How I Helped: Is a series of real life situations which I am starting today. Here I will present you 2 real life cases every week in 500-700 words. This series will show you what financial issues can arise and what you learn from these situations. In last 4 years, I have prepared almost 60-70 Financial Roadmaps and few Estate Plan. Each of the roadmaps was unique as the financial situation of each family was different. Some were financially stable while some of them were going through financial troubles. The probable solution to each of these cases was handled differently. But the interesting aspect of financial planning is that life situation of each of us offer some great learning for others as to how you should address your financial issues.
Note: The names and any other financial data present in the cases are not original. Only the financial situation is presented to help you understand more about financial planning.
Shivam has been associated with me for four years. When he met me first he was already in financial trouble. His cash flows have turned negative and he hardly has any money to save. Shouldering responsibility of two children and aged parents his worrisome can be judged from his words. In his thinking here was no way out for him. The biggest setback came for him when he took a housing loan but his spouse left the job soon after. Now only his earnings are there to support his family. He knows now that if any emergency arises and his income stops then his financial affairs will go for a toss and his family will be in deep trouble.
Much like Shivam family, most of the middle class thrive on double income to reach their dreams. Be it children goals, your own retirement or starting a venture. When one of the partners is on a steady income the other partner can think of taking a risk of leaving the job and realizing his/her dream. But there are many life situations when this double income reduces to a single income. Caring for children, health issues, etc.. can force one of the partners to leave his/her employment. Then life suddenly becomes difficult if you have not planned well which exactly what happened with Shivam. With double income, he built his lifestyle and added a housing loan on top of it but considering the affordability as per both incomes. When his spouse left the job the expenses took a toll on the family budget. There was hardly any way to reduce them because of the education expenses of the children and housing loan.
The Financial Plan
When I analyzed the finances of Shivam I found that he hold good ESOP value under his portfolio. Apart from it, he has not been able to accumulate any financial asset including EPF. The recommendation for him was to instantly clear the housing loan with ESOPs which he did. Then with proper financial planning and working on the expenses, in next 2 years Shivam was able to start saving for his goals along with creating provisions for emergencies. Within these 2 years, we spend a lot of time discussing the financial goals, lifestyle expenses, and even his career stability. I assisted him to join a professional group across his domain of expertise which gave him needed support for his career opportunities. After 4 years of rigorous reviews, Shivam is much more relaxed with his finances and now looking forward to built his professional career.
Managing your lifestyle within your means is very important. There will be changes in life you will come across and which will bring a larger change in your financial situation. A double income in a family surely gives you a sense of self-confidence that you can realize your dreams much more comfortably. But it can change and then you will have to accommodate the changes in your finances accordingly. It will be smoother if you have a plan in place else you get into a situation much like Shivam and you may not have enough assets to rely upon. Hence, it’s wiser that one should keep reviewing his/her own financial situation periodically so that any changes or issues in it can be addressed at the right time and with right strategies.