A road trip to Leh explains the financial planner if she should plan or leave it to destiny.
A random chat at a social gathering let loose a train of thoughts in my mind. The conversation was about role of destiny versus planning in money management. Someone argued that anyway whatever has to happen, will happen, so what is the use of planning things. On hearing this, my mind went back to a road trip to Leh that we took a few years ago. I felt that trip gave me a lot of lessons on destiny versus planning. It was a planned journey, but destiny did have a big role to play in changing our plans. Would the trip have happened if we had not planned, or would it have turned out better if we had not planned anything? In money management too, would things turn out differently if we leave everything to destiny?
We were six of us with one goal- a road trip to Leh. Since we had that goal in mind, we converged on common convenient dates and applied for leave at our respective offices. The first step was to decide to take the trip. Next was setting the route plan and making the necessary bookings for travel and stay. This was like putting the basic building blocks in place. If you want to buy a house, you will need to arrange for the down-payment, so why not estimate how much you will need and start saving and investing properly for it, even if it means starting with a small amount. And keep a lookout for the house that you would love to buy. Or if you would want your child to get into a good college, why not start saving as soon as your child is born or even better if you can begin earlier! Set the goal and take steps to implement it. If there is no goal, we will never start, and if there is no action to implement, the goal will not be met.
Our plan was to do Delhi-Shimla-Manali-Leh and back the same way. Somewhere in between Manali and Leh, we discovered that the road conditions were quite bad and it would better if we changed the return journey route. So midway, we changed the return route to Leh-Srinagar-Jammu-Delhi. At that point in time the changes that needed to be done were cancellation and rebooking for stay, which we did with the help of family back home.
You thought it would be a good idea to buy an insurance policy for your child’s education and went ahead to buy one. And in a few years you realize that it was a mistake, and you may not be able to achieve your goal. So what do you do? Look at what are the possible alternatives, and what you will need to do to correct it-surrender/making the policy paid up, impact on taxation due to this, all needs to be seen. If you get confused and feel that you need help, look for an advisor who can help you set things in order for the long run. There is always a possibility of decisions made with best intentions might go wrong. Instead of bemoaning the errors, taking rectification steps will get you back on track.
Then on the return journey, we were to reach Srinagar from Leh, but got delayed and could reach only up to Drass. We had no bookings but were lucky to find a good place to stay there. Next day when we were about to leave, a bridge just outside of Drass, was damaged, leading to closing of the only road from Drass to Srinagar. The news was that it might take a day or longer for the bridge to be re-erected and the roads to be re-opened. We had to watch the time as any further delays beyond a point would affect our train/flight bookings from Delhi. But our extended stay in Drass brought about some wonderful unexpected experiences with the locals.
So you had put money into some debt funds to buy the house as planned earlier. But suddenly the tax laws changed. Now the long term for debt fund investments is three years and not one year as earlier. You are 1.5 years into your investment and were looking forward to buying the house in the next few months. What do you do? Is it possible to delay the house purchase, or is it possible to utilize some other resource to fund the requirement. What is a better solution? You will need to make a choice and change track again. But what remains is that the money is being invested well and wealth is being created for goals. Had you not started on a plan, even this would not have possible. Many a times you are forced to make a choice, but you might end up with better experience due to that choice.
We reached Srinagar after some delay. In the next leg of the journey, there was a minor accident and again our time to reach Jammu got delayed. Two amongst us had to board a train from Jammu the next day. So it was a race against time to be there. Again with some quick thinking and some good luck, we managed the journey and reached late night.
You decided to postpone the house purchase till completion of 3 years of your debt investment. In the meantime your company transfers you to a Tier II city. The new location might change the employability situation for your spouse, your cashflows will change drastically. Do you still want to go ahead with buying the house? You can postpone the decision to buy the house, use the money in the debt funds to set up your new home, your kids schooling for a couple of years. Some of it could be re-deployed in long term assets like equity to fund your kid’s higher education goal. This way you will utilize your savings to fund some other goals. Or continue with debt investments for longer and take a smaller loan in some years to fund your house purchase. Had you not started on this saving and investment in a planned manner, you might not have so much money on hand to invest for the multiple goals that any normal family would have. Readjusting the plan might bring in newer perspectives to life.
From then on it was a smooth journey and we returned home exhausted but exhilarated and with some of the best memories of travel. While there was a greatly detailed plan we were following there were several unknowns that came in the way which changed the course of our journey. But we did end up with what we had set out to get, a beautiful experience.
Having a plan aids flexibility to change when destiny plays its role. You can make a better decision if you have some plan for the long term. Else destiny will forever keep you on your toes and you will not be able to find the joys of money.
Kiran is a member of The Financial Planners’ Guild , India (FPGI). FPGI is an association of Practicing Certified Financial Planners to create awareness about Financial Planning among the public, promote professional excellence and ensure high quality practice standards.The Great Diwali Discount!
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First Published on Nov 18, 2016 09:22 am