A unstable enterprise, lack of contingency planning, high-interest debt, and 4 dependents (two kids and fogeys)—that’s what it took Mehul Ratanghayra, 46, to understand that he wanted assist to get on to the trail to monetary freedom. Until then, Mehul and his spouse Reshma Ratanghayra, 40, invested a major sum—sadly, like most Indian traders—in belongings similar to put up workplace deposits, Life Insurance Corporation (LIC) , and different conventional monetary merchandise. “My funding technique was haphazard; I selected random brokers and bankers to deal with my surplus revenue and banked my financial savings on their recommendation, which was commission-based and, probably, even biased. I additionally didn’t know find out how to plan for my kids’s future bills. Besides, I had inadequate insurance coverage protection and contingency funds. Moreover, I had a high-interest mortgage which, too, was consuming into my financial savings,” said Mehul Ratanghayra, who is an entrepreneur and runs a business of branded car rental services in Mumbai. Investment journey In 2014, Mehul and wife Reshma, who is his business partner,too, realized something wasn’t right; their income wasn’t generating the financial cushion they needed. They took a call to seek an expert for advice and, with some research, understood the need for a fee-based financial advisor who would act as their fiduciary (and not a random commission agent). This is when they reached out to Tarun Birani, managing director, TBNG Capital Advisors. Birani discussed their money habits, financial goals and proceeded to do a thorough financial risk assessment. Birani, a Sebi-registered investment advisor, found that the investment instruments they had chosen weren’t aligned with their financial goals. They underestimated their risk capacity and invested 55% of savings in debt. The majority of their assets were in safer low-risk instruments, not generating adequate gains. Their existing insurance did not tally with their human life value calculation. They lacked adequate contingency fund. Besides, there was no segregation for personal and business finances. “On the positive side they were extremely open and transparent about their financial journey and life plans. With this, I got the right insight to better understand their goals and the blueprint to plan the way ahead to fund their milestones,” stated Birani. Contingency planning Birani stated step one was to get their contingency fund in place to make sure they’d ample liquid financial savings to fall again on. As a thumb rule, a sum equal to six months of important bills was parked in funds that might be simply liquidated inside a 48-hour interval to cowl any important requirement. Next was to make sure they’re insured. Through a human life worth calculator, ample time period cowl was calculated for every member of the family, together with a whole well being check-up to rule out any underlying medical diseases. “Mehul’s earlier LIC insurance policies have been primarily moneyback ones with very low life cowl, which was insufficient as per human life worth calculation. As a thumb rule, 7 to 10 instances of annual revenue must be appeared for all times insurance coverage,” Birani added further. Asset allocation “From an investment angle, their asset allocation strategy required an overhaul,” stated Birani. “Mehul invested 24% of his belongings in actual property, 55% in debt, a mere 18% in fairness, and three% in liquid funds. This didn’t align along with his risk-return capability of fifty% in excessive, 40% in medium, and 10% in low dangers belongings.” Birani took around two months to plan, during which he created a corpus for future expenses, like kids’ education and marriage. Investments that didn’t align with goals were exited from (like post office savings). Besides, the planner made a focused plan that was prioritized to systematically clear high-interest debt. Most direct equity and commission-based investments were removed. Further, the planner created road map for separating personal and business finances. “Today, in 2021, their asset allocation matches their risk profile; their portfolio consists of 53% equity, 35% debt, 10% in real estate, and 2% in liquid assets. Through prudent and diligent investing, they are on the right path to financial freedom. They are debt-free with sufficient corpus to cover contingencies. Their kids’ future financial needs are taken care of through monthly investment plans,” stated Birani. The planner has additionally ready them on a plan to financially deal with any unstable enterprise state of affairs to make sure their funding journey stays on observe to make them monetary freedom. Financial freedom is just not troublesome to realize; all it requires is a bit prudence, diligence, help and above all absolutely the need to be financially free. Subscribe to Mint Newsletters * Enter a legitimate e-mail * Thank you for subscribing to our publication.