A family that plans together stays together

“As a family, we decide jointly our financial goals and how to achieve them,” says Radhika Desai, a homemaker from Thane. “Ever since it has been made a family activity, everyone is enjoying. They feel committed and want to participate. There is much more enjoyment in the entire exercise,” Ms. Desai adds.

Done jointly, there is a feeling of commitment and also empowerment. Everyone has a say in it. Take the views of children. Let them feel involved. This is a life skill.

During one of my quarterly reviews, with the permission of my clients Jahanvi and Rohit, I allowed my young daughter to join us.

How to manage money

I still remember my client’s words: “Sanaa you are lucky that your father is making you participate. Managing finances is a life skill. For years, I didn’t pay heed to your father’s advice and shielded my daughters from finance. My argument was, let them concentrate on their studies and career. Today both my daughters are very well-qualified and having a brilliant career. They know how to make money but they don’t know how to manage money.”

As a professional, I have always maintained that “nobody ever becomes wealthy by making money. Individuals only become wealthy by managing money. For making money, an individual has to be brilliant in his/her occupation, for managing money, separate skills are required.”

Financial planning is not about finance. Over the years, as a practising financial planner, I have realised that financial planning is not about numbers. It is about human emotions. Financial goals are not numbers; they are events which everyone in the family look up to.

Is getting a daughter married a financial goal, dependent on a number or amount of money needed, or is it an event full of emotions? There was an advertisement whose tagline was “Father’s happiest day and saddest day in life is the same,” and then pictorially daughter’s marriage was shown.

Emotions vs numbers

Similar is the case with a child’s education, home buying and retirement. There are so many emotions behind all milestone events in our life.

When these are converted into numbers, it is like describing a flower by specifications such as its weight, height, width, colour shade and number of thorns. The beauty of the flower is lost once it is converted merely into numbers.

We financial planners are guilty of converting financial goals into dry numbers. It sounds something like this conversation between a financial planner and a client.

Financial Planner: Sir, based on your requirement of planning for your daughter’s marriage we have worked out three scenarios. Worst case, middle case and best case. This is based on assumed rate of return, inflation, prevailing tax.

Worst case scenario, you will accumulate enough funds up to the stage of ‘Baraat’ coming to your doorstep after that you won’t be able to fund the function. Middle case is you will be able to fund up to the first two ‘pheras’, beyond which you will run out of money.

Client: What is the best case scenario?

Financial Planner: Sir, the best case is you will have enough funds to complete the marriage, but money will not be left for your daughter’s ‘bidaai’ ceremony.

Strategise together

If financial goals are emotions of the entire family, then the strategy to achieve them should also be a family activity. Let everyone participate. Sit together and discuss the goal. Plan that event.

Part of the planning should include finances. If the whole family is to participate in planning a marriage in the family, then let the financial aspects be also planned jointly.

Once that is done, find out how those funds will be generated. Will it be from the income of that year or some investment maturing, will the family have to borrow? There could be a situation where a goal is likely to occur in future and hence the family decides to strategise investments well in advance. There is a possibility that the family may have to curtail some amount of expenses or indulgences. Even if that happens, their commitment to that strategy will be very high.

Priorities are clearer

“Gaurav, I really don’t need to change my handset now, I can easily defer it by six months, let us first focus on funding Deepti’s education,” says Mrs. Sharma. “I will feel relieved once we have accumulated enough funds. May be later on I will purchase a high-end model,” she adds.

Next time when you think of FDI, think of ‘My FDI — My Family’s Decision to Invest.’ This has much more bearing on your life than the amount of funds flowing through Foreign Direct Investment into the economy.

(The writer is a financial planner and author of Yogic Wealth)

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