Sahayak Gurukul

Sahayak Gurukul is an attempt to share thoughts and knowledge on aspects related to Personal Finance and Wealth Management. We provide financial insights into the markets, economy and Investments. Whether you are new to the personal finance domain or a professional looking to make some extra cash, our blogs are curated to demystify investing, simplify complex personal finance topics and help you make better decisions about your money while keeping it entertaining and enjoyable.

Thursday, 13 February 2020

Money talk on Valentine’s day….

“I don’t care too much about money, because money can’t buy me love…”
I know what you're thinking: Who talks about money on Valentine’s Day?
It’s Valentine’s Day and talking about money matters and financial planning at the same time doesn’t sound very romantic.
But, there's a real good reason to talk about financial matters on this day.
Love is said to be the most wonderful feeling in the world. It is true that money cannot buy love and happiness, but money can certainly buy things through which people can
express their love and buy essential things that make you happy. Love is essential in every human life, but money is also very important to live a life of comfort.
Do you know money is the number one issue married couples fight about?

The main reason for breakup of relationship, leading to separation and divorce is infidelity and the second main reason is Money or Financial Infidelity.

Of late, Money matters are one of the prime reasons for stress in relationships and marriage and the reasons couples break up. Being unfaithful to your spouse doesn’t always involve an affair. Sometimes it’s when you’re unfaithful to a shared financial vision by opening a side bank account or stashing away cash, That’s also deceitful. The same applies if you have a credit card your spouse knows nothing about, or even the fact that you are helping a family member or friend without your partners knowledge. Many an infidelity also may also have its root cause in money and unmet expectations.
Love and money are two extremely complex subjects in their own right. When they're mixed haphazardly, it could create a recipe for disaster. Relationships are inherently complex, especially in the present day and age. There are various reasons that determine whether or not someone enters into and remains in a relationship. Many people have their own objectives when it comes to relationships and the motivating factors that drive them.

What is more important, money or love?
Both can be important in their own way to make our life work. Money should not be the main objective of your relationship. And financial success usually comes as a result of a partnership that works, from love. That is why it is important to have both money and love.

For those who think that money is more important than love, they believe so because they believe that money is the glue that keeps the couple together. Without money, they cannot buy the house to move in together, Without love, you will live empty inside.

How important is money in marriage?
Having money in marriage helps to make marriage more enjoyable. The things money can buy will reduce the pressure couples feel. This will enable the couple to focus on building the relationship even more in an atmosphere of love and affection.

For a healthy relationship, One of the first things that couples need to do is to broach the subject - Don’t ignore the money talk. The most essential step in financial compatibility is to open the lines of communication. Most couples spend more time discussing restaurant choices than money matters.

Discussions on where you're at with regard to saving and spending should be a regular activity. Go over monthly bills with your spouse, revisit your goals, review your portfolio at the end of the year and discuss your achievement vis-a-vis your goals. There are couples who communicate about their finances via email or WhatsApp. It works best for them when each of them takes the time to put their thoughts in writing and then allow their partner to review and respond at a time that’s convenient. Other folks like to sit down over dinner or chat while taking a walk or during a drive. There’s no correct venue for these conversations, they just need to happen.

Answer the following questions frankly and you will know where you stand in your financial relationship with your partner.

Do you spend money or make purchases and hide them from your partner?
Do you pay cash, so he/she won’t know what you spend money on?
Do you have debt or bad investments that you are hiding?
Do you share your credit score?
Does your spouse know what to do and whom to contact in case of a financial emergency?

The first step in developing a healthy money relationship with your partner is to come clean with all things financial, instead of hiding money secrets. Money secrets can drive a huge wedge in relationship. It’s like having a financial affair.
Many couples are very secretive about their income. They never share their actual take home and other perks, bonuses etc. Some partners overstate their salary to impress their family and some may understate due to a variety of reasons.
It may be due to lack of trust or confidence in the partners ability to budget and manage finances, misplaced financial priorities of partners, to hide expenses or simply an ego issue.
This problem gets more pronounced in business families where cash flow is not consistent month on month.

Start with discussing your financial goals, what you want to achieve in the immediate future and long-term financial plans. Write down when you want to make your big ticket
purchases, followed by planned holidays and other expenses in the next couple of years.
Planning your future lives together can be one of the most meaningful and important steps you can take as a couple to create a happy financial relationship.
Here are some questions to think about when you set financial goals together:
Have you shared your income details and made a Budget?
Have you shared the details of debt and other fixed obligations that you have and plans to
repay that?
Have you saved enough to cover at least six-month expenses in case of any emergency,
safely parked in a liquid fund, which is readily available to meet any contingency?
Have you got sufficient health cover and Term insurance to meet any eventuality?
Have you discussed where you want to be financially in 5 years, 10 years and 20 years?
Have you planned for your retirement, where do you want to settle, how much money would
you require per month at present cost?
Have you discussed the funding of your children’s education?
What do you and your partner want for yourselves, your family and your community?
What is the financial impact of these goals? For example, if you desire to travel to Europe or
buy a luxury SUV in 3 years, how will you save for this goal?
Have you agreed upon a savings and investment strategy?

Another important aspect to ensure is to plan your nomination, legal heirs and write a will. All financial records should be documented, and your spouse should know their whereabouts and whom to contact in case of any need or emergency. There are countless cases, where the sudden demise of a partner left the other partner totally lost in terms of their financial status and what to do next. There are numerous cases of life partners stuck in illiquid assets, legal issues, and in “cash poor” situation despite being “asset rich” finding it difficult to even meet their monthly expenses. This not only leads to uncertainty and legal complications, but at times, also to distress sale of assets at highly discounted rates thereby incurring huge losses.

Thus, it is imperative that your partner is aware of all financial details, the paperwork is in order and all nominations are in place. Proper estate planning is not only important but also necessary for a “peaceful death” and a smooth transition to the next generation for the legacy to continue.

Marriage is a partnership. It’s time to stop making money mistakes and find common ground. Sure, it’s tricky to figure out how to not fight about money, but you can learn how to discuss your finances in a more productive way.

There's no harm in bringing in a professional to help. I would strongly recommend that you consult with a financial adviser who can evaluate your current financial situation, check your risk profile, help you plan your financial goals, recommend a suitable asset allocation, devise an investment strategy, sit with you and regularly review your achievement of financial goals and suggest corrective steps where required. Make him your sounding board; let him give you an unbiased and non-emotional opinion on your financial strategy and bring financial discipline in your relationship and life.
I can't tell you what exactly makes love endure over time but working through your money issues will certainly give your relationship more staying power.
Valentine Day is a good day to start and maintain a healthy financial relationship with your partner.

Here is wishing that your Love keeps blossoming, you Live Richer and enjoy life.
Happy Valentine’s Day ….
Happy Investing!
Sandeep Sahni

Note: All information provided in this blog is for educational purposes only and does not constitute any professional advice or service. Readers are requested to consult a financial advisor before investing as investments are subject to Market Risks.

About The author

Sandeep Sahni

Sandeep is an alum of IIM Lucknow with a Post Graduate Degree (MBA class of 1988). His also an alum of Shri Ram College of Commerce, Delhi University (B.Com. Hons. Class of 1985.)
Sandeep's investing experience and study of the Financial Markets spans over 30 years. He is based in Chandigarh and has been advising more than 500 clients across the globe on Financial Planning and Wealth Management.
He has promoted “Sahayak Gurukul” which is an attempt to share thoughts and knowledge on aspects related to Personal Finance and Wealth Management. Sahayak Gurukul provides financial insights into the markets, economy and Investments. Whether you are new to the personal finance domain or a professional looking to make your money work for you, the Sahayak Gurukul blogs and workshops are curated to demystify investing, simplify complex personal finance topics and help investors make better decisions about their money.

Alongside, Sandeep conducts regular Investor Awareness Programs and workshops for Training of Mutual Fund Distributors, and workshops and seminars on Financial Planning for Corporate groups, Teachers, Doctors and Other professionals.

Through his interactions and workshops, Sandeep works towards breaking the myths and illusions about money and finance.He also writes a well-read blog; : https://sahayakgurukul.blogspot.com https://www.sahayakassociates.in/resources/our-blog

He has also conducted presentations, workshops and guest lectures at Management institutes for students on Financial Planning and Wealth Creation. He can be reached at:

91-9888220088, 9814112988

sandeepsahni@sahayakassociates.in

www.sahayakassociates.in

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Tuesday, 4 February 2020

Budget 2020 and After….

“Investors will go through the budget document and the Budget speech with a fine-tooth comb, looking for indications on how the government will tackle the slowdown and the path forward. Investors are keen to see a coherent economic game plan.
There is consensus among global investors that the time has come for a serious push to improve the business climate. If we do not see major reform steps to boost the economy now, given the economic weakness and the majority this government enjoys, there is little chance anything significant will happen later. For investors, this Budget will be a litmus test for judging the reform credentials of the government.”
The above was a summary of the investor sentiment and analyst calls before the budget 2020 was presented. Post budget, many analysts believe that a golden opportunity has been lost, despite the government having the mandate, macros being favourable and the top echelons making the right sound bytes pre budget and assuring all concerned of doing something spectacular before the budget. After the inspiring economic survey — a document that has zero-actionability but is supposed to be a reflection of the mind of government — was tabled in Parliament on 31 January 2020, the market expected serious efforts towards wealth creation, but alas, nothing substantial has been done and the economy has been left to fend for itself.
CEA K Subramanian in the Economic Survey said,“Wealth creation, through legitimate means, should come with a degree of pride, and not as an act of apology.”
He further quoted former RBI Governor Raghuram Rajan and Luigi Zingales's book “Saving capitalism from the Capitalists,” warning against the dangers of regulatory capture by private interests.
He adds, "The root of wealth is economic activity and lack of it brings material distress. In the absence of fruitful economic activity, both current prosperity and future growth are in danger of destruction. A king can achieve the desired objectives and abundance of riches by undertaking productive economic activity".
Kautilya advocates economic freedom by asking the king to “remove all obstructions to economic activity”.
The CEA takes refuge in Kautilya's wisdom several times. "The King (i.e., the State) shall promote trade and commerce by setting up trade routes by land and by water, and establishing market towns and ports," he quotes from the Arthashashtra in a chapter on Targeting Ease of Doing Business.
The Survey used ancient literature and contemporary evidence to drive home the point that India’s dalliance with socialismis an exception, with belief in the “invisible hand” of markets being the norm.
Based on the above and other such quotes, it was expected that the government will loosen controls, remove bottlenecks to growth and make major reform announcements in Budget 2020.
The Union budget document is a projection of the Income and expenditure for the upcoming year and lays out the priorities of the government. Analysts and economic thinkers like to look for direction in the figures to see which path the government wants to adopt to achieve the desired GDP growth.
Ideally the budget should act as a catalyst for growth, provide stimulus to unleash the animal spirits of the entrepreneurs and the private sector, improve business sentiment, assure the citizens that the government is working on a long term growth plan for all sections of society and portray the government as fiscally responsible so as to provide the right environment for society to prosper and grow.
The expectation scale is lower of Indian businesses; all they seek is that the government should reduce the administrative burden oflaws, rules, compliances and filings in doing business. They just want continuity in policy and that, they should be largely left alone to do legitimate business and create wealth. They want the government to maintain law and order, enforce contracts and ensure that there is no undue harassment and tax terrorism. Someone rightly said, “most businesses grow at night when the government sleeps.”
However, Pre Budget, there seemed to be a consensus among business and finance experts that the 2020 Union Budget will do something truly innovative and reformist,to put India on the growth path, a la 1991. Based on this assumption and conforming sound bytes from the government, the Sensex soared by more than 10% to an all-time high of over 42,000.
Most investors suffer from what we call a conformation bias - which is essentially a type of cognitive bias that involves favouring information that confirms to your previously existing beliefs or biases. It leads people to hold strongly to false beliefs or to give more weight to information that supports their beliefs than is warranted by the evidence. This is precisely what happened pre budget, all investors believed in the hope, that the government will definitely provide the stimulus to the economy and electronic, print and social media strongly supported this view, which resulted in the Hope Rally.
Harvard psychologist Daniel Gilbert wrote a long time ago: “Humans are credulous creatures, who find it very easy to believe and very difficult to doubt. In fact, believing is so easy, and perhaps so inevitable, that it may be more like involuntary comprehension than it is like rational assessment.” Gilbert and colleagues showed through experiments that our first choice is to believe what we hear and read and that is exactly what happened Pre Budget.
Warren Buffet said,“You pay a very high price for a cheery consensus.” The post budget crash of nearly
1000points on Saturday drove home this point really hard for many investors and stock traders who were hopeful, absolutely without any basis.
Sticking to the old Warren Buffet saying definitely pays dividends, “Be greedy when others are fearful and fearful when others are greedy.” This has been proven once again as all the losses of the budget day fall have been recovered today even as I write this blog.
Coming back to the budget, now that the event is over, what exactly could have the government done and what is the way forward?

The problems ailing the economy today are well known; slowing growth, rising unemployment, poor business and consumer sentiment, rising inflation, virtually negligible incremental investment, contracting exports, declining saving and investment rate, high level of real interest rates, major fall in incremental credit growth and slowing consumption.

During a T 20 match, the captain sometimes sends a pinch hitter not only to increase the scoring rate but also to send a message to the opposition that he means business and to try that the most critical bowler of the opposition is used so that the other batsmen can capitalise on the weaker bowlers left.
Some may say that Economy is not a T 20, but a test match; but when a draw is not an option, you may have to take a calculated risk and go for a win rather than send Dravid to stabilise the innings for a draw to result.
Hence, The first thing which was required was a change in mindset and a sense of urgency. The powers to be have to get into a growth mindset and leave behind the socialist populist mindset of controls and monitoring, but the budget paper went against the ethos and recommendations of the economic survey. The mindset of shortages has to change to a mindset of abundance, as very well elaborated by Chetan Bhagat in a recent post budget article.(https://timesofindia.indiatimes.com/blogs/The-underage-optimist/immigrants-or-business-mentality-needs-to-change/)
What was required was strong structural reforms, innovative schemes to tap the resources and policies which convey that the government means business, will go all out and is ready to walk the talk to achieve the dream $ 5 Trillion economy by 2025.
Auto and real estate sectors are bleeding; they also have the maximum multiplier effect and are big employment generators both skilled and unskilled. No immediate relief or boost has been provided to these sectors.
Many commentators and analysts were recommending and expecting a TARP kind of relief to the ailing financial sector. The Troubled Asset Relief Program (TARP) was an initiative run by the U.S. Treasury to purchase toxic assets and equity from financial institutions to strengthen its financial sector and stabilize the country's financial system, restore economic growth, and mitigate foreclosures in the wake of the 2008 financial crisis. However, no such relief is evident and the financial sector woes may continue much longer in the absence of TARP or a Bad bank or any such immediate relief.
We have all heard of $ 1.4 Trillion boost to infrastructure sector; but where is the money and resources for that. Some effort has been made in the form of relief to FIIs, concessions to Sovereign funds, deepening the bond market and by increasing limits; but will that be enough to tap the amount required to achieve the target? Something more could and should have been done.

During the US visit and subsequently too, The Hon’ble Prime Minister himself made statements that “we shall bring Equity taxation at par with the rest of the world” The markets thus expected relief on LTCG introduced in 2018 and complete withdrawal of DDT.
Compared to consumption growth in the range of 7% to 8.5% in the previous half years, the consumption growth in this year was only 4.1%. The consumption by Individuals was weak on account of reduced income growth, poor sentiment, reduced income, loss of jobs, high levels of unemployment, reduced competitiveness of SMEs and fear of regulatory action during purchase of high ticket items.
A boost to Consumption was expected to be provided in the budget by putting more money in the hands of people and increase in rural spends. The budget has made an effort by offering a higher personal income tax slab without exemptions, increased spend on rural infrastructure, though MNREGA has been ignored, and rise in government capex.
There have been some positives in the budget; a realistic nominal GDP growth projection, credible fiscal deficit numbers, vision and intent for GDP growth, increase in government capex, Freeing of the sovereign bond market for retail investors, waiver of taxes for investments in infrastructure by Sovereign wealth funds, relaxation in corporate bond schemes, scheme to resolve tax disputes, aggressive disinvestment target and LIC IPO, tax relief for individuals, increase in audit limits for MSMEs, introduction of the tax charter, and the government proposal to remove criminal liability for civil offences, and other such measures.

But, will these policies be enough to boost growth in the short term and sustain high levels of growth in the medium to long term. There has been a major expectation mismatch in the budget 2020.
There was an urgent need to go beyond good intentions and revive a slowing economy but it seems that it shall take a few more quarters before the potential can be reaped.
Meanwhile let us console ourselves by saying that we are still one of the fastest growing economies in the world and we shall get to a $5 Trillion economy by 2025, God willing.

Happy Investing!

Sandeep Sahni