1. Doctors start earning late: Absolutely no doubt about this! It takes a long time to do your MBBS, then you specialize further…well you are almost 32 by the time you start earning.

2. Doctors have a higher spending need: Doctors have to live like doctors, don’t they? So they spend more on clothes, car, the places they visit are expensive….so they have a lesser amount to save or invest.

3. Repaying educational loans: Not a very Indian concept, but people do borrow money to pay fees – and it has to be repaid.

4. Doctors are, well, for a better word, arrogant! Like all professionals they think ‘Investing / personal finance is easy, I do not need help. Well they are wrong. Their syllabus does not prepare them for anything in finance.

5. They are busy even when they start earning – they neglect their finances. (the fact that they neglect their own health is a matter of another story!)

6. They have no business sense – they do not know their costs, their variable costs, marginal costs, taxation, other revenues, etc. This puts them in a great stress – and largely have no clue about how to handle it.

7. They do not know how to sell their practice – running or otherwise!

Well there are many more reasons, some of which I have covered in my book for doctors. If you read carefully, most of these reasons come from a lack of knowledge of finance. Imagine asking doctors to attend a workshop on ‘Practice management’ or ‘Personal Finance’ – their immediate reaction is ‘We are not in it for money’ – well I think we are all in it for money, right?

If  99% of us work for money, how come only 1% of us make our money work for us?

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- does not include tips giving blogs (what share to buy, when to buy, etc.)

- searched and have found only 4-5 blogs so far

- will not cover blogs with basic errors – the effort to enumerate mistakes is too much, so will just say ‘not worth the effort’

- Manish Chauhan, Deepak, Ranjan, and myself seem to be addressing different communities

-Many mails asked me to cover blogs writing about equity. That I will not. For me covering equity blogs is too much effort, and frankly not worth it, except if I am doing it for a magazine – for DECENT amount of money. In other words, I will not do it

Not too keen to do this story….hence withdrawing the offer to do a comparative article…:-) sorry!

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I do not have enough data to agree or disagree with this statement. However I was quite stunned that none of the professional courses – medical, law or engineering teach even basic BUSINESS FINANCE. Many of the doctors and lawyers will surely start their own practice. Should there be no effort to teach them basics of finance – forms of business organisations, basic accounting, basic banking, …

Imagine a lawyer specialising in corporate law – not knowing enough about how a Profit and Loss account is made or how a Balance Sheet is drawn up. Or not knowing that the accounts of a company are made in Schedule 6 format.

These kids are expected to do share valuation, arrive at Mergers and Acquisition ratios, know what is a 51% holding, or a ‘controlling interest’….etc.

I think a basic finance course – business and personal finance – should be there in every syllabus – including the Bcom student, the budding doctor, actor, lawyer,  – whatever you do in your life, accounting is the 5th R if not the 4th!!!

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I am communicating far, far more on my blog than through my other daily interactions or even through lectures. I hate, hate, hate hurting people – knowingly or unknowingly. However I do hurt people.

So here is my apology to all Marxists, Socialists, Capitalists, Democrats, Republicans, Congress (no not Baboons), BJP loyalists, all Ayn Rand devotees (I used to be a fan, never became a devotee), all fans of indexing (does not work in India), all regulators (does not work anywhere in the world), all financial education and inclusion bandwagon riders (yes there are about 84000 organisations doing it), all experts who come on television, all anchors, all personal finance writers who spew generalisations as personal finance planning, all the people reading my blog, all the people who click on the ads on my blog, all the people know ads should not be clicked, all the people who comment, all the people who think I edit comments, all the people who know I do not edit comments, to all the children who expect their parents to spend for their education, to all the parents who show off their wealth by blowing money on kids weddings – and the kids themselves do not want it, to all those who are not investing for retirement, to those who are hoping that their kids will take care of them in their old age, to those who do not plan for retirement thinking they will die young, to all those students whose MBA degree is getting them only low end jobs, to those colleges who are telling their students …well it is too boring is it not….so …..and every body else including Obama, helicopter Ben and their guru Alan Greenspan, why even Osama’s children. And the innocent people around Osama who were killed by Obama’s men.

Not a fan of Osama, but not a fan of Obama either.

So just to carry this a little further, Michhami Dukkadam to all of you….well Wikipedia says this is what it is:

Jai Jinendra

On this auspicious occasion of Paryushan we wish you all Michhami Dukkadam!

We beg your forgiveness from inner of our hearts for whatever misdeeds or mis-behaviour whether knowingly or unknowingly occured by ourselves to you through mind, thoughts, actions or speech during the past year. Michchhami Dukkadam on the occasion of Savantsari Maha Parve

Kshamapana Sutra with Meaning

KHAAMEMI SAVVE JEEVA (I grant forgiveness to all living beings)
SAVVE JEEVA KHAMANTU ME (May all living beings grant me forgiveness)
METTI ME SAVVE BHUYESU (My friendship is with all living beings)
VAIRAM MAJHAM NA KENAI (My enemy is totally non-existent)

MICHHAMI DUKKADAM

With best wishes and prayers for the well-being of all things living……!

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Let me enumerate (Ripley’s should not use it in their Believe it or Not, please)

1. Money invested for 80C benefit, but not mentioned in the Return of Income.

2. Money kept in a company fixed deposit, interest stopped coming (FD matured) not claimed FOR 3 YEARS. Of course company made no attempt for 2 and a half years, then sent one letter…so effectively after 32 months!!

3. Rs. 3 lakhs lying in the current account, Rs. 1500 credit card bill not paid for 2 years. Same bank. Obviously bank did not inform (accounts are connected, but current account is operated jointly and credit card is in the husband’s name )

4. Salary not credited to bank account for 3 months. DID NOT REALISE THAT SALARY WAS NOT CREDITED.

5. Bought life insurance paid 2 years premium, did not pay 3rd premium EVEN THOUGH SHE HAD ENOUGH MONEY in the bank, because she heard ULIPs are bad. Premium already paid Rs. 150,000.

6. Did business with brothers, invested with them, bought insurance with brother as nominee. Died at age 36. Wife and daughter penniless, being supported by HER father. Some chance that brothers will pay her something, but NOTHING BY RIGHT….maybe a pittance as a FAVOR….

can go on and on…

I have been stunned. If they get a financial planner who charged them Rs. 55,000/- p.a. but SAVED Rs. 300,000 in some simple mistakes being AVOIDED…should the client crib about 55K paid or be thrilled that he saved Rs. 245,000? L O L

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As a part of my personal financial planning seminars, I come across thousands of customers who are looking for advisors. As a part of my training sessions, I come across millions of agents who are looking for customers. However, for me it is not just picking up a telephone number and passing it on.

This is because there is a huge difference between what my seminar participants say they want and what the agents I train are willing to do. Here is what a customer expects from his agent.

Please do not say you are coming do financial planning if you are only coming to sell me a financial product. I understand the words financial planning and know what a sales pitch is.I am busy. I run all day and some evenings.

When I have all the information presented to me, I tend to make fast decisions – whether it’s deciding which item to select on the restaurant menu (Rs. 300) or which car to buy in the dealer’s showroom (Rs. 12 lakhs). At the same time, I have no time to waste on mutual fund or life insurance policy (Rs. 240 lakhs over the next twenty years). . I may need to update my life insurance and pension plans. I need someone who is going to work with me and help me understand my needs and address them appropriately representing my best interests.
•    Please tell me about yourself – introduce yourself properly. I would like to know why you are in this “profession”. Are you here by choice, by force or you have just inherited an agency?
•    Tell me about the company (ies) that you represent and its reputation for reliability, service and quality of products. Has this company checked you for competence, basic education, etc. or have you been recruited as a part of its “trespassers will be recruited policy”.
•    Please do not make a sales pitch! Please suggest me appropriate products and tell me the basis on which I should choose them. Also, please tell me about products that you do not sell. I am willing to pay you a fee for suggesting products not in your portfolio. Fair enough?
•    Please get to know me. Please do not assume anything about me. Find out who I am, what I want and what concerns me. Be like my tailor, measure me every time we meet – it helps.
•    Please respect my time. In case you need 20 minutes say so. In case you need 60 minutes, say so. I get very upset if you seek appointment for an inappropriate quantum of time. I am happy to slot your appointment accordingly. I cannot keep clearing my throat and watching the clock on my table.
•    I will buy from you do not worry! I need to buy from somebody so why not you? I am comfortable buying from you, but do not start selling before you know what I need.
•    Please remember I will tell whom I want to tell – I know sales people like to boast about their latest “conquest”. When you ask me to share financial and other personal information with you, please keep it private. My wife, my brother, my colleagues, my boss, my assistant will all know from me, not from your boasting. Fair enough?
•    I need to know about financial products – I am a senior executive in a pharma company, not some stupid bumpkin. However, I am also not an expert in life insurance or retirement planning. Don’t just tell me I need more life insurance. Explain why you believe I do. Show me the steps and the logic. Remember I can think. Tell me how the particular product will benefit my family and me. Finally, tell me why you believe that a particular policy or strategy you recommend is the best choice for my situation.
•    Please don’t tell me what I can afford. That’s my call. Tell me the cost of having it and the implication of not having it. I can understand that if I am uninsured and I die my wife will be on the streets. Similarly, when you are asking me to sign up to a pension plan tell me what is the implication of a smaller monthly payment. I will tell you whether something you recommend is affordable.
•    Help me with the documentation and later – my car sales representative is absconding after I got delivery of my car. I am now chasing a telephone number for the registration book. When I buy a financial product, I surely need some handholding. I have been insured for the past 18 years and have invested in a mutual fund for the past 10 years. I have not been able to understand life insurance language.
•    I hope you will be in this profession – I have no time in my life to be chasing you. In addition, I do want to know whether you will be in this profession for at least 10 years. I have not changed my family doctor for the past 44 years – I hope to create such a relationship with you also.
•    Please feel free to admit your mistakes – I do not want my friend’s wife to review my portfolio and tell me I have been sold a lemon. Believe me you will make lemonade for me. If I find out, I have been sold a lemon, I will scream, and scream loud for all the regulators to hear. I will be hurt, but you will be finished. I have made many mistakes but I accept it and tell my boss before he finds out. Keep this going. It helps.

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Does this mean you should not invest and keep postponing your investment program?

No!

No doubt, being in debt, could make it tough for investors to make money; because if you have some high-cost debt it may not be possible to get returns higher than the rate of interest at which you have borrowed. Hence it is thought to be counter-productive to simultaneously invest as well as borrow.

Expert say

Many financial planners would suggest that you pay out or cut down your debt. In other words, if you have a credit card loan at an interest rate of 42% per annum (pa), the money you are investing will have to make more than 42% pa to make it more profitable than simply paying down the debt. There may be investments that deliver such high returns, but you have to be able to find them, knowing you are under the burden of debt. I surely cannot find them.

The debt trap

You may be paying off the following:

1. THE most expensive loan

This is your credit card debt. High interest is relative, but anything above 30% pa fits in this category. Carrying any kind of balance on your credit card or similar high-interest vehicle makes paying it down a priority before you start to invest.

Personal loans at 30% pa are also included in this category. Despite a bull market (which may last another five years?), getting a 30% pa return on a sustained basis is a pipe dream. Also did you know that SIPs started as back as a year back are now in the RED? (31 Mar, 08 – today’s comment). You should also be keeping track of your net-worth and for this you could go to www.myirisplus.com which has a software that helps you track your net-worth.

2. Low-interest debt

This can be a car loan, a line of credit, or a personal loan from a bank. The interest rates are usually described as prime plus a certain percentage, so there is still some performance pressure from investing with this type of debt. It is, however, much less daunting to make a portfolio that returns 12% pa than one that has the pressure to return 25% pa.

3. Tax-deductible debt

If there is such a thing as good debt, this is it. Tax-deductible debts include mortgages, student loans, business loans, investing loans and all the other loans in which interest paid is returned to you in the form of tax deductions. Because this debt is generally low interest as well, you can build a portfolio while paying it down.

Note: The types of debt we will cover in this article are long-term low-interest and tax-deductible debt (like personal loans or mortgage payments). If you don’t have high-interest debt or, better yet, all your debts are tax deductible, then read on. If you do have high-interest debt, you’ll need to pay it off before you begin your investing adventure.

The time to invest is NOW
Debt elimination, particularly of something like a loan that will take long-term capital, robs you of time and hard-earned money. In the long term, the time (in terms of compounding time of your investment) what you lose is worth more to you than the money you actually pay (in terms of the money and interest that you are paying to your lender).

You want to give your money as much time as possible to compound. This is one of the reasons to start a portfolio in spite of debt (but not the only one). Your investments may be small, but they will pay off more than investments you would make later in life because these small investments will have more time to mature.

The plan
Instead of making a traditional portfolio with high and low-risk investments that are adjusted according to your tolerance and age, the idea is to make your loan payments in place of low-risk and/or fixed-interest instruments. This means that you will be seeing ‘returns’ by the lessening of your debt load and interest payments rather than the 4-8% return on a bond or similar investment.

The rest of your portfolio should focus on the higher-volatility, high-return investments like equity shares and equity mutual funds. If your ability (or willingness) to take risk is very low, the bulk of your investing money will still be going towards loan payments, but there will be a percentage that does make it into the market to produce returns for you.

Even if you have a high-risk tolerance, you may not be able to put as much as you’d like into your investment portfolio because, unlike bonds, loans require a certain amount in monthly payments. Your debt load may force you to create a conservative portfolio in which most of your money is being ‘invested’ in your loans with only a little going into your high-risk and return investments. As the debt gets smaller, you can readjust your distributions accordingly.

The big picture
It’s a one-point conclusion: you can invest in spite of being in debt. The important question is whether or not you should. The answer is very personal and can be determined on a case-to-case basis. There is no denying that there can be benefits from getting your money into the market as soon as possible, but there is no guarantee that your portfolio will perform like it needs to. Such things depend on how adept you become at investing.

The biggest benefit of investing while in debt is psychological. Paying down long-term debts can be tedious and disheartening if you are not the type of person who puts your shoulder into a task and keeps pushing until it is done. For many people who are servicing debt, it seems like they are struggling to get to the point where their normal financial life — that of saving, investing, etc — can resume.

Being in debt is pretty much a state of limbo state, when things seem to be happening in slow motion. By having even a modest portfolio to distract you from the tedium, you can keep up your enthusiasm with regards to finances. Knowing that the sun will come up and being able to see the dawn are very different experiences.

For some people, building a portfolio while in debt provides a much-needed ray of light. It is like your first day at the gym. You keep regretting all the sweets, and fried stuff that you ate. What you can now do is get on the treadmill and start the work-out!

PS: Did you know that your weight is a much larger function of what you eat and a small function of how much you burn?

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Communicate your vision to your agent in a way that he understands. Too many agents start giving directions before knowing where the client wishes to go. Instead of getting into who has communicated badly, it is the clients job to ensure that the agent understands the destination before he starts driving!

Long term wealth creation requires a certain mind set – it is about choosing the more (sometimes) painful path rather than the easy path. Show your committment. Do not pull off the SIP or the Unit linked plan because the market came down 5%. Do not chew the agents head because your fund finished 9th instead of 1st. When your kid comes 5th rank instead of 2nd, you spend time with the kid, do you not? See the fund performance over a longer period. Elsewhere there is an article on mutual fund performance read that. Keep reading and learning – and make sure your agent does that too.

Be humble enough to learn from various sources and from your agent as well – make sure he is constantly updating you on the same! Great clients seek to learn from books, seminars, good magazines, and many such sources. Great advisors learn and keep their clients upto date on whats happening. So be great!

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If this were to happen to somebody dependant on you, who will pay the bill?

You?

Your employer?

Your children?

Your children’s inheritance?

Your spouse? In case you do not know ‘Who’ is going to pay such a bill if you are the earning member, look at ‘medical insurance’. When we think of insurance, we think of tax breaks. Or a favor to some relative who is not so well off or a colleague’s wife who is pushing you to do her a ‘favor’ to cover the minimum number of lives. If you are in that category, wake up. You need ‘medical insurance’ today. Considering the increasing costs of medical care in India, it is becoming necessary to have a safety net, for individuals to fall back on, in case they face an event of hospitalization following a medical emergency.

In case, you are wondering how this bill went as high as Rs 14 lakh, join me. I also wondered, then had a peek at the bill – hospital bed charges, nursing, nursing at home, medicines, assisted living, the works. Lack of good quality financial data, collection and analysis is not available in Indian conditions. Take a look at the statistics in the US and you will be scared. More than 40% of the people who needed assisted living were working people. Long-term care insurers have so far paid USD 6 billion in claims. The cost of medical treatment is a definite burden on the resources of an individual, whether salaried or self-employed. They may deplete or in major cases, wipe out the entire savings of a household. In India, the insurance industry as well as the medical fraternity would love to have details on the average age of the cardiac patients, the average age at which cholesterol becomes a cause for worry etc. However, we have no reliable statistics. As a wealth consultant, I do come across many persons under 40 who have diabetes, cholesterol, stress, but still live in denial when it comes to having general insurance on their own.The average costs for cardiac ailments/ procedures are in the range of Rs. 15,000-20,000 for angiography and upward of Rs 2,00,000 for angioplasty, with CABG (coronary angio bypass graft) costing upward of Rs 3,50,000. For major orthopaedic procedures like replacement of joints cost upward of Rs 1,50,000 and even routine procedures like fistula, hernia do cost in the region of Rs 75,000. These costs are quantifiable, and transferable at a premium, why not avail it when you can? In case, you are already afflicted by some disease, the medical insurance will no longer be available. At that stage all you can do is repent.

If you are young, this is the time to take insurance. In case, you are supporting (or likely to support) some elder relative, it makes sense to take medical insurance now. Do not wait for the disease to strike.

The most common excuse I hear from people is, ‘My company covers me through a group policy’ so I do not need to do anything on my own. This is not a good logic. What happens if you are between jobs? What happens if you are 38, dependant on your spouse’s company policy, and there is a divorce? Or your spouse dies? Will the group medical insurance kick in for the widow (er) of an ex-employee? What happens if you decide to start your own business? What happens if an American company wants you to be their representative in India and run a one-man office? There are just too many imponderables because of which you need to take and own the policy rather be dependant on your employer. The easiest thing for a medical insurance agent to tell you is ‘Ha, I told you so’ after the event occurs. Believe me, it is not pleasurable and a good insurance consultant would treat it as a communication failure – in not being able to convey the importance of the message before the event. Apart from these ‘insurable’ costs there could be other costs for which you need to create your own kitty – nursing, adult diapers, special equipment, assisted living etc. In India we still do not have ‘long-term care insurance’ and this means you have to find your own solutions to such problems.

The medical insurance market offers many of the shelf products to most people – and the premium is likely to go up in the near future. Once there is detariffing of the premium, you will see many innovative products, but nothing is likely to be cheap. However, when you think you might end up staring at a bill of Rs. 20 lakh, start early.

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But let us look at what could be the potential problems in the Will that you create.

I have seen horror stories in the Wills and inheritances that have happened, let`s take a look at them!

Scenario 1: One child depriving the other children of their rightful share: I have seen this happen, especially if the other children did not know about the existence of the asset. Other scenarios are other children are magnanimous to let it happen, they are too old and weak to fight, or they are worried about that affecting the relationship, etc. In case you wish to make sure that some of your children do not deprive the other children of the money, make sure you say it in your Will, loudly!

Scenario 2: My brother is not even bothered about my father, I have to look after him, and so his house in Santacruz should belong to me. Excellent thought. But sister, did you know that as soon as the sun rises after your father`s funeral, your brother can go to court and claim `undue influence`. Especially now that the flat is worth Rs. 1.7 crores! Though it sounds `justified` giving all your assets to one child who took care of you may not be a great idea. Pay the `caretaking` child a nice salary : after all you will pay a full time nurse, will you not ! Let us say you think your `sacrificing daughter` deserves a salary of Rs 30,000 a month that will amount to Rs 360,000 a year, for 5 years that will amount to only Rs 18 lakh, not Rs. 1.7 crores as she claims!

Scenario 3: Will my second wife leave all the assets to the children of my first wife? If you are into `TV serial kind of relationships` or a simple second marriage, ensure that the children of the first wife, the first wife, the second wife, and the children of the second wife are not in any kind of a financial `joint relationship`. It does not work. Simple, but true, you need to separate them and your Will has to be well drafted.

Scenario 4: Your daughter wants to move in with you to look after you. How noble! But after 3 months she asks to be made a joint owner in your property. You do not like it, but grudgingly you oblige. Your daughter is of course a sweet heart. And she cannot say no. In fact she had `forgotten` to tell you that she is a guarantor to her `artist` son`s TV serial venture which ran aground 2 years back. Can the bank start chasing you? You bet!

Scenario 5: You spent Rs 5 lakh on your son`s education and Rs 12 lakh on your daughter`s wedding expenses. Your son wants to know how are you planning to leave the house to them `equally`- after all there was no equality while spending! So he wants a bigger share in the inheritance. You do not need to fret and fume, just communicate.

Scenario 6: You think your `qualified` son can do with a smaller inheritance than your daughter who married the high school sweet heart. Your son is doing very well for himself, likes his sister, but knows that brother-in-law is a bum. Well ask your son, he might think differently! He might legitimately say, `look give me more, I will be there for her when my sister needs me` or say `Are you punishing me for doing well in life and leaving your money to that bum!`. Communicate with your children, do not assume.

Scenario 7: You loaned Rs 10 lakh to your son when he bought that penthouse, he knew you had the money and you gave. Now your son of course did repay in the first year very promptly, second year a little less promptly and third year only 8 cheques came. Now he is avoiding your calls! What do you do? If your relationship is important, bite the bullet. Most importantly let the other children know it, and ensure that this is mentioned in the will; now dividing the rest of the assets equally is unfair. Keep track of all your investments, loans, etc by downloading free (trial) accounting software from www.myirisplus.com

There are of course many circumstances in life which have not been enumerated here and could be unique to your case. It is necessary that you consider a financial planner for deciding how your will should be made and then a lawyer to actually draft the same for you especially it there are non-family beneficiaries. Some simple solutions that I have seen include buying a life insurance policy early on in life and making the appropriate person the beneficiary. For e.g. a client has taken an endowment policy and made his driver a beneficiary – in fact he has assigned the policy to his driver. What is the logic? Well the client is an entrepreneur with a net worth of Rs 60 crores, but he is not sure that his wife and daughter will have the magnanimity to give Rs 10 lakhs to his driver so this solution

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