Mr. Saha, an Electrical Engineer, has worked in a Navaratna graded PSU for 20 years now. His level of income is sufficient to lead a respectable life in society. His children are brilliant and the elder one is already set on her path to archaeology. The younger one is now in senior school and aiming for going ahead with information technology. He has set in mind a few options for higher studies. Mrs. Saha took a break from her job 10 years ago, attributed to the transferrable job of her husband. Now the family is back in the city again and the children are grown. So, she is planning to set up a small business of fashion jewellery with the help of digital media marketing. The project is not too capital intensive, yet she will require some funds twice a year for holding exhibitions. The initial investments will be taken care of by her savings.

Mr. Saha takes care of the medical costs and health insurance premiums for his parents. His father has his own savings to take care of their personal costs and they live in their ancestral house. Still, Mr. Saha wants to keep a fund handy for the elderly parents, in case there is a sudden requirement.

Mr. Saha will purchase a luxury car this year and keep the old car for the use of the family. They will require someone to drive the second car in that case.

So far the family was living in the ancestral house while staying in their hometown and paying rent while staying in other cities. Now, Mr. Saha will permanently live here and the children need their own space. So they have booked a modern flat in a posh and greener locality.

Mr. Saha is a wise spender and the family has quite well-balanced needs and wants. They do not overspend on things that are not necessary. Their only luxury is a family holiday every year, sometimes, but infrequent, trips abroad.

Mr. Saha regularly invests in mutual funds through SIPs. Mrs. Saha buys gold coins every year as a ritual. Apart from this, both of them maintain their Public Provident Fund accounts as compulsory savings. They also have quite a few life insurance policies.

At this stage, let us ask a few question to the couple:

1. If there is a sudden hospitalisation needed for someone in the family, have they located the fund or marked an asset that can be liquidated? Given, that all members do not have sufficient health insurance.
2. Mr. Saha has more than 15 years of service. Does he have sufficient term life insurance in place?
3. Did they plan their retirement expenses?
4. How to pay for the children’s education? Did they allocate any specific investment for this?
5. How do they plan to pay for the flat that they have booked? 
6. In the case of a housing loan, and a car loan, how the EMIs have been planned?
7. How much is the annual surplus for the family? How much liability will be good?
8. Which investments are marked towards Mrs. Saha’s business goal?
9. Do they know their PPF expiry and extension blocks? What are the expected funds and when? Is it mapped against their financial goals?
10. How the holiday expenses have been planned?
11. Is there any investment mapped for the marriage of their children?
12. What are the duration of the SIPs and are the expected returns matching with the nature of their respective life goals?

All above are necessary questions in relation with meeting Mr. Saha’s life financial goals – 

• Emergency fund, 
• Protection fund, 
• Retirement fund, 
• Child education fund, 
• House purchase plan, 
• Car purchase plan, 
• Business set up fund, 
• Holiday fund, 
• Child marriage fund, 
• Long term wealth creation.

Saving money and investment is not the same. When you aim to reach all the above goals, you need to set specific timelines for each of them and assign them with a present financial value. You need to consider reasonable inflation separately for your goals, eg: the costs of child education and healthcare expenses are growing at a much higher rate than your regular household expenses. So, each of them requires separate treatment with different nature of the investment.

When you chose an investment avenue like a mutual fund or an equity portfolio, consider why are you investing. Choose the asset class combination as per your need and map the investment with your specific life goal. Track the investment at a regular interval to monitor it. Check if it is growing correctly to reach your goal in time or if there will be a shortfall. Restructure your investment availing yourself the right advice on basis of the performance of your investment portfolio. 

If you wish your investments to serve their purpose, you need to know their purpose. Link each of them with your goals. That is the only strategy for a successful investor.

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- Aditi Nundy