Have you ever wondered why people close to you – brother, sister, in laws, friends, cousins, colleagues, do not seek advice BEFORE they buy a financial product?
It is my job to wonder why, so I do. Most of the people who consider me their financial adviser (or at least think I know more than them) seek my advise once in a while about what they should do with their money. Does it mean they ask me what to do BEFORE every money decision that they take? No. Out of about 3000 people I have dealt with, about 10 of them do :).
Recently a friend redeemded Rs. 30 lakhs from 3-4 equity mutual fund schemes. I knew about it after he had redeemed. On prodding he told me that he was planning to buy a house for Rs. 88 lakhs (including furnishing it should be about Rs.1.3 crores. He explained that he was living in Powai and he wanted to buy one more flat – it was supposed to be his Retirement plan. He was planning to give it on rent (impact of Rich Dad Poor Dad perhaps). He was putting about Rs. 24 lakhs of his own and borrowing Rs. 64 lakhs. On a ctc of Rs. 23 lakhs this was just 3 years CTC so he did not find it too high. He wanted to give it on rent to take care of the EMI and the rent would continue post retirement and post emi.
The economics was not working. He was getting about Rs. 3.5 lakhs as rent (annually) but he was paying Rs. 78,000 as MAINTENANCE (club house, swimming pool….are not really free are they?). The EMI was high – he was already 47 years of age (so the loan had to be repaid in 11 years). He had NIL liquid assets except his Pf. His daughter aged 20 was ready for going abroad, his wife was dead against the deal, he felt his job was great (I am not sure he can keep the job for 11 years). His son was 16 years of age and planned to study abroad…OMG to me this was …well He did not ask me, did he?
My questions are:
Do I speak so harshly (or condescendingly as Gowri says) that people do not ask? or
Do people decide to do something and then justify in leisure?
Do people want to be secretive (why should Subra know I have 2 houses in Powai and 1 in Pune?)
Do people think I will laugh at them for not doing a SIP, …or being in equity for a long time?
Do not know, do not understand…and find it amusing when they ask me AFTER THE EVENT? Makes me laugh. Sometimes sad.
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