation and post-graduation. Moving from equity to debt, once she starts her undergrad in 2026 and post-grad in 2030.
Selling the current house to buy a bigger one, utilize investments to fund the additional money required.
Investing in short-term debt investments for these goals just a few funds for his financial goals, “Based on our risk appetite, we are investing in a mix of Nifty50 Index and flexi cap funds for our equity allocation. Earlier, we were investing in multiple equity MFs and were finding it difficult to manage multiple funds on our own. We are in better control of our equity allocation now,” Singh says.
Goals and timeline
Singh's financial goals include ensuring a comfortable post-retirement life in the next 20 years, providing for his daughter's education, purchasing a bigger home without impacting his retirement corpus, and taking a family trip abroad. He also aims to maintain his current lifestyle post-retirement. Kumar has charted out a specific timeline for each financial goal to achieve these objectives. “We have planned our retirement taking into consideration my current monthly fixed expenses and the future value of our investments,” says Singh.
He has also set aside funds for his daughter Reet Kaur's education. “For our daughter's graduation and postgraduation as life milestones, we had budgeted ₹15 lakh and ₹30 lakh, respectively, based on the current level of expenses for college. She would start her undergrad college from 2026 and, based on Kumar's suggestion, we are reallocating the money required for this goal from our equity portfolio to debt portfolio to protect this corpus for
Chanchal Kaur (41)
Equity MFs
50
Equity MFs
60 (in %)
Debt MFs, EPF, NPS 6 months; amount increases with increased income
Using annual bonuses to fast track the loan closure,in next 3-4 years
Investing 60% of annual income, moved from Ulips to SIPs
Major decision
Chanchal Kaur decided to support their daughter's education by stepping back from her academic career, making Balpreet the primary earner.
Advice
Created a plan to bridge this income gap, keeping their financial goals intact.
Advice from:
a Sebi-registered fee-only investment adviser her graduation.” His daughter wishes to travel abroad after her 10th board exams. Singh plans to fund this trip by pre-planning a corpus instead of taking a loan.
Singh also aims to purchase a larger home and a new car without compromising his retirement savings. His strategy involves selling his current property, along with additional required funds for which has been investing, to acquire a new one. This approach ensures that his retirement savings remain untouched while he upgrades his living space. “We would like to buy a bigger house and change our car. These have been planned in a way that it should not be impacting our retirement goals and our daughter's education expenses” says Singh.
Uncertain risks When he started his career, Singh relied solely on his employer's health cover. The covid pandemic made him opt for a larger cover and reduce the dependency on his employer. “We bought a family floater base policy of ₹15 lakh and a super top-up policy of ₹20 lakh. We bought both policies based on Abhishek’s advice. Before that, we were entirely dependent on the cover provided by our employers. Currently, we have a family floater cover of ₹10 lakh, provided by my employer. We are paying an annual premium of ₹27,000 and ₹5,000 for personal base and super top-up policy,” says Singh.
Singh has opted for a term plan covering 10 times his annual post-tax income, and aims to increase this cover to meet rising lifestyle expenses and inflation so as to protect his family's major financial obligations in case of his untimely demise. “We have a term plan cover which is 10 times our annual post-tax income and could cover their major financial goals in case of loss of life of the primary earning member of the family,” says Singh. He also has an additional personal accident insurance policy, with a coverage of ₹50 lakh.
For any unforeseen challenges, Singh's family has an emergency corpus for six months, which they plan to increase over a period of time, as advised by Kumar.
Earlier, Singh used to channel a large part of his monthly income into premiums of traditional insurance policies, which did not align with his expected returns, risk appetite and financial goals. “We are currently putting 60% of our monthly income in systematic investment plans (SIPs). After buying adequate term plan cover, we paid up those policies and routed the amount saved on premium to monthly SIPs, investing in a mix of equity and debt funds. Of late, it's only SIPs in equity and flexi-cap funds as per our future goals,” says Singh.
Kumar has also asked Singh to close his ongoing 10-year home loan as early as possible. “We have an ongoing home loan and the outstanding is currently 25% of the original amount. We are planning to pay it off within 3 to 4 years using the annual bonus," he adds.
Choosing the right financial adviser is pivotal in managing one's finances effectively