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COUNTDOWN TO RETIREMENT

Last Sunday I visited my Uncle’s home in Bangalore. I was with their family – Uncle Naresh, Aunt Bhumi, their daughter Swathi and Son Krishna were sitting in the drawing-room discussing how life is going, further education plans, daily expenses, competitive world, how prices of products and services increasing, etc.

In the discussion, my uncle shared his life journey so far and the financial instability he has been facing since long ago. He started, “My father use to have a small Kirana shop, we use to earn our lively hood from small means. I was the first person in my family who started a job in 1990, it was like a big achievement for my family, everyone was happy, and we presumed that we don’t have to work hard or bother for our daily bread and other requirements. My juniors, cousins, and neighbors use to take my advice for their career guidance. Then on life became so smooth, but you know what is the big mistake I did, I never thought of savings, I was spending money on the basic needs and fulfilling the desires of my family, enjoying life with the income I could make, neither I thought of extra income nor I thought of saving money for future needs for any known or sudden events or emergencies. My thought process stopped till how someone gets a job, and I never focused on what to do once we get the job. I was just living in the present and never made a plan for the future.”

Then he elaborated,” I got married in 1994 after 4 years of service. In my marriage, I spend whatever I could save… I mean unplanned saving I made in those 4 years and borrow some amount from Marvadi Setji, which got repaid 3 years after marriage”.

Swathi detailed, “So you paid off your personal loan (borrowed money) in 1997”.

Uncle Naresh said, “Yes, you are right Swati, it looks it a small marriage expense for me when I took that loan, but it took 3 years in total to repay, then I realized the amount we repay including interest is more than what the actual amount I took. Later at the end of 1997, I took a housing loan, it was 20 years of loan which I repaid in 2017”.

Krishna with curiosity asked,” Then what happened next, did you do something different, did you rethink about your priorities to solve the problem?”

Uncle Naresh answered, “Hahaha… (Laughing loudly), my mindset was like all other people in society, that is to have my own house, one LIC policy, some gold, and a Fixed Deposit. This means that a person did enough in his life and he is settled. I did the same, I never thought beyond that, I never thought about the education expenses of my both kids and my daughter’s marriage expenses.

I spent my 20 years repaying housing loan, it was a big chunk of EMI every month. The expenses of the family increased after you both were born (pointing out to his kids Swathi and Krishna), it was all unplanned. I was more engaged in satisfying the basic necessities of my wife and both the kids, spending money on entertainment, family rituals, on the social gatherings, after all, we are part of the society and have to maintain the relationship with people around and the status of the family, right?”

I said, “But uncle, once a while participating in a social gathering, rituals, entertainment is absolutely fine, few events become a need somehow and is good to a certain extent. Truly speaking if we keep on doing these things, we may look like flourishing people in the society but in true aspect, we are financially weakening ourselves internally”.

Uncle Naresh said,” Yes beta. That’s absolutely true. I do understand your point. But no one was there to guide me during that face of my life. I was just coping the acts of my relatives and neighbor around me”.

I interrupted, “Sorry to say, uncle, no matter how small or big is your job or income you can improve your standards if proper planning is done for known and unknown financial needs. It needs clarity of what you have today, what is that you need tomorrow, might be it is education for kids, the marriage of your daughter, and savings for your retirement, whatever it may be. You can plan for the things which are in your hands and make a strategy for it. If you don’t have enough after retirement you become financially dependent on others, what will you do if no one is ready to take care of you, have to ever think about it”.

Aunt Bhumi responded, “Beta, your uncle has LIC policy of 6 lacs which he will get at maturity and we have a Bank deposit of 3 lacs. Once he retires after 3 years from now, he can survive with this money”.

I said, “Yes Aunty. If he keeps his necessities very minimal he can survive but again let me correct looking at current living cost, I don’t think this will be sufficient in the long run. Adding to that I am talking about how you are planning to take care of your kids’ further education and your daughter’s marriage, you will start looking matches for your daughter and she will get married in the next four or five years right? Your kids are not yet settled, they are still dependent on you, and Krishna is planning for a professional degree in the USA.”

Then looking at my uncle I continued,” Uncle one should plan the financials in such a way that your kids are settled and you have enough for you and your spouse for the livelihood even after retirement and some amount to accumulate for the bad times. You were aware of a few events and we never know about the future uncertainties of life, problems never knock our doors before they enter our life. If we do not plan for certain and well-known events how can we even think about tackling the uncertain situations”.

Naresh Uncle said,” Honestly speaking, it is not actually easy to look after the school’s fees of kids in any metropolitan cities, you might be aware of the fee structure, the school activities demand more money to spend. And for higher education, for any professional degree, we need a huge amount to spend.

Gone are those days where if you have the knowledge you gain money by using it. These days, if you have money, only then you can gain knowledge, you get a good school, college, professional degree. And if we are not able to afford it we have to compromise with small things, we get a small job, and the small story continues… struggle lifetime earning money for basic needs and lifestyle.”

Aunt Bhumi added, “Nobody wants such a struggling life, everyone wants to settle down and have a peaceful life with no financial challenges and burden”.

Swathi suggested, “We can take a loan on our house for Krishna higher studies in the USA and my marriage expenses”.

Naresh Uncle said,” Well that is the only option left with me. But it is not going to solve the problem. Once Krishna completes his education and starts earning he will start repaying the loan. Meantime I can only take care of the family with the LIC and Fixed deposit amount I have. The worst part is I do not have any pension so that I can take care of my family now and in the future, I can take care of myself and my spouse. I could have planned my pension when I started my job and could have thought about investing a small portion of monthly income for all these requirements. I wish I have some better option to solve this, but I cannot go in my past to correct all those mistakes of not planning my finances on all these requirements. I feel I am actually retiring only from my job but not yet retiring from my financial obligations towards me and my family, It is actually a new and tough responsibility of tackling the situation, now I have to look after it with no regular monthly income in hand.”

Krishna asked me, “Brother. Then what can one do if it is not going in the right way? What is that one can do so that we don’t see the situation that our family is facing today? How can someone overcome it? I really what to know so that I do not repeat the same in my life.”

I answered, “See Krishna, there are many factors which revolve around it, major factors are your income, your monthly expenses, your family member responsibilities, medical emergencies, retirement planning, kids to get settle, their marriage, some uncertainties which you cannot predict, etc… It is good to have a detail discussion with your personal financial advisor. Because financial advisors are experts in this subject they know how to design a strategic plan and the options and schemes available in the market where you can invest and accumulate money for your needs.

Individual needs are different from one another. some people want monthly income, some want wealth accumulation, some want a combination of it, someone wants to block their amount for certain period of time whereas others want to have a liquidity nature of the investment, so it differs as per your requirements. Financial advisors will advise you how to do financial planning so that you don’t have to bother during your bad phase of life, and you don’t have to worry about your financial necessities”.

Krishna with gratitude responded “Thank you so much brother for your advice, I am sure it will really help me”, he continued, “Papa we should not delay such things, let’s meet Financial Advisor tomorrow”.

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