How smart planning turned the Bhandaris into millionaires

Mr. and Mrs. Bhandari (name changed), a couple in their mid forties, visited me last week and said that they were now firm believers of the doctrine of 'living today like there is no tomorrow'.

 

They had compelling reasons to stick to this doctrine. They simply wanted to consult me to find out if all was ok and if there was anything at all they really needed to worry about.

 

Here is a synopsis of their financial situation as analysed and prepared by me.

 

• The Bhandaris started their career about 23 years ago with a combined salary of Rs. 9,000 per month. Today, Mr. Bhandari works in a private sector banking company earning close to Rs. 10 lakh per annum. Mrs. Bhandari works in a leading FMCG company and earns about Rs 10 lakh too.  
• They have about Rs. 15 lakh to take home. Financial commitments like PPF, insurance premia and other liabilities like utility bills and miscellaneous home expenses take away about Rs. 3 lakh or so per annum. This leaves them with Rs. 12 lakh every year, or Rs. 1 lakh a month as pure cash to do whatever they want.  
• Life is nice for them, their companies cover them adequately with group life insurance, all medical bills are reimbursed and holidays get covered with the generous LTA (Leave Travel Allowance). They had home loans, car loans, personal loans once upon a time and all are now paid off. They are totally debt free. They own their home, car, other assets practically everything.  
• They put away about Rs. 4 lakh in good investments for their children about 12 years ago. They generated a return of approximately 22% p.a. and today each child has assets well over Rs. 20 lakh, i.e. they generated 40 lakh i.e. 10 times! Children are now financially independent and going forward the investment return will cover their balance education needs and marriage costs.  
• For their retirement they were investing small amounts based on their affordability. In the early years they started with Rs. 2,000 per month and gradually kept increasing their monthly investment in line with growth of income. In the last few years they have been investing Rs. 15,000 per month. Over a 20-year period, today they have amassed a corpus of over Rs. 2.1 crore. In the next 15 years of their working career even if they generate just 10% on this amount till they are likely to have about Rs. 9 crore on their retirement without any additional investment. Add to that maturity of insurance policies, PPF and other investments, they will have another Rs. 1 crore. I leave it to your imagination, what a wonderful retired life one can live with Rs. 10 crore in cash.  

The real question is how many people are in a situation like this?

 

Most importantly, let us not forget that they started their life with a combined salary of just Rs. 9,000 per month. Their strategy was based on just 2 fundamental aspects viz., disciplined budgeting and a well-planned investment portfolio strategy. No unnecessary risk taking, little exposure to equity shares, no trading, no futures and options just simple disciplined investment planning.

 

Given a situation like this where they feel they have nothing to worry as such why should they not live life to the fullest? If you have a situation like this then why not have a weekend break in Paris, summer holidays in Switzerland, Diwali in Mauritius and do all your shopping from carnivals in Singapore, Dubai each year?

 

I assessed their situation extensively and found that they do not need to do any more investments, need no more insurance, if they wished they could actually retire in the next couple of years. They had done a fine job and all that was needed was some elementary estate planning.

 

This is not a hypothetical story; it is the story of simple ordinary people amongst us. No ancestral wealth or senior management position is required to achieve all this. Everyone can do this but the problem is that our expectations are myopic; we live in the short term and hence miss the larger picture. All you need to do is change with changing times, adapt to the changing financial environment, no need to take unnecessary risk and plan things with a good perspective of years to come.

 

All is well if planned well. Life really can be very good just like the Bhandaris who have complete control of finances, have never compromised on lifestyle and are now waiting to splurge. 

 

Kartik Jhaveri, an expert at Financial Planning, is a Certified Financial Planner and a Chartered Wealth Manager. He may be reached at kartikjhaveri@transcend-india.com .

 

Disclaimer:

The contents of the above articles are the intellectual property and copyright of the author, Kartik Jhaveri. No part may be used or reproduced in any form or manner. If you choose to act upon the information contained in the above article it is at your own risk. This article is purely educative and you are strongly advised to consult an expert prior to taking any significant decision.

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