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Get your priorities right

The time between making a financial plan and executing it should not be very high

Steven Fernandes 

As the saying goes, ‘even with the best of intentions, things just happen’. As it did with Pravin Sinha. The thirty-nine year old has been planning to get his finances in order for a long time. But time has been a serious constraint.

Almost a year back, when he met a financial planner, a former class mate as well, he was quite overjoyed that finally there was help at hand. Sinha, a vice-president with an information technology company, met the financial planner in the latter’s office soon.

And after a long discussion, it was decided that there were some urgent steps that were needed and some long-term planning. For this, the financial planner required some financial documents related to his income, expense, assets and liabilities in order to analyse and provide the right solution.

After the first meeting, it took the financial planner nearly four months of reminders and constant follow up to get all the required documents from him. While Sinha constantly apologised saying that it would take some time to locate all the documents. Finally, he did locate them, the plan was prepared and after long discussions the implementation schedule was put in place as well.

But again due to his job commitments, Pravin somehow could not even complete the initial risk cover enhancement or any investment suggestions for almost a year. Things are still to be implemented. And for all one knows, his financial situation may have changed and he may have splurged somewhere or is planning to do so. Obviously, the financial planner is quite uncomfortable with the constant delay.

Sinha’s is not an isolated case. Financial planners have many such clients. Another one is 40-year old Raviraj Gupte, a general manager in one of the leading companies in the hospitality industry. Gupte maintained scans of all his investments and insurance documents and was therefore, able to provide all his financial documents within two weeks of starting the financial planning engagement.

But once the financial plan was done, it became difficult to contact and communicate with him since he has to travel constantly to different parts of India as well as South-East Asia.

Even though the financial plan was ready at the start of the year, it was discussed only in mid April when Gupte was available in Mumbai. Since then, another five months have passed and there is no news about the implementation of the insurance or investment recommendations. At times the emails sent to him are answered after nearly two weeks.

In both Sinha and Gupte’s case, we find that though both are very keen in putting their financial lives in order, somehow or the other due to job commitments they are not able to give priority to their finances. They did not even feel it necessary to involve their spouse thinking that they already had other family commitments. And what is the end result.

  • Both are heavily underinsured and have excess funds lying idle in savings account earning 4-6 per cent interest when the inflation is in the excess of 7 per cent. Ultimately this excess cash sometimes gets utilised in buying fancy things which might not be your need but desire.  
  • Imagine if in such a situation if god forbid, either of them meet with an unfortunate event, and the family income stops, they being the sole earning members of the house. This is a possibility given the fact that today people earn a fat salary but in return they spend countless hours at office under stressful circumstances.

What’s the way ahead? Just like a manager in an organisation knows exactly what is to be done when he is supposed to achieve certain targets, we too need to prioritise our financial goals in such a way that we are constantly reminded of our very own little things which we have planned to achieve within the stipulated time. A few tips here should help.

  • Keep reminders: People use gadgets like mobile phones or the ipad- off late to set reminders for their official meetings. Why not incorporate meeting your financial planner or meeting your insurance advisor to complete that pending life insurance/ mediclaim proposal, in your reminders!  
  • Take responsibility: No one else but you is responsible for your financial future. The more you neglect and delay planning for your present and future, the more difficult it will be to achieve even basic goals like your retirement planning. Have you thought what would happen to your finances in the event of a job loss? Why wait for calamities to fall on you to meet your planner or to begin your investments?  
  • Involve your spouse: Financial planners recommend involving the spouse in financial planning in order to ensure that one person takes charge and religiously helps in implementing the suggestions which is what is the ultimate aim of preparing a plan. It also helps that the spouse is aware of all the financial aspects related to insurance/ investments/ assets/ liabilities of the family. Haven’t we heard of several cases where on the death of the male earning member, the spouse was not even aware of how much insurance cover or loan liability her husband owned?

The writer is Chief Planner – Proficient Financial Planners

First Published: Sun, October 14 2012. 00:50 IST