How my 5 answers to this lady was like Financial Planning for her !

POSTED BY Jagoinvestor ON August 15, 2013 COMMENTS (46)

One of our readers Sonadhi wanted to hire a financial planner, but first wanted to get clarity about her financial situation and some solutions on her financial life problem at our questions and answers forum. She posted her query and I answered her in detail. I gave her a detailed answer which you cant call “Financial Planning” , but I can say that my reply must be sufficient for her to move ahead and get a lot of clarity. Just wanted to give show you her question and my answer, because I am sure a lot of people will get some idea of what needs to be done in some situations.

financial planning example

Sonadhi question

My baby girl is about to complete her three years.My target is min.25 alcs at her age of maturity the age of 20 years. I am not sure on how to invest for her.Confused to go for Rd/FD or PPF.Also interested in Mutual funds,but no knowledge.Think for LIC plans for children but they have very high premiums with less benefits.Confused between what is difference between ELSS & SIP. Not able to have the financial planner at this stage.Also paying heavy EMIs. Who can guide me.

My answer to her

Lets quickly do your financial planning in few points. Based on your information till now here is what you need to do

Step 1 –  First step is to restructure your finances, Restructuring is required because cash flow is important to be planned,. Unless your cash-flow is planned properly , things will be tough . So first ask why you are paying that 5,000 per month in LIC , how old it is ? What benefits are you getting out of it . The way I see is , You are taking lot of pressure each month for a bad outcome at the end, its not going to give you returns of more than 5-6% at the end, so better make the policy paid up . This way you will release 5,000 per month .

Step  2 – Your RD of 5,000 is fine , let it go so that at one side , some money is secured. The 5,000 which is release out of LIC should be redirected to 2 good mutual funds through SIP . You said you do not understand Mutual funds, and hence not able to act . Trust me , Mutual funds are mainly for those who do not understand stocks and markets that well , there is nothing to understand there much , More than knowledge you need “discipline” here . All you need to do is start a SIP of Rs 2,500 per month in 2 funds . like HDFC prudence , DSPBR top 100 , HDFC Equity etc . Any of two will do .

Step 3 –  Better take a Term plan first for a good amount , like 50 lacs or 1 crore . Premiums will be a lot smaller compared to what you pay in LIC right now and it will be a yearly commitment which you can do .

Step 4 –  I think over next 6 months , you should also create your emergency fund, because right now your EMI is 21,000 , but because of movement in interest rates, it might go up and down , so you should factor in for that !

Step 5 –  Wealth will get created over a long term , short term focus should not be too much on what is performing in which manner , more than returns , right now just focus on your discipline and how you can increase your investments overtime .

I hope you got some good answers and value out of this thread .

Let us know if you feel more relaxed and did it serve you ?


I am sure the question and the answer must have given some hints and insights on what needs to be done in a particular situation. Can you improve on some of my suggestion ?


46 replies on this article “How my 5 answers to this lady was like Financial Planning for her !”

  1. sukras says:

    HI Manish, Am new to this blog and was referred by a friend. I have gone thru ur suggestion above and stand at a similar situation and have no clue of mutual funds or any term plan in hand. I have reviewed the HDFC Life protect, Kotak preferred term plan, and aviva i life. All the terms i have checked at 75 lacs over 30 yrs term and the premium is different and in order as follows : 9000/11200/ 8078 respectively. Why is it different? How shd i choose? Am 34 yrs old and have a 8 yr old son.. I also want to know wat type of SIP i need to do.. for my sons education or my retirment income… I have 2 LIC policies taken 3 yrs back.. Jeevan suraksha and Jeevan anand for 25 yrs/… just paying 25000/ annually for both..

    How do i plan my finances for a better tomorrow. I have home loan of 42k and thats it.. after reading ur recent RD review am interested and gonna save in it. Only that all the time i was saving in my SB itself.. now as i read am wanting to know more and going thru all the mutual fund proposals in each of the brand … i am going blank !… kotak has so many even in life insurance.. what do i do? can u help me? Am reachable at also.

    Thanks for your support.

    1. Hi Sukras

      I think you should go slow first 🙂 You are new and you should spend some time to get more knowledgeable on this . I suggest you read

      and also listen to , which will be good listen for you 🙂

      I suggest you take help of our forum to ask your specific questions and spend more time for next few weeks –


  2. sangita says:

    Hi Manish,

    I am following up your articles since one year. Have got rid of LIC and ULIPs. (though to pay off downpayment for Flat).
    Your articles just make me confident in the actions that I take in my financial life.

    Thank you so much…In these troubled times correct information is what will save us from deep fall.

    1. Good to hear that Sangita . I am honoured !

  3. Sandeep says:

    Hi Manish,

    good article.

  4. Very interesting Manish. Your comments are well conceived and you offer sound advice. It is interesting that investment strategies are basically universal regardless of where we live. Be prudent with spending, save wisely, set up an emergency fund of at least 6 months, then invest in a well diversified group of no-load mutual funds or index funds or ETFs. This should make sense to everyone.

    1. True 🙂 . Common sense is not restricted to location 🙂 . MOst of the things suggested are based on simple logic 🙂

  5. saravana rajesh says:

    Dear Manish

    Good article. I’m happy that I have really moved up in my financial life.
    I feel better.

    Good.Keep spreading the message…

    Thanks a LOT!!!!!!!!!!!!!!

  6. Ashish says:


    Disclaimer: With due respect to your intelligence and knowledge I would like to post my views here. Please don’t take it personal or offence towards any financial planner(s).

    I’ve a very basic question, “Is it only me or the way I think” may sound weird but this is looking dry truth to me.

    No wonder these days, all investment advisers/planners are following the same route, you read any article/watch any show/or show your concern towards financial planning:
    • Emergency Funds
    • Term Plan/Risk Cover
    • Health Cover
    • Fixed Instruments
    • Equities(MF, Stocks)
    • Rebalance…Diversify…Rebalance…Diversify (Gold, Debt, RE and it goes on depending on one’s risk appetite, horizon and magnitude )

    This is the baseline trend advice to any individual; the proportion might differ but same baby steps. What I want to know is this the only way we do financial planning? What could be the oddball ways if we think out-of-box? Can we achieve/add something different to this?

    Nobody or very less talk about lending, crowd funding, education, walking extra mile and importantly ask all to earn and be less dependent on other and be responsible. (E.G) why parents always have to think that I need 25Lakhs for child education and 50Lakhs for their marriage? How can we change this mentality?

    I am just trying to understand what can we do different, since you meet with so many people and a SME I would love to hear different viewpoints from you.

    Thank you!

    1. Sreeram says:

      Ashish – Count me in your club.. Even I felt the same… I had been following the financial advice given in Indian Express every Monday.. but then .. I have got bored with as they too tend to take the same blue print which you have highlighted in your comment! I’m as keen as you to know if there are any alternative route for financial planning. Perhaps Manish could help us out here..

      1. Ashish says:

        Sreeram – Indeed, i’m also eager to hear from Manish/Nandish but still waiting for experts views 🙂

        1. vandhi says:

          Pls post the same query in the forum, At least our gurus will help us to understand ,is there any other route for FI planning.

          1. Ashish says:


            Trust me I’ve raised this question to couple of CFP but none were able to actually promote it with valid reason. I don’t want to blame them but this is purely beat-up scenario where we walk on the same path as others do.

            All CPF come up with, OK, so you need blah blah amount for your child higher education(in fact many are now suggesting for lower school education – its getting so expensive), child marriage, your retirement and what all not…

            So what if a parent has 2-3 children are they suppose to save 25L each for education and 50-75L each for marriage. Is this possible in current world economic salary venture. What about a person earns 10K per/month. Nobody tells how s(he) needs to save? Just insane i can’t think of this? And how on earth do they know/or suggest us that our children will be big bank engineers/doctors/business graduates?


    2. Ashish

      Very good question . The thing is those “baby steps” are the first foundation step for any investor and most of the investors in India are eligible for this kind of planning . You might have completed these steps and must be looking for “next step” . But then you are exception or part of very small group.

      I am not sure if I answered your question . Can you now put another question for me to answer as extention of this ?

      1. Ashish says:


        Thanks for the reply. “Foundation Steps” is/will always good/must have and one should stick to it. I am not walking that extra mile( i follow the same steps 🙂 ).

        But i am wondering there would/should be something different for each person or something beyond this, and that “next step”, what is that? or what are the other ways is what i am interested in knowing more. A person earning 10K/month and a person earning 10L/month both will have different planning. Now the prior can’t think of 25L for child education and so and if s(he) can than how and what?

        Can you please elaborate of this or a good article is welcome from you as always 🙂


        1. Ok

          There is this joke in financial planning that “Planning” is for poor or middle class. Wealthy people look at wealth creation ! .

          So all these basic steps and foundation is to achieve your goals in life . When you move to next ladder its more of just creating more wealth and genreating higher returns .

          A person earning 10L/month will not worry for his goals, because that is already going to be achieved . He needs wealth management , not financial planning .

          Not sure if I was able to answer your query !


      2. Manish awasthi says:

        Sharing a diffrent approach.

        i read a planner aricle who was creating plan . his reply was “you son is 16 years old Can you ask him to take up some part time jobs or some tution and also ask him to save some money for his education . i believe by this he will understand the importance of money and will also help you in creating education corpus. I also suggest instead of working on creating education corpus for your children save money for your retirement and take education loan and ask your child to repay loan. It will be better if you make your child independent instead of feeding him with your life savings”

        i like his approach . it is bit different as we indians believe we should pay for our child education marriage and spend our entire life saving for them..

        Dont know whether i answered your question but i believe you are looking for a diffrent approach

        I personally like his startergy of making

        1. Yea , its a great thing ! especially in Indian culture !

  7. Kishore says:

    Before taking the Mutual Funds, financial planners will say you need to know nothing. After five years when you complain your funds are not performing well, they will say that you should have done enough research before buying one. Which to believe?

    1. I think he is right when they say you should have done your homework , Either do that homework or do enough homework in selecting the planner itself 🙂

  8. Vivek says:

    Thanks for all your writeups! I have also gained a good deal of knowledge from your posts. Last weak my banker tried to sell me an insurance plan as a form of investment, but based on all the gyan you have given us, I refused him and now have decided to start a PPF account instead! Also please write an article about Mutual Funds. IS a MF better choice than a PPF? What are the pros and cons of the same. I would be greatly delighted if you come up with such an article.

    1. I will so some study and come up with a post on this . I am sure more people need this !

      1. Vivek says:

        Indeed a lots of people are in solid confusion similarly like me.

  9. Ashutosh Arun says:

    Dear Manish,
    I am really thankful to your website which has solved many of my queries regarding my financial life. Frankly, I had absolutely no idea about finance and investments before I started referring your website; not even about the terms involved. Thankfully, your website has helped me learn some basics. However, I have a small query of mine. Actually, I want to get married next year and for that I wish to create a fund of about 5 lacs. The first question is, is such a thing even possible through consistent investment? My monthly income is around 50k out of which around 30k is my existing financial commitments including investments, premiums and EMIs.
    Secondly, through some online research I got to understand that there are certain liquid funds which can be utilised for short-term investment aimed at wealth creation. But as I told you before, I have only a faint idea of what they actually are and I want some good guidance in this regard as to how go about investing in them, keeping the aforementioned objective in mind. Thanks in advance.

    1. In short term, only secured investments should be choosen for a goal and given you need 5 lacs, that means 5,00,000/12 = Rs 40,000 per month will be required to be saved . hence its not possible in your case to have 5 lacs in just 1 yrs because the max you can save it 20,000 !

  10. Joel Trinidade says:

    Dear Manish,

    I had a LIC policy thank God it no more. It came down as a legacy thanks to one of my Uncles . I realise the cancer of LIC has spread far and wide in our society. Now with many platforms and readily available information people are realising that that LIC is not life insurance corporation but Loot India corporation. Its the official looting agency of the government of India. The LIC babus , agents , staff have been thriving but there days are numbered now. The Arvind Kejriwals of the financial domain are waking investors up.


    1. Haha .. thanks for recognising our work 🙂 .

  11. Dhananjay says:

    If I open SIP of Rs.2500 for any above mentioned funds, how much confirmed amount I shall get after 20 years ? Will investment through SIP successful with guarrenty ?

    1. Dhananjay says:

      Am still waiting for my query .

      1. Manish awasthi says:

        If you can be very discplined i can suggest you one startergy making good returns in SIP.

        If u can save 2500 monthly, put 1500 in SIP in good fund and put 1K in savings/RD (creating a buffer amount to avreage) and when you think market has bottomed out and NAV of fund in which your SIP is running is 10-20% down then your average price then do a top up (move money from your savings to MF). Its like investing more when market is down..But u need to be very discplined in this approach.

    2. No there is no guarantee !

  12. sundaram says:

    Dear manish i dont know why all the people like you specifically force the people to avoid LIC? recently I read one article from one CFP ask their viewers to surrender all endowment policies and put the money in mutual fund. I beleive they are only a knowledge of paper not in field. kindly let you know lot of good and knowledgeable agents available today. in mediocore family LIC only make them a committed investment habit for their future. term assurance and mutual funds are good but in real nobody willing to continue more than 3 to 4 years and if there is any financial problem in life they immediately stop to pay the premiums. this is what actually happend. if other LIC conventional there is a fear of less return in discountinuing, so they will pay the premiums and save their family atleast in minimum level.
    my request is dont under estimate our practical experiance and i can show you how many families will get financial support through this committed investment if the event of their bread winners loss. recently one of my friend’s brother working in software company invest all the money in mutual fund and take 1 crore term plan. after third year he will not ready to pay the term premium feel it is waste and no return will come now i am just 30 and will take some other pl;an after 40 plus.
    6 month back he met with an accident at trichy all the mutual fund money will go for hospital and funaral expenses. to the family almost collaps and his wife go to some shop for survival. atleast minimum of earnings will go for savings for some year in compulsary savings like LIC plans. this is my openion and practical experiance

    1. I agree with you . A lot of families have this habit of forced saving because of LIC . and they should continue with it . However we are saying that if a person is motivated enough to take control of his decisions then he should not be forced due to situation, but by his knowledge.

      1. Version says:

        Insurance has been and will always remain integal part of financial planning. Important is to treat insurance purely as an insurance and not mix it with investment. Therefore, one should buy term plans that have much lower premiums than other plans that build cash value. This insurance cover would secure family in the unfortunate event of policy holder’s demise. Mutual funds, PPF, NPS, etc., are investment products and one should investment in those products depending on one’s age, risk apetite and financial goals.

        1. Yea .. you are bang on !

    2. SuresH says:

      Hello Sundaram,

      In my openion, those are not having finacial disicpline or lack of financial planning, shall opt for LIC plans. But one should adhered to finacial disicpline and planning to fulfill their financial goals. LIC plans doesnt offer morethan 8-9% returns with which we cannot beat inflation.


      1. Chandrasekaran says:

        Rightly pointed out, that too as a follower of Manish you are good to say “persons lack of financial planing shell opt for LIC” Well said Suresh.

  13. Chandrasekaran says:

    Dear Manish,
    The way by which your imparting the knowledge on wealth creation is an Excellent method to understand & as well get quick solution for a needed problem. Any Dick & Harry can follow your simplest methods.well done.( I fed-up with mutual fund too, their expenses are too much for a small return, which gives now a days very much lesser return considering Fixed Deposits, can`t we go for E-Gold!?)
    With Regards: Chandrasekaran

    1. Rattan Lal says:

      Avoid e-gold now. I had invested in e-gold. The Spot exchange is in crisis. It is not able to clear its’ contracts. I am going to get physical delivery of gold if possible.

      1. Thanks for sharing that .

    2. No e-gold at this moment 🙂

  14. Santanu says:

    Thanks Manish for answering the simple target with such detail. Like her I got the answer for my kid as well and from last 2 years following you continuously I learned the basics as well. I can say that out these 5 I have already followed 4 and one is left which I will complete in next month.

    You have opened many people’s eye like me and also you have educate people in such a way that they can say “No” to their relatives for selling unwanted insurance policies. At least I have done the same and explain him with data.

    Keep up the good work.!!

  15. Mohammad says:

    Sonadhi says she wants to invest in mutual funds, but does not have knowledge. In this age where you have a vast library at your fingertips [ the world wide web ], do not say that. If you do not know what that is, spend some time reading about it. How about a few hours in weekends? Think of it as an investment, too.

    And go over JAGO INVESTOR top to bottom, if you have not done that already. It might be boring at first, if you are new to personal finance, but as time goes on, it will get very interesting.

    1. Thanks for your points here 🙂

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