A Page from the diary of a Personal Finance Expert

Life is 1% of how we plan.

Rest 99% life surprises all.

When I decided to take a full-time plunge and start on my own, I thought knowledge in personal finance will be sufficient to float and thrive. Over the years I realized true professional competency requires much more.

Like any other entrepreneur or a business owner, a personal finance expert must don many hats to do their jobs effectively. The first step to take up any profession is sound education. Second is to hone skills and gather maximum domain knowledge. Third is to stay conscious and updated.

When I started my journey in Financial services post my MBA, there were no special courses focusing on personal finance. I entered this space because of my interest. 18 years down the line there are plethora of courses available. So, freshers who are entering are better equipped and have us to learn from in terms of setting up practice.

With some newfound wisdom, reading glasses, salt and pepper hair which I guess comes naturally when you enter the fourth decade of your life, I can confidently say no education prepares you for real life. Real education and learnings start when you are on the job, when you are exposed real time and practice. You keep evolving as you move in the professional journey and at no point in life you can say that you know it all and you have perfected your domain expertise.

Let me walk you through, a typical day at work.

It starts with the opening bell of the stock exchange and often runs into evening hours. The operating hours may be more for freshers or entrepreneurs like me. My typical daily schedule includes the following:

  • Newsbytes-Catching up with news on Twitter/IN shorts/WhatsApp/Telegram. I am not a big fan of Newspapers and Television. I catch up with my reading on Magzter and Kindle during the day
  • Glancing through my Calendar-Making mental notes of Important/Priority/Not-So important tasks
  • Syncing feeds to Portfolio Software, this helps in clients seeing real time data on the Mobile App. This is done every day for 365 days. If I do not do, I start getting barrage of WhatsApp messages. After all we make investments for long term but all of us like to look at our investment portfolio on daily basis 😉
  • If it is Monday, then the focus is entirely on clients and operational issues. Having said that it does not mean that I do not tend to client queries on any other day. But I follow strict TAT which is shared with clients at the start of onboarding process.

Tuesdays are reserved for chatting up with Domain partners (Relationship Manager from Funds, Insurance Adviser, Chartered Accountant, Brand & Digital, and Software partners). This is my time of gathering market intelligence.

Liaising with so many different stakeholders has not been easy for a social recluse like me. Over the years I have stepped out of my comfort zone and learnt the ropes of talking to my vendors and partners, be in their good books as my ability to keep up TAT and promises to clients depend a lot on their promptness and servicing. This is especially important in smooth running of my practice.

WTF are reserved for zoom review calls with clients with the first call starting at 10:30am and last one ending at 6pm

Saturdays are reserved for learning programs, writing blog posts and making social posts for Client WhatsApp broadcast. I also spend time on pursuing my crafty hobbies like doodling, connecting with family and friends

  • Servicing clients-As the book of business gets built over a period, our focus gradually begins to shift from acquiring new business to servicing current clients and customers. So post syncing feeds my actual day work starts with reviewing client portfolios, answering client queries, addressing outstanding issues before spending time on prospecting and research
  • Prospecting – No matter in what phase of business growth you are in. To keep the sales funnel full this is one part of the job which no adviser can neglect. For a fresher this activity may take majority of the time during a working day. For established solopreneurs referrals may be enough. Strong digital presence also helps in getting new clients.
  • Administrative chores – Although this often can fall under the category of servicing clients, I spend significant segment of my working day dealing with bureaucratic tasks such as updating MIS report, updating client records, scheduling Birthday messages, recordkeeping. This is usually scheduled on weekly basis on any of the two days.
  • Continuing education – This inescapable element of vast field like personal finance can go considerably beyond the mere satisfaction of industry or credential educational requirements to include investment and product research. Many securities and insurance vehicles require specific training before the vendor will approve the advisor to sell them. I make it a point to learn at least one new thing in a week and attend virtual/physical seminars/learning events. Time consuming and requires considerable monetary resources.
  • Three calls a day to clients keep the Doctor away-Before I end my day, I call up at least 3 clients for a general chat and exchange of wellbeing.

As I mentioned earlier no education prepares us for this, lot of learning comes on the job by hit and misses, learning from peers and industry seniors. The Bottom Line is,

My job as a Personal finance expert encompass a great deal. Much more than managing investment portfolios or closing sales. Prospecting, marketing, customer service, compliance, administration, and education is a part of my daily routine, and the success of my business depends on my ability to effectively integrate these things into my schedule which is always work in progress.

Need and Benefits of Emergency Fund

Covid19 came as an alarm. The world experienced emergency of almost everything.

Essentials, Financials, Professional and Communication everything became urgent as the world went under a lockdown – unannounced and uncertain. Everyone realized how emergent can be an emergency. Reflecting on the same I realized that we need to underline the very significance of Emergency Funds once again.

“When you’ve emergency fund worth two years of expenses, you’ll be less afraid of lay-off. An emergency fund offers sufficient time to look for another suitable job, career avenues etc. This is the first milestone in the journey of financial independence.”

2020 has been a year marked by uncertainty. Covid seemed to have brought about big life lessons for all of us. After spending weeks in quarantine due to the COVID-19 crisis, we are re-entering a world marked by dramatic change. Salary cuts, lay-offs, fall in revenue have been drastic as we start taking stock of our lives.

Emergencies from lay-off, sudden lockdowns and the worry to survive together with unknown health challenges like virus are now fact of life and here to stay. How can one be future ready for such contingencies?

In uncertain situations and ensuing economic fallout, an emergency fund is your first line of defense. In case you do not have an emergency fund, now is the time to prioritize it and make it No.1 item on the to do-list.

In normal times, keeping between 3-6 months’ worth of living expenses in cash to cover monthly expenses was okay. After all the point is to have enough support in worst case scenarios like Covid19 giving rise to economic fall, lay-offs and unemployment.

For the post Covid19 world, an emergency fund should be between 12-18 months’ of living expenses. More so because the economic implication is still unknown.

What is an emergency fund?

An emergency fund is essentially money that’s been set aside to cover any of life’s unexpected events. This money will allow us to take care of ourselves, incase of contingencies and unexpected events. These unexpected events can be stressful and costly. Think of it as an insurance policy.

Here are some of the top emergencies people face:

  • Job loss / Unemployment
  • Medical Emergency- While many people have health insurance, sometimes it doesn’t cover all of the medical expenses that might crop up if you get unexpectedly sick or need surgery. …
  • Unplanned travel expenses
  • Accident or Uncalled for Event leading to expenses Medical / Car Repairs etc
  • Family emergency

Saving money isn’t always easy. In fact, it is the most difficult task for most of us. But it’s likely to be less painful than the alternatives. The reason I advocate emergency fund is because, In my 18 years of professional journey, I have experienced two job losses, family emergency, unexpected medical emergency as well. First time I was unprepared but subsequently was better prepared as I had emergency fund in place.

Top Benefits of having Emergency Fund

1. It keeps your stress level controlled

It’s no surprise that when life presents an emergency, it threatens your financial well-being and causes stress. If you’re living without a safety net, you’re living on the “financial” edge—hoping to get by without running into a crisis. Being prepared with an emergency fund gives you confidence that you can tackle any of life’s unexpected events without adding money worries to your list.

Two decades ago, my mom had to be rushed to the hospital in the middle of night as her hernia had ruptured and strangulated her intestine. Studying for professional exam, that was my first brush with unexpected life event, and I was alone to manage it. My Dad was travelling, and my sister was in her 8th month of pregnancy.

This was one of the most stressful time for us physically, mentally, and financially as my folks were without insurance cover and emergency net. Mom’s stay in the hospital for 11 days was financially draining for us. This one event changed my thoughts on medical insurance and emergency fund. Now I feel much better and well prepared.

2. It keeps you from spending on a whim.

You must’ve heard the saying “out of sight is out of mind.”

That’s the best way to store your emergency money. If the cash is only as far away as your closest debit card, you may be tempted to use it for something frivolous like a designer cocktail dress or big-screen TV—not exactly an emergency. Luxury is never an emergency.

Keeping the money out of your immediate reach means you can’t spend it on a whim, no matter how much you’d like to. And by putting it in a separate account, you’ll know exactly how much you have—and how much you may still need to save.

3. It keeps you from making bad financial decisions.

There may be other ways you can quickly access cash, like borrowing, but at what cost? Interest, fees, and penalties are just some of the drawbacks.

Emergency fund during unexpected times can help cover emergency expenses without taking a loan.

4. It keeps you from dipping into your long-term investments and jeopardize your long-term goals.

Financial Planning is about sticking to goals. Having an emergency fund saves you from dipping into other goal specific investments. If you are a small business owner, it is always advised to have emergency funds to business as well as home expenses and keep the other goals and investments safe.

Furthermore, the Covi19 crisis and recent portfolio reviews with clients led me to ponder and I could think of lessons learnt during crisis to build and emergency fund.

Covid19 Lessons for building an Emergency Fund

If you are a single earner or your income fluctuates, consider building emergency fund beyond three to six months. Unprecedented situation like Covid 19 probably requires to build emergency fund for at least 12-18 months.

Starting an Emergency Fund begins with setting a budget. Calculate your monthly income and expenses: How much money is coming in and how much is going out? A spreadsheet or a budget app can serve as the foundation for the calculation, enabling you to carefully track your spending. Few weeks in lockdown have taught us that we can live on fewer things.

Some of the essential expenses, are:

  • Household expenses
  • Lifestyle expenses
  • Health care (including insurance) premiums
  • Loan EMI servicing
  • Unavoidable Regular Expense (these are based on individual needs)

Let’s say it adds up to Rs. 50,000 per month. Assuming we want to build emergency fund for 1 year. Your target emergency fund will be Rs.6 lacs. This figure may look impossible to achieve as it looked to me when I started building my emergency Fund. Remember Rome was not built in a day.

Something is better than nothing. You can build up to it by investing smaller amounts on a regular basis, like every month. Have a savings timeline in mind, so you will know exact amount and in how many months you can build your emergency fund. Over time you’ll eventually meet your goal. The important thing is to make a start and be consistent.

Where to park your Emergency Fund?

Your piggy bank may be a good idea, but it’s not the prettiest place for your emergency fund. Few options to consider:

  • Recurring Deposit
  • Overnight/Liquid Funds (Mutual Funds)

Whichever option you choose for your emergency fund, ensure that it doesn’t get intermingled with savings for retirement or other plans, and should be free of any withdrawal penalties or procedures that would delay your receipt of the money or diminish the amount you’ll get back.

The Bottom Line

An emergency fund can be a lifeline when you confront unexpected circumstances, like present Covid 19 allowing you to have a place to live, put food on the table, pay utility bills and keep pace with credit card and loan payments. Establishing an emergency fund can be one of the best gifts you can give your future self. And it can be simple to do, as long as you put together a budget, watch your spending and stick to your savings goal.