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Two threatening life stories taht will make you rethink financial planning

Two Threatening Life Stories That Will Make You Rethink Financial Planning

#1 Story of Vishwanath and His Second Chance at Life

“I mean, we’re financially stable, my wife was earning too. But I was not confident whether that’d be enough for her to take care of our kids by herself. Or enough to make them feel financially secure, you know, to let them attain the life they desired. They have a whole life ahead of them. I had never assessed these things before.”

Said Vishwanath—product manager for an IT company in Bangalore.

Vishwanath is not just another guy who is earning and having a successful career. To be honest, he takes his personal finance pretty seriously.

When we met last year in February, he had his life covered, regulated his expenses with active management. He was also a consistent investor in Mutual Funds and had a good understanding of how the equity market worked.

Surprisingly he also had a conscious repulsive tendency towards investment insurances, particularly ULIPs. Instead, he had his investments in ELSS funds and PPF among other instruments for tax benefits.

He had all the basics done right and showed excellent commitment. For a person who is not in the industry of personal finance or even finance, I must say his ‘portfolio’ was in pretty good shape.

Preceding to our first meet, Vishwanath had visited Hawaii to attend a business conference in the month of January.

On a dreadful day, Vishwanath woke up to a notification that made him realize how much out of control everything is.

The notification on his phone read:

“BALLISTIC MISSILE THREAT INBOUND TO HAWAII. SEEK IMMEDIATE SHELTER. THIS IS NOT A DRILL”

He was convinced it wasn’t a joke; after all, he was in the place where the Pearl Harbour attack happened.

Panic began to set in.

“Why does someone from southern-most India have to come halfway across to this? It wasn’t fair at all!”

His words were simple and carried an enormous weight for anyone to bear. It is, indeed, not fair. Nothing ever is.

Talking to him, it was apparent that fear of abandoning—or being forced to abandon—your dependents, your family is worse than the fear of death.

Think about it, which is harder, facing your own death or being forced to give up your family for no reason at all?

This was exactly the situation Vishwanath was put

in. He elaborated:

“I called my wife—told her there is no time to worry. I talked to my children, too. Above all the fears and tears, I wanted to make sure they are safe, even in my absence.”

“I am still not sure whether it was instinctive or not. I started to imagine them going on about their life after this. I told her what I had planned for our family, especially our children and their future. What I had in mind and how I had planned and built my investments and everything.”

“Honestly, I didn’t think she listened to it at all. I was dumping all my responsibilities onto her. It is the last of things any man would want to do. But I was helpless. And I cursed myself for that.”

What he meant was very clear.

Even with some good investment decisions and financial stability, the financial future of Vishwanath and his family was still a question mark. You cannot expect life to play fair, can you?

What would happen if his wife also had gotten sick or lose her job after he’s gone?

Even though the odds of it happening are minuscule, looking at what is at stake, you definitely cannot take a risk. Uncertainty has been the biggest enemy of peace of mind. And it’s a terrible thing to live in the fear of it.

Fortunately, Vishwanath got a second chance to fix some things and increase the odds against uncertainty. The EMERGENCY ALERT turned out to be a false alarm. The same was taken back after “40 minutes of terror”.

He didn’t wait a day after coming to India, to home. Being already aware of personal finance and its working, he knew he needed a solid financial plan. And here we are today.

Vishwanath created a financial plan teaming up with his wife. Both of them review their financial plan at least twice a year together. They discuss and take every financial decision unanimously.

When asked,

“We don’t plan on winning the fate, but we don’t plan on giving fate easy win over us either. We honestly started it as a precautionary measure; we expected it to be tiring. But now it is more of an adventure, we understand each other even better and that makes life interesting.”

This should be one of the best decisions of Vishwanath. Creating a financial plan is one thing, but creating a financial plan as a family simply amplifies its effectiveness.

“Even though I hate to even talk about it, this incident gave me the push that I needed the most in my life. I am grateful for every new day and the opportunities I get.”
“I still don’t want to die, but if I must go, I’ll be at least at peace this time.”

—Said Vishwanath with a subtle smile on his face.

Vishwanath was lucky enough to get a second chance. Others may not, you may not. Financial planning sets your goals and investments in motion. It allows you to confront some of the worst possibilities ahead and make plans to tackle them in advance. It raises your odds against life’s uncertainties.

Now, how far are you from that one terrifying phone call or that text message?

#2 Story of Karthik: Illfate of an Nri

It is not a revolution per se, but organizational restructuring has become so common on the global level.

Economy slowdown, Growth of AI, Cost cutting, improving operational efficiency; the reasons are so many. But the solution is usually the same—employee Layoff.

The layoff storm hit Karthik, too.

Karthik was a Senior Design Engineer working in Kuwait. Life was smooth. Unfortunately, lady luck did not favor him when the Kuwaiti Govt. kissed goodbye to expatriates. Neither did the wholesome 15 years of experience.
Illfate of an NRIIt looks like layoff is the go-to option for Governments to employ resident citizens instead of creating jobs.

Coming back to Karthik, he kept trying for a new job in Kuwait itself for almost 6 months with no success. Since the layoff was govt. enforced, his chances of getting a new job seemed very thin. Given the high cost of living there in Kuwait, he was unable to accept less paying jobs either.

Staying away from home and family is suffering in itself. Losing a job in such a situation and not knowing whether you’ll get a new job or not will only make it worse.

He had already stopped providing for the family. His home loan EMI back in India was being paid from his investments. As his savings went below a critical level, Karthik made the tough decision of moving back to India.

Karthik had almost all of his savings in India. The cost of living, too, is relatively very less here. Also, India has fast-growing industries with a potential job market for him to exploit. He figured it should give him some more time to get it all back in control. He only had to find that one job that fits and pays him right. It appeared to be a fair bet.

But, was he in for a surprise?

A couple of months went by as he struggled to find himself a deserving job. Questions began to pop up in his mind as his confidence took a dip. It was the culmination of financial stress, fear of uncertain future, self-doubt and so many other things that sucked out his confidence.

“Did I make a mistake of coming back here?”

“What if I don’t find a job at all?”

“Almost half of my liquid assets are used up in the past 10 months.”

“How am I going to take care of the family?”

“How am I going to pay off the loans?”

“I cannot lose all my savings on this”

“I cannot stretch it to the point of selling jewelry or property”

“Should I take a personal loan to hold everything together for a while?”

Remind you, Karthik had a lot more to worry about. Ever since he lost his job, he did not have any health cover. If any health issue has to happen during this time, it would have become the worst days of his life if it wasn’t already.

Besides, his children were old enough to understand the ongoing crisis but were young enough to stay in school. Karthik cannot let this affect their wellness or education. Hence, as he tried his very best to prevent any adverse effects on them, it stressed him even more.

On the professional side, he also knew the ill effects of being unemployed for almost 10 months. He had to keep him updated with the new trends in the industry just so that he won’t be seen as obsolete.

After 10 months of joblessness and using up almost all of his liquid assets, Karthik accepted a job that paid him only 50% of his pay from the last job. He was literally forced by the financial crisis to accept a job that did not do justice to his worth.

These are the darkest areas of career crisis which no NRI wishes to explore.

What went wrong? Could he have found a better paying job?

Maybe or maybe not—the right job opportunities are only a matter of time. However, he obviously could have handled things better.

A few proactive steps that would have given better stability to Karthik:

  • An Emergency Fund of 6-8months of expenses would have given him the confidence and the control that he needed the most.

Emergency FundKarthik had no dedicated Emergency Fund. It could have given him a precise time frame of how long he can go without a job. Since he was an NRI, he would certainly need a larger emergency fund.

Has he left Kuwait very soon, could he have stayed there a little longer and found a better job? We’ll never know.

Above all, it would have given him confidence and control when everything seemed out of control.

  • He could have requested the bank for EMI deferment.

EMI deferral is when the lending bank allows you to stop EMI payment for a specified period. Karthik could have requested the bank for deferment of his loan until he got a new job and became financially stable.

  • Or he could have restructured his home loan for lower EMI amount.

Restructuring of his loan would have allowed him to pay lesser amount as EMI, while taking away some financial pressure off him.
Restructured Home LoanConsidering Karthik’s past consistent EMI payment records and his legitimate reason for inability to pay the EMI at that time, the bank would have definitely accepted his request. It is certainly better than carrying around the EMI payment stress or missing of EMI payment and the eventual default.

These would have minimized the damage to his savings. The dissolving of his liquid assets would have been much slower. In turn, it would have saved him from the immense stress that he was in, every single moment.

  • He could have invested a higher portion of his savings in liquid assets like mutual funds.

Liquid assets like mutual funds would have helped him to focus on his job search more rather than worrying about which physical asset to sell if the need may arise.

Given that he had no health cover, it would have become a crucial decision.

In case if he had any medical emergency, he would have had no choice but to take a personal loan. And then he would have waited to sell any illiquid asset like jewelry or property later for an acceptable price.

Lucky… he did not have any health emergencies.

Karthik risked getting into the debt trap, just because he didn’t have a sufficient proportion of liquid asset.

Basically, Karthik needed a financial plan that would have helped him to have a better life. Much better than the one he is having now.

Financial planning lets you know your financial potential and your limits so that you can take the right optimal decisions during the times of the financial crisis.

Unfortunately, he had to compromise for a lesser paying job just to manage expenses and keep everything afloat at home. Now it is at least 5 years set-back in his life, because of which, Karthik has to change his financial goals and his retirement plans.

Maybe if he had a financial plan, he would have stayed a little longer in Kuwait and found a good job.

Maybe he would have negotiated boldly for better pay. He would have had much lesser mental stress. Above all, Karthik would have preserved his precious peace of mind.

Layoffs are happening at a rate higher than ever, today. Especially if you are in your mid-40s or older, you might as well consider your job loss—a forced retirement.

If you lose your job today, how long can you go without a steady income?

How long can you provide for your family and fulfill your responsibilities?

Do you believe financial planning could have spared Karthik some suffering?
Mutual Funds

It All Boils Down To:

The best thing about stories such as these is that they give us the heads-up. They give us the blue-print to prepare ourselves ahead.

Vishwanath and Karthik are people like us—like you and me. It could be that guy who was sitting at a table adjacent to you in a restaurant. They have endured so much; some made it out successfully, some are still making it. A few share their experience with the world in hopes that someone will notice at the right time and make use of it.

In the end, it boils down to two choices.

You may ignore what you have just read and carry on, until one day you share your story only to become an eye-opener for the next person in line.

Or, you may start taking financial planning seriously and secure your life, while inspiring those around you for a financially better life.

Look! The ball is in your court now.

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