Financial Planning For Singles - Helping You Attain Your Financial Goals Earlier

[TSIVipul]

Disclaimer: Neither I am a CA nor I am a professional financial planner so before moving ahead with the advise posted, better will be if you contact your CA or some financial planner


Okay guys, last night I came across two friends of mine, both of them are now working here itself and since the guys were placed in same company about 2.5-3 years back after their MBA hence the salary package is also nearly same for both but there is a difference. A really big difference and the difference is that one of them owns a Swift DZire and a CBZ while another owns just one Discover and a flat. So what made this difference? Simple, ‘financial planning’ did it all. As we say “money spent without planning is money wasted and money spent with planning is money invested”. Same is the case here, the guy who owns the car simply saved for one year and bought a DZire VDi while the guy who owns the flat one day visited me and discussed a lot with my father and some more people that what and how to do and my chance or luck, I was present in that meeting and hence got a chance to know some minor level and really easy financial planning which has no complex jhol-jugaad nothing, but very simple and straight as well as proven financial planning.
Before moving ahead, let me tell the current state of both the guys: One owns a DZire and pays expenses which include car loan installment + House rent + Fuel expenses. While the another guy pays expenses which include Home loan installment + Fuel expenses. But then an another difference has arisen by the tax savings etc and not to mention the flat whose cost was around 15 lac at the time it was bought, now it costs around 23-24 lac(in slightly more than an year). So who do you think is in a better state now? I let you decide.

So let’s move ahead with some financial planning, here is what we are going to discuss:

• Got your first salary, now what?
• What all you have now and what all you want?
• Short term joy or long term joy?
• Plan your expenses and Investments.
• Do you really need a car?
• Targets and their fulfillment.
• Make right usage of loans and which loan to go for.
• Marriage is near, how expenses will change after that?

So let's move on..

Chapter 1​

Got your first salary, now what?​

Well, first salary is something which is a completely unforgettable experience, right? I won’t include this salary in any kind of planning because if you plan this salary too then you are a true miser. This salary is for the purposes like mother’s saree(typical Indian style), father’s watch(again typical Indian style), brother/sister’s new phone(hehe..again) and so on so at the end you yourself are left asking your family for financial support!!
Okay, the first salary is spent and now came the second one, well now all you have to do is cut unnecessary expenses and spend wisely, second salary and third salary are left for practicing as it’s not easy to follow this practice all of a sudden, it takes at least 2-3 months of time.

Okay, so now you have practiced this exercise and started spending wisely, from wisely I mean ‘cut unnecessary expenses and spend minimum possible amount to get maximum possible outcome keeping quality standards into consideration’, following this practice is really tougher than what it seems but still it is a habit, in fact a good one.
Now let’s move to next chapter..

Chapter 2​

What all you have now and what all you want?​

This is a question which is equally mixed with joy and sorrow, when you think what all you have, you just look around and find that you have an empty bank account, some clothes and some things which are our primary needs, you know ‘Roti, Kapda aur Makaan’ and hence you laugh at yourself for once and then you think what all you want. Wow, this one is even more amusing because you want EVERYTHING.
From everything I mean Aishwarya type wife, Ambani type life, Vijay Mallya type cars, A daily visit to big bars..eh you need it all and hence you become sad now because you have an empty bank balance!!
Okay, here you need to be clear at what you are now and what you want to be in a decided course of time? Why? Because like you can’t see far and ahead and plan your moves in foggy weather, similarly you can’t plan out your expenses and investments until you know what you are going to do. So before planning your financial moves it is very important that you decide what all you want and in what course of time, but yes ‘you need to be practical in deciding it’, being emotional won’t work it out for you..

I hope you have decided now, so let’s move to next chapter..

 

[TSIVipul]

Re: Financial planning for singles - helping you attain your financial goals earlier!

Chapter 3
Short term joy or long term joy?​

Haha, this question is mostly asked when one compares GF and Wife!! Eh..jokes apart, let’s talk sensible now(really tough though).
Those who invest in market decide if they will invest for short term or long term looking at what they are investing in and how was the behavior of that stock or commodity whatever it is in past, something similar is here too. Short term joy is the one which remains for short term and long term is the one which remains for long. Oh, how difficult definition it was, right?
When it comes to short term joys, there you can classify things like a good cellphone, a bike or even a car or say anything which comes under 20 month salary of yours(for unmarried guys), now you may think 20 month salary can be a big amount, but my dear how much will you save?? Haha, that short term joy which will eat your 20 month salary is actually your 80 month saving. Now how it sounds? Got sad, no issues..take the bigger goosebump now.
Long term joys, simple – the joys which remain for long term. Hmm, something which costs at least up to 5 year salary of yours. Yes, a big amount it is, but then joy is also big. Basically this joy is property, any property it can be from a plot of land to a villa, anything.
Now here you need to be specific, if you need short term joy before or long term or you need a balance. Note: Both of these joys undercut each other, if you take short termers first then long termer will move a bit too far and if you take long termer first then short termer will move far, though not too much but will and hence maintaining a balance between two is really tough.

Example: Suppose there are two guys with salary 30k each. Now one of them buys an i-10 and one buys a flat after one year of job. Now the guy who has bought the flat pays an EMI of 12k per month for 15 years while the guy who bought the car is paying 5k per month for 7 years and about 4k per month on fuel and other expenses of car. Now after 5 years comes a point where the salary has hiked and hence the guy with home loan is simply paying the installment and planning to buy the car, but do you think it will be as easy for car owner to buy a home this time as it is for home owner to buy the car?? Of course no, Reason: Sky rocketing rates of property and already the car owner has burnt a lot of his money in fuel.

Chapter 4​

Plan your expenses and Investments​

"The man who moves ahead without planning finds the problems at his doorstep itself". These words are really true, anything done without planning always takes you somewhere else instead of where you actually wanted to reach. Eh, on the day of your wedding wasn’t the route and place to be reached planned or you just danced, drunk and started driving around in search for your wedding venue?? Same is here, you made that plan and got a wife, now make this plan and get your financial target(I know I am very smart, no need of appraisals)!!
Okay, how to plan expenses? Simple, make a list of what, where and how and then plan it out. It’s easiest for single guys to move with a plan and save maximum possible, then why not do it? Well now after making out the list of expenses you can decide where to cut expenses like why to buy an i-phone when I can buy a galaxy?
Similarly now you have to plan your investments too, you are new to job and savings are nowhere enough to spend in property or buy a property, but then for what purpose the banks are there? You are young and have a long life ahead, the bank will happily give you a good amount of home loan as compared to the amount they will give to a 40-50 year old man. This is the right time where you can save a lot and pay back a very big part of any home loan and not to forget the added advantage of tax benefits on that loan.
So before moving ahead, most important is that you plan your expenses and investments so that you can make maximum out of your hard earned money in long term. “Agar abhi ek ka do nahi kiya, toh kal toh hoga hi nahi, karoge kaise(If you won’t invest today then what will you do tomorrow when you won’t have anything to invest)”??

Chapter 5
Do you really need a car?​

Right now I am scared if mods will give me infractions for this chapter or members will be planning to give me a thorough servicing whenever I meet them. There is a Hindi idiom “Andha kya maange, do nain(what blind will ask for – two eyes)”, similarly what petrolhead will ask for – a ride.
Now here lies the crux, petrolhead wants a ‘ride’ not necessarily a car. Well in what cases a single guy needs a car? Let us look at some of them:

• Bragging
• GF said she likes that car.
• Going to office.

I really don’t find any other reason, I mean you are single yaar, why you need 5 seats or 4 wheels? You can buy 2 seats with 2 wheels for a lot lesser and that is also more than enough for you. And not to mention, riding with GF is always more fun!! And then you get a thump at back with a soft voice saying in your ear “aaram se chalo na(ride slow na)”. I don’t know which car can give that feel.
Now look if you really need a car, a depreciating asset which will just eat a big part fo your salary for a good long time? Or you have some other targets to achieve in the mean time??
You think of it, I am moving to next chapter..

 

[TSIVipul]

Re: Financial planning for singles - helping you attain your financial goals earlier!

Chapter 6
Targets and their fulfillment​

Well have you ever fired a shot without a target? If done then you have wasted minimum 80 Rs of yours but if you are moving around and spending your money but have no target then rest assured you are gonna be set back by at least a thousand times of 80 Rs. Okay, so you have the job, you have planned your expenses and investments, you have done it all. Now set a target for yourself whether you will opt for long term or short term and then increase the depth of your financial planning.
Though this target setting was to be done before anything but I have kept it here as the target set needs to be practical(at least financially possible in the decided time). So now you decide if you need a house or a car before and then make necessary changes in your expenses and savings accordingly.
Best approach though is to get a property as soon as possible as it acts as a security(financial security) in itself and can give you immense help in case you face an major financial emergency.

Chapter 7
Make right usage of loans and which loan to go for?​

Who said loans can’t be used? What are various sections of our tax laws meant for? You need to understand how to take advantage of those tax laws.
“A well planned loan is a facility and an unplanned loan is a burden”

• Home loan: Comparatively lower interest and very good tax benefits are the advantages you get in this loan. So by taking a home loan added to the benefits mentioned, you get the biggest benefit is that the money you would have paid as rent will now be paid for you to get your own home loan cleared. Congrats, you are at least a home owner now.
• Car loan: Comparatively higher interest rates and no tax benefits at all are what you get with this loan. Hence for the same amount of car loan as it was of home loan you end up paying higher installments(for same period) as well as no tax benefits are also incurred. Eh, it’s not for no reason it is said that “bigger home loan and smaller car loan should be taken”.

Also don’t forget to get your loan insured, here are the details of loan insurance picked up from an another thread:

Get your loan insured.

It is the most important point to remember while getting a loan.

You are insured, your house is insured, your car is insured, your health is insured..then why isn’t your loan insured?
I mean you have got risk cover for your life, health, home and car then how can you leave this liability without any risk cover? If something goes wrong then this loan will get converted into a disaster for you and your family. If you want to keep yourself safe from it then get your loan insured.

What is loan insurance?

• Loan protection insurance, or loan payment protection insurance, is a form of payment protection insurance. This type of insurance can help you protect your monthly loan payments if you become unemployed or suffer an accident or sickness.

• Loan protection insurance will typically be used to protect a home loan, car loan or even sometimes personal loans.

• Under a loan insurance cover, the lumpsum amount reduces as the outstanding loan decreases as per the loan schedule.

What are the benefits of loan insurance?

Loan insurance means during tough times, you'll have an insurance cover to take care of the EMIs or of the outstanding loan amount. This is especially useful:

• In case of death or disability due to an accident or sickness.

• In case of loss of jo.

This effectively reduces the burden on your family in case of any unfortunate event that occurs with you. They would be saved from the financial trauma of paying off the loans.

In cases of a joint loan application, a joint loan insurance plan can be taken which will effectively cover you and your partner.
Both will have the reassurance that if either of you should be faced with redundancy, illness, have an accident or even die, your repayments will be made for you.

What kinds of loans are covered under such an insurance schemes?
Loan insurance is offered mainly for home loan borrowers. However, some banks offer loan insurance for personal loans as well as auto loans.

Do I have to pay any premium for such insurance? If yes, how much?
Like any insurance you do need to pay premium for the insurance. There are only a few banks which offer this kind of insurance without any premium. Premium amounts usually vary from bank to bank and depend primarily on:

• The age of the person taking the loan: The premium is usually higher for older people.

• The loan amount: If the loan amount is high, the premium payment will also higher owing to the fact that the bank has a higher liability in such cases.

• The tenure of the loan: If the repayment period is longer, the premium to be paid is also higher.

• The medical record of the individual: If your physical health is good, the premium amount comes down. However, if you are suffering from any kind of serious ailments the premium amount will go high.

What are the things to keep in mind while checking about loan insurance?

Loan insurance is something that you need to give careful thought to. You need to check:

• What does the loan insurance cover? Does it cover death by accident or death by any cause? Does it cover temporary disability only or does it cover permanent disability as well?

• Eligibility for the insurance. Check out the eligibility criteria for the insurance. Check whether the loan needs to be of a certain amount.

• Payment of premium. Check whether you can pay the premium as part of the EMI or does it have to be made as a lump sum amount.

• Is a medical check-up necessary? Check whether a medical checkup is necessary in all cases.

Are there any tax benefits because of the insurance being a 'life insurance' scheme?

Yes, there are tax benefits that you can get with such kind of insurance. Since you are paying a life insurance premium, you can get deduction under Section 80C. However, if it is clubbed with your EMI payments, you will not get the insurance benefit.

If you haven’t yet got your loan insured then get it done today itself.

Chapter 8
Marriage is near, how expenses will change after that?​

So you are getting married shortly, congrats in advance. Even I am also gonna get married shortly and this is what scares me most. Why? The way my expenses will increase by at least 3 folds is what scares me.
Yes you read that right, I haven’t said 2 folds but I said ‘3’. For maintaining same living standard as you are doing now then you will have to spend 3 times of what you spend now. So better search for an earning bahu or be ready to take a bigger dent. BTW, now if you get an earning bahu, then be ready to get your first property or maybe second!!

That’s all from my side..awaiting your views..

 

[Iron Rock]

Re: Financial planning for singles - helping you attain your financial goals earlier!

Thread now live from T.I.P. zone, thanks!

 

[Theferrarifan]

Re: Financial planning for singles - helping you attain your financial goals earlier!

Good thread once again TSiVipul(got it right). Although I have some years left to plan.

 

[TSIVipul]

Re: Financial planning for singles - helping you attain your financial goals earlier!

Good thread once again TSiVipul(got it right). Although I have some years left to plan.

Thanks buddy, we both are sailing on same boat with 'some' years left for planning!!

Awaiting the real life experiences of some members(if they feel to share them)..

 

[dharmesh]

Re: Financial planning for singles - helping you attain your financial goals earlier!

Nice thread and great effort for putting up the write up Vipul.

Now coming back to point, the thread seems to be misleading a bit. The only type of investment mentioned here is property. Well if not property then what are other options?

My suggestions to the youngsters. If there is no need, then donot buy a property even for the investments purpose. Reason being, as more and more people are buying property for just sake of investment where it is not their need. The rates of property will never come down and this makes it difficult for people who actually need the house.

There are other type of invesments also, which could help you balance out your finances very easily. Remember, if one thinks I will buy house and will sell it in 1-2 years and I will earn lot. It is not as easy as it seems here while writing.

The other type of invesments are:

1. Mutual funds.
2. SIP (This is the best long term investment).
3. LIC policies.
4. NSCs.
5. PPF
6. Recurring deposits.
7. Now every bank have their own tax benefit long term saving plans.

 

[ERTIGA_ZMR]

Re: Financial planning for singles - helping you attain your financial goals earlier!

Vipul, hats off. A great thread for age group 22-25 Years. I believe the above is mine story. I started working at one of the MNC at age of 21.5 and booked my flat at age of 24 and by 28 years I have loan free house and a car with a moderate loan say around 7 lakhs.

My take is that first secure your future then start spending on depreciating assest but at same time we should not compromise on our life style. The first 6-7 years when you start earning are the best years to enjoy the life, if you miss those days and saved everything for future then neither in future nor in present you have lived your life.

Following are my points:
1: Judge your financial liabilities if there are any please make sure that your over spending should not affect it.
Financial liabilities can be supporting parents, sister marriage, sibling's college fee or your study loan.

2: If there is no financial responsibilities then please enjoy the moment and at same time try to book a house if you are planning to settle down away from home town. Take the step as early as possible because you will have more loan repay time and may be you should be able to close loan before marriage itself.

3: Buy car only when it is needed and do not over budget it.

4:Paying rent for a very long time is real waste of time better to pay Home Loan EMI.

5: Taking help from parents while making down payment of flat or car is not a bad idea unless it's real tough situation for parents. I have always got full support from parents and if we buy some property it's for entire family and what we earn is also for entire family.

I remember, when I was booking the apartment my frnds used to mock me that why I am buying house now only. Now those guys are finding very difficult to purchase the flat in the good area as the in 2008 40 lakhs flat is now more than 65 lakhs.

 

[dharmesh]

Re: Financial planning for singles - helping you attain your financial goals earlier!

I remember, when I was booking the apartment my frnds used to mock me that why I am buying house now only. Now those guys are finding very difficult to purchase the flat in the good area as the in 2008 40 lakhs flat is now more than 65 lakhs.

That's really important point, If you need the house then it is now, because rates are going to increase no matter what. Even in the time of recession in 2008-2009, the property rates din't go down as expected. Don't wait for tomorrow.

 

[TSIVipul]

Re: Financial planning for singles - helping you attain your financial goals earlier!

Now coming back to point, the thread seems to be misleading a bit. The only type of investment mentioned here is property. Well if not property then what are other options?

Well that's the reason I called up for the experienced members. Thanks for pointing out shortcomings buddy, this will make it even better.

There are other type of invesments also, which could help you balance out your finances very easily. Remember, if one thinks I will buy house and will sell it in 1-2 years and I will earn lot. It is not as easy as it seems here while writing.

It takes a lot of effort, no doubt..but then no doubt on earning part too. 'No pains = No gains' is applicable here.

The other type of invesments are:

1. Mutual funds.
2. SIP (This is the best long term investment).
3. LIC policies.
4. NSCs.
5. PPF
6. Recurring deposits.
7. Now every bank have their own tax benefit long term saving plans.

Again thanks for providing the list buddy, it is really helpful. All one needs to do is to make out what his actual preference is.

Vipul, hats off. A great thread for age group 22-25 Years. I believe the above is mine story. I started working at one of the MNC at age of 21.5 and booked my flat at age of 24 and by 28 years I have loan free house and a car with a moderate loan say around 7 lakhs.

Thanks buddy, your story and purchase sounds really interesting. BTW, congrats for achieving at least 50% financial freedom at this age.

My take is that first secure your future then start spending on depreciating assest but at same time we should not compromise on our life style. The first 6-7 years when you start earning are the best years to enjoy the life, if you miss those days and saved everything for future then neither in future nor in present you have lived your life.

Again +100, BTW..it looks like you saved a lot in those first 6-7 years itself!!
Rest meet me, I have been following it all since two and a half years(from the time I started learning it all).

Following are my points:
1: Judge your financial liabilities if there are any please make sure that your over spending should not affect it.
Financial liabilities can be supporting parents, sister marriage, sibling's college fee or your study loan.

2: If there is no financial responsibilities then please enjoy the moment and at same time try to book a house if you are planning to settle down away from home town. Take the step as early as possible because you will have more loan repay time and may be you should be able to close loan before marriage itself.

3: Buy car only when it is needed and do not over budget it.

4:Paying rent for a very long time is real waste of time better to pay Home Loan EMI.

5: Taking help from parents while making down payment of flat or car is not a bad idea unless it's real tough situation for parents. I have always got full support from parents and if we buy some property it's for entire family and what we earn is also for entire family.

I remember, when I was booking the apartment my frnds used to mock me that why I am buying house now only. Now those guys are finding very difficult to purchase the flat in the good area as the in 2008 40 lakhs flat is now more than 65 lakhs.

Thanks for valuable tips buddy, they are really helpful. Eh..the real experience has no match.

That's really important point, If you need the house then it is now, because rates are going to increase no matter what. Even in the time of recession in 2008-2009, the property rates din't go down as expected. Don't wait for tomorrow.

 

[ERTIGA_ZMR]

Re: Financial planning for singles - helping you attain your financial goals earlier!

Again +100, BTW..it looks like you saved a lot in those first 6-7 years itself!!
Rest meet me, I have been following it all since two and a half years(from the time I started learning it all).
.

Nope Vipul my first 5 year salary was spent on food, phone, camera, laptop, gifts etc etc.Only good thing happened to me that I had no other financial responsibilities and had 200% support from Mom and Dad who paid my down payment and also helped me to close the home loan.

But I have not purchased the car as I knew it could have been real liabilities and absolute luxury unless I am married. Rather I spent a lot on bikes from 2001-2011 I got 4 bikes :). But after 5 years I started taking life seriously and paid my maximum part of earning towards home loan as I had target to get rid of all the loans before 30 and then enjoy savings for next generation.
In my case I had blend of masti as well as some cautious investment in land and home but full credit to my parents who always backed me.

 

[dharmesh]

Re: Financial planning for singles - helping you attain your financial goals earlier!

It takes a lot of effort, no doubt..but then no doubt on earning part too. 'No pains = No gains' is applicable here.

No doubt in that Vipul, but not to forget the initial down payment for the house would not be less.

 

[Username]

Oh my god! So much to care about, need to invest and need loans for that. Need insurance for loans too! God, why is growing up not optional?

Jokes apart, very interesting thread. If I had to summarize it, I would say "Buy property". Is that what you want to say?

I have learnt some lessons on saving, on much small scale though(which is quite good).I always save from my pocket money, to be able to buy games when I want. By last year, I had around 10k+ Rupees saved from many sources. Then I thought for what am I saving, I should spend this money on some computer accessories. I spent most of it on games and other accessories(long list), and suddenly felt incapable of even meeting my daily expenses(which includes pens, notebooks, occasional canteen food), forget about getting new games. I could have gone for months with that saving without any pocket money. Now I have again started saving, and thank god I learnt a lesson early. I know actual salary and pocket money are different things and I shouldn't compare them, but its an interesting lesson nonetheless.
Spend your savings carefully. I did not and outcomes were not so good. Not sure if you mentioned this in the thread, I may have overlooked.

 

[TSIVipul]

Nope Vipul my first 5 year salary was spent on food, phone, camera, laptop, gifts etc etc.Only good thing happened to me that I had no other financial responsibilities and had 200% support from Mom and Dad who paid my down payment and also helped me to close the home loan.

Well buddy, in the starting phase there is nothing wrong in taking help from parents especially when you are making some good investment. Even I myself is dependent on my father these days for preparing my own launch pad.

But I have not purchased the car as I knew it could have been real liabilities and absolute luxury unless I am married. Rather I spent a lot on bikes from 2001-2011 I got 4 bikes :).

Bikes are still far cheaper to run and maintain as compared to a car and then I am sure you would have bought at least three cars in the said period of 11 years. BTW, I never had an idea that you have been working for so long!!

But after 5 years I started taking life seriously and paid my maximum part of earning towards home loan as I had target to get rid of all the loans before 30 and then enjoy savings for next generation.
In my case I had blend of masti as well as some cautious investment in land and home but full credit to my parents who always backed me.

Looks like you made good financial planning at right time and used the experience of your parents too quite well. So what are your current observations and satisfaction levels as compared to those who opted for cars instead of any appreciating asset like house or other investments?

No doubt in that Vipul, but not to forget the initial down payment for the house would not be less.

Buddy you are absolutely right but it is not necessary to buy a 50 lac apartment only one can go with a low cost one. At this early age(and of course good salary - anything above 25k) many banks are ready to give us good loans and hence going for a low priced property in early phase isn't a that big deal. All one will need to do is be quite strict on his budget for some years but when you are single then you can easily do that too.
Today I have developed bad habits of burning a lot of fuel, spending more on phones, eating outside a lot etc but if I buy a flat and my net savings become lower then I'll automatically develop a habit where I'll prefer VFM more than premium things. Right? Same is the story here, all one needs to do it change his preferences and it's done at the end. And then - "THE REWARD WON AFTER SOME PAIN IS ALWAYS MORE PLEASING THAN SOMETHING WON EASILY".

Oh my god! So much to care about, need to invest and need loans for that. Need insurance for loans too! God, why is growing up not optional?

Buddy, truth being said - Right now you need not to think all this at all. This is your time where you should learn living in your own style and when you start earning then you will have more than enough time to think and plan all this.

Jokes apart, very interesting thread. If I had to summarize it, I would say "Buy property". Is that what you want to say?

Yups 'buy property' is my basic point. Why? Because if you don't buy it today then it will be even tougher to buy it tomorrow and if you don't buy it tomorrow then it will be near impossible to buy it a day nest to it and so on..

I have learnt some lessons on saving, on much small scale though(which is quite good).I always save from my pocket money, to be able to buy games when I want. By last year, I had around 10k+ Rupees saved from many sources. Then I thought for what am I saving, I should spend this money on some computer accessories. I spent most of it on games and other accessories(long list), and suddenly felt incapable of even meeting my daily expenses(which includes pens, notebooks, occasional canteen food), forget about getting new games. I could have gone for months with that saving without any pocket money. Now I have again started saving, and thank god I learnt a lesson early. I know actual salary and pocket money are different things and I shouldn't compare them, but its an interesting lesson nonetheless.
Spend your savings carefully. I did not and outcomes were not so good. Not sure if you mentioned this in the thread, I may have overlooked.

"Playing with cash is always more joyful than playing with anything else, even wheel too". This line is 100% applicable on me and if you are learning or tying to learn this art of playing with cash then that's great because it is gonna help you a lot in future.
How my father taught it to me? He just gave me exposure to the financial decisions and allowed me to give my suggestions and helped me make corrections where required.

 

[Theferrarifan]

Now come up with a thread - academics goals