As the second covid wave makes its way through India, Mint speaks to people across the country on how they are saving, spending and coping financially with the pandemic. Devendra Vijay, 39, works with a Mumbai-based textile company. He lives in Thane with his wife and two kids (a 11-year-old daughter and a six-year-old son). The pandemic has changed his perspective about money and professional life. He joined a new company a few days ago, confronting questions about money and his ambitions. He writes his thoughts on his finances, investments, expenses and charity.
When did you become financially responsible for yourself?
After doing my MBA in marketing from Pune, I got a job at a textile company based in Bengaluru in 2004 at a salary of ₹9,000. From my first salary onwards, at the age of 23, I have been financially independent.
What kind of conversations did you have about money while growing up?
Being from a community (Marwari) that focuses on business, I learned about delayed gratification at an early age. My father has always traded in stocks. While studying, I was aware that equity is risky, but it can deliver higher returns than fixed deposits.
How do you then manage your investments?
I have been investing ₹15,000 in three mutual fund schemes through SIPs for many years. The rest are typical investments that a salaried person makes: I contribute ₹5,000 every month towards the National Pension System. There are some fixed deposits and irregular investments in public provident fund. I have a small house in Bengaluru, which I bought when I was staying there. I recently bought a house in Mumbai. I prefer physical assets like property. I don’t invest in gold or debt funds.
What about direct stock investments?
I don’t invest in stocks directly. In my younger years, I did dabble in it but lost money. After making losses, I decided to invest through MFs.
How has the pandemic impacted your income and expenses?
There was no change in income as business was steady at the company where I worked earlier. Travelling for leisure and eating out has stopped. But to work from home, there were some expenses like switching to a more expensive and faster internet plan, getting new furniture and an extra phone for kids to attend online lectures. There was no significant reduction in expenses.
Has covid changed the way you think about money?
Yes, it has. The pandemic made me think of death. I decided not to bother too much about money and the future. Instead of saving an extra amount for a rainy day, I’d rather use that money to travel somewhere with my family.
Do you have insurance cover?
Apart from health insurance from my employer, I also have a ₹10 lakh family floater and a life insurance policy worth ₹60 lakh.
Do you have an emergency fund?
No. But I do keep money in a bank that can take care of six-seven months of EMIs. The EMIs for the two houses add up to slightly over ₹1 lakh.
Expert Speak | Allocate cash for six months’ expenses to emergency fund
Devendra Vijay has done well to get an early start in life. He has acquired two properties and invests ₹15,000 a month in mutual funds. He has done well on the assets side, but needs to do a few more things to set things in order, says Steven Fernandes, a Sebi-registered investment adviser and founder of Mumbai-based Proficient Financial Planners. He has the following suggestions for Vijay.
* He can avoid maintaining six to seven months of EMIs in his savings account. Instead, he can invest in liquid funds or a sweep in the deposit of the bank. Instead of considering EMIs as the benchmark, he needs to consider his monthly expenses and allocate at least six months of expenses for his contingency fund.
* He needs to avoid sending financial details to his wife via WhatsApp and instead write down the complete financial details in a diary or spreadsheet.
* His life insurance cover is too low and needs to be at least 10 times his annual income.
* His health cover is low, too, considering his income and lifestyle. He can increase it with a top-up plan of ₹50 lakh.
* He needs to assess his preparation for funding his kids’ education and invest more than the current ₹15,000 in equity MFs for their goals. He can align the property, NPS and PPF to his goals.
* Avoiding debt funds is not advisable as they are more tax-efficient than fixed deposits in the long run, and hence he should make them part of the asset allocation, which is presently biased towards real estate.
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