Financial Planning - A Horror Flick

It started more than a decade back. And like my moustache a decade prior, never left me since then. Here is the story of my flick with the horrors of financial planning.

In those days I was not doing well and was not even sure where I stood. So that was my first step and eventual introduction to the world of horror.

One fine morning, I got my bank pass book updated only to get the specifics on the bad news. Never easily knocked down, I looked at the princely salary I took home and deducted amount spent on petrol for my M-80 (I guess my only expense those days). A little math told me that in a year I will add Rs 18,000 and not a paisa less to my account. In 2 years I can get a bike and start afresh.

After I started my job, I was asked about marriage. Nonononono...3 years passed and I was asked the 18th time. Ok..let me find when I can say yes. Hoteling, food, gifts, cloths, specially made cloths the list was endless. So I started scanning though monthly bills, checked rates of Honeymoon travel deals and saw matrimonial sites to get prevailing earning expectations for eligibility. Easy..I will wipe myself out in 15 days flat.

So I did my first operating expense projection. Arrived at a required income to Rs. 15,000 / month. That’s what will take to get me say yes for marriage. Or rather for a girl to consider me.

Another 2 years and I passed the mark. I was left defenseless. Got married.

Now some serious stuff started on the planning front…financially. I will throw around a ton of numbers, feel free to be brave.

In day to day life I do not want to check my wallet continuously and when I look over the hill the sky should look clear. One should not be at the expense of another. So I split the plan in 2 parts - Monthly expenses and life events. Lets start with the little monster - Life events.

Life events are a few moments in our life. Success or failure, either way, takes your breath away. A sound financial support can be the bedrock to ensure success. Child's education, marriage, possible medical expenses and a home are on my shortlist.

Rules - First, Inflation is assumed at 6%.
Second, All figures are in Rs.
click to enlarge


Now the elephant in the room - Monthly expenses.

I have a blind spot which makes me miss the most obvious. Monthly expenses were my financial blind spot. It took a genius to expose it – MS Excel.

Since I started small, the numbers today looked good. Lead straight to financial hibernation. Expenses were done on a As-Is basis, never totaled let alone categorized. As with life events, I had to start with gathering data on myself. How do I spend ?

1. Made a list of everything that I could think of,
2. Categorized it,
3. Found the prevailing rates and frequency of expenditure
4. and then add some pork to build cushion.

Let’s do a dipstick,
1. Food – Milk – 1.5 litres /day; Brand –Chitale; Rate – Rs. 24/litre
Vegetables – Rs. 40/day (Pl. consider Potato’s and Onions that are a blind spot)
Grains – Wheat, Rice and Dals – Yearly purchase – A possible miss
2. Fuel – Rate – Rs. 55/ Litre. Mileage – 50 miles / litres for 2 wheeler and 12 miles / litres for car in city
3. Schooling – Fees, Purchases
4. Bills – Utility bills, Municipal Taxes, School fees
5. Maintenance fees – Apartment complex
6. Cloths - Regular purchases and festive purchases
7. Gifts – Festivals, Occasions.
8. Hoteling
9. Services – Dhuni-bhandi, Ironing etc.

Lets say I get a figure of Rs. 18,000 / month. Hmm..just 18K. Unfortunately, there are 12 months in a year. So makes it Rs. 216,000. Okay, just 4 zeros; look at life events and why bother. But what if I live till ripe old age of 80 years. Another 45 to go. Wait…not so easy. Rule 1 – Inflation of 6% / year.

Now sit down, with a glass of water at hand and somebody home. MS Excel tells me that I will expend Rs. 28,04,864 in the last year my life. And a cool Rs. 4,59,52,599 to get there.

The two monsters add up to a shade below to Rs. 6 Crore. That’s what I need in this life. How, I ain’t got a faintest of idea. Well my friends, this horror flick keeps me thinking.

Just finished my glass of water and need more. Got to go.

Someday, I will return to tell you if I made it through or fell by the way.

See ya,
Kedar