Short Story
28-year-old Som is a Senior Consultant in the HR Tech domain. He lives in Gurugram with his mother. He completed his schooling and graduation in New Delhi. Later, he went ahead to pursue MBA after 2 years of work experience. He wants to clear off his education loan before he moves on to acquire a new asset like a new flat or property. In the long term, he plans to build on certain assets and needs to grow the corpus and make necessary arrangements. In this story, we deep dive into Som’s personal financial journey in relation to technology.
Savings & Investments
Som had a good amount of savings when he left his job to pursue an MBA. He decided to keep a part of the sum for his expenses during the course and invested the other part in a fixed deposit. His plan was to have some security or added corpus which he could build upon.
SD: When did you make these deposits? Was FD/RD the first kind of savings/investment product that you used?
SB: FD was created with Standard Chartered Bank when I left my first company. It had an initial lock-in of 1 year. I continued, re-invested that. Once I joined the new organization I doubled the amount and continued with the same FD. This particular Flexi-deposit with ICICI I created 6 months ago.
Recently, he invested in a Flexi-deposit with ICICI which is for smaller amounts with no lockin period to add to his emergency fund.
SD: What prompted you to start a Flexi-deposit? Was there any particular reason?
SB: At that point in time I had started investing in ELSS and other investment products as well. However, there was an associated risk as well. I felt the FD I had with Standard Chatered Bank was not sufficient enough to cover for an emergency fund. Hence, I looked up the returns chart for both SC & ICICI. This (ICICI) had a higher rate of return with no penalty charges. That is why I decided to go with this particular product.SD: Do you anticipate any kind of emergency for which that amount would be appropriate to keep? What kind of scenarios do you anticipate or plan for?
SB: Any health emergencies or certain unforeseen market scenarios like Demonetisation. Considering those in mind I think 1.5–2 months of my liquid salary is sufficient.SD: What about your PF? Was it started by an Employer? Can you tell me a little about it?
SB: First Employer was Accenture and that is where my PF account started. There was break for 2 years and now I have 2 separate PF accounts.
Som made his first investment in an Equity Share through Paytm money. Though it was a nominal amount, he got some practical know-how of investments by tracking that particular Equity Share and how it tracks NIFTY and SENSEX. Additionally, he got theoretical knowledge during MBA.
SD: Can we now talk about your investment journey? How did you start? What kind of instruments do you currently invest in? Was there a change in your preference of products and how do you think about your Portfolio?
SB: During my MBA stint we had Financial Management as a course. This got me interested in different financial products and how they work and was also attracted by the returns. Given the 2nd year of MBA, I invested a nominal amount in an Equity Share. That was through Paytm Money which had just launched. It was a nominal amount and I kept tracking that particular Equity Share and how it tracks NIFTY and SENSEX. I did get some practical knowledge on how these products work — apart from the theoretical knowledge that I was getting during my MBA. Since I did not have a continuous source of income during my MBA, I only kept that particular Equity Share. Once I had joined my current organization, it gave me a continuous source of income on a monthly basis. A year back I started an account with Zerodha and that is when I started investing in stocks primarily and apart from that ELSS is one thing I invest in to save on tax.SD: How do you identify stocks you want to invest in? Where do you do your research?
SB: I do my own research. Money Control is one website where I will check for any stocks that I can buy. ELSS you have limited options of 12–13 ELSS that are currently quite renowned. You don’t have many options and I just check what are the risk and returns portfolio. Accordingly, the ELSS decision is quite simpler. For buying stocks I scan websites like Money Control and track the market and accordingly based on intuition and judgment I will buy a particular stock.
Based on his judgment, if he feels the market is going to go up, he purchases a stock and sells it if he gains a particular % return on that stock. To monitor his stocks, he uses Paytm Money and Zerodha. He makes investments through Zerodha as it has a consolidated stock table that one can track on a daily basis and it allows one to invest in the stock market directly.
SD: Can you talk about your journey with Mutual Funds?
SB: Mutual Funds I purchased through Paytm Money initially during my MBA. It was a nominal amount I had invested to get an idea of how it works.SD: Have you had to re-think your investment strategy post lockdown? Can you talk a little about that? What has been going through your head?
SB: Before the lockdown you could track the SENSEX and see if it was doing reasonably well. There was a particular trend that could be gauged. I was investing in ELSS in the very beginning of the month when I receive my salary. Now that is not the case anymore. Since the SENSEX is so volatile, I don’t have a fixed tenure in my mind to invest into ELSS. I do it interim and I don’t have a fixed amount that I invest right now.
Loans
Som has only taken a single loan so far to pay off his MBA fees. Though he compared interest rates offered by various banks, he went ahead with Central Bank because of his father’s trust factor and a negligible difference in the interest rates.
SD: Were there any investments you made expecting or anticipating the MBA exam fees? What was your financial planning around the payment of the fee for your PG?
SB: I had taken an Education Loan of about 12.5 lacs during my MBA and 6 months post that there was a moratorium period wherein there was no compounding interest, there was only simple interest that was being charged on the principal amount. My father used to help me fund that. In fact, for the entire 2 years, he used to repay the interest amount that was being charged. Post that my father paid a part of it — around 30% was repaid by my father, the rest principal part I have been repaying as EMI.SD: So if you had to give me a timeline year-wise — When was the year that you took the loan? How many years has it been? What is your payment history and your plans for the repayment of this loan?
SB: I applied for a loan in the month of June 2017 — just before joining my MBA course. I completed my MBA course in March 2019. Then there was a moratorium period of 6 months, however, I had joined the new organization which I am presently working in the month of April 2019. At that point I realized — why delay the repayment? So I started repayment from the month of June 2019 itself. Presently I have repaid about 50% of the initial principal.
While applying for the loan, Som had decided on a repayment tenure of 7 years. But once he completed his MBA and got placed, he started paying off the loan during the moratorium period itself and restructured his loan repayment plan after speaking with the bank manager. He paid 50% of it in 15 months.
SD: You said that initially when you took the loan there was a 7 year period that you had planned for. Has there been any change in that plan?
SB: Yes there has been. It has been 15 months since I started on the repayment. I have decided that once I have started repaying that EMI in the last year in the month of June. I decided I want to do away with it in less than 7 years. Ideally 3–3.5 years. I don’t know the new tenure that has been figured out. I discussed it with the bank manager and he gave me a figure that if I repay by so and so period and if you are planning to repay the entire amount by June 2022, you will have to pay this monthly amount. That is your EMI. I agreed with him and I am currently continuing with that.
Som is far-sighted and he knows that it is inevitable that he will have to take a home loan in the future. He knows that he cannot afford to have too many other loans at the same time. This led him to plan and pay off his education loan within 3–3.5 years.
SD: What made you want to settle this loan sooner than you had planned to earlier?
SB: I had other plans as well. Being in this my late 20s, you have certain plans that you keep in mind considering your future. I still have a plan to buy a flat. Although I have a flat in Kolkata as well, I want to purchase a flat in one of the metropolitans. Thinking of all these factors and the lump sum figure of those flats in Tier 1 cities, I would essentially have to take a loan to meet the entire cost of the flat. Invariably if I have to take a home loan as well, it would cost me a significant portion of my salary. I that time I can’t afford to have too many other loans.
Insurance
Som was offered health insurance by his employer that covered him. Since he understood the importance and benefits of a good health cover, he went ahead and chose a plan that covered his family(mother) as well.
SD: What investments do you have at present?
SB: There is a health insurance plan offered by my company itself. They deduct a nominal amount for both mine and my family members (mom’s) coverage. I think it is about Rs 4,000 a year, quite an insignificant amount.SD: So you negotiated that with your insurance provider?
SB: Not negotiation. There are plans. If you have 2 dependent members, the amount is fixed at a certain level. If you have upto 4 members there is another amount — a slightly higher amount.SD: What kind of documentation did you need to provide to get this insurance?
SB: At the time of onboarding the usual documents which we furnish — photograph, Aadhaar Card, PAN card and along with that my mother’s Aadhaar card.
Personal Data Sharing
Som had a particular experience 1.5 years back where he received multiple calls on an evening and the person on the other side knew about the bank account that he had. Som could guess that fraudulent activity was being carried out so he immediately reprimanded and disconnected the call.
SD: Has there been any instance when you feel your personal data is with people you don’t want it to be with?
SB: I received this call one day during my MBA. He was stating that my Standard Chartered debit card will be locked if I don’t visit a bank or call on this particular number. I realized that some malpractice was being followed. So I immediately reprimanded and disconnected. I received such calls on 3–4 more occasions. One was related to my bank account again. The other two were people who were demanding or requesting for money. I don’t know how they received my phone number, but I have this kind of intuition that one of these apps might have leaked the details because they knew my name and they knew where I stay.SD: Requesting for money as in? Or Requesting on Google Pay or PhonePe?
SB: Not Google Pay or PhonePe. Calling on a phone, they knew my name and there was this particular guy. I think he was calling from Rajasthan and he said he was in urgent need of money and he said one of his family members wasn’t doing well and he requested money of about 20,000–30,000.SD: What was your response?
SB: I did not reprimand him, but I asked where he was calling from and how did he get my phone number. He did not have an answer to where he received the phone number from, but once I was enquiring and probing into details he got agitated and asked whether I am planning to give the money or not. As soon as I said no, the phone was disconnected.
Trust factor plays an important role for Som. He is not comfortable sharing his personal data with fintech and e-commerce platforms as he thinks that there isn’t a regulating authority that is strong as compared to government banks.
SD: Do you think your information is more prone to fintech & e-commerce platforms?
SB: I don’t think there is a regulating authority that is still as strong compared to those that government banks. SEBI & RBI do have government and security norms where data can’t be shared with any other third party. The same trust factor I don’t think I can build in any fintech app or eCommerce app.SD: What about your social media information? Would you share it with your banks?
SB: No, not at all. First of all, I don’t see a purpose. How my social media account is linked to any other financial products and any of my digital footprint can be of use to them. Secondly, I am not willing to share that.
Life goals and planning
Considering the current situation of COVID and the uncertainty around it, Som wants to go easy on the investment part. In the long term, he wants to clear off his education loan before moving on to build on certain assets like a new flat or property.
Som loves to read. Though fiction has been his favorite genre, he has now started reading finance-related books to improve his knowledge of personal finance and implement it.
SD: What about your own wedding ceremony? Are you planning for that? SB: I do have that at the back of my mind, but I think the investments and FDs I have will cater to my expenditure.
SD: Do you have any mentors to talk to and ask for financial advice?
SB: If it's taking a loan, I would go to my uncle who was associated with a bank for his entire career. If it is stocks and equity then I would not say mentor but I would go to my colleagues and well-wishers to consult them and discuss the market.SD: Did you find these finance-related books informative?
SB: I did. I think of my current practices that I am following was an insight that I gained from a particular book where he mentions about even though we are into digital platforms and we do not keep a track nowadays of our expenditure, even nowadays its advisable to jot down a rough monthly expenditure and stick to it so that you are not spending it frivolously or doing any impulsive purchases or being extravagant. It has helped me cut down my expenses. Not a significant amount every month, but if I see it over time I’m sure it will be significant.
For Som, financial freedom would be the time when he has a stable source of income with aspirations that he can achieve without being employed by anyone else. He believes that having his own venture or generating enough periodic returns on his investments or any other assets are two routes he could take for this.
SD: If there was any advice you’d want to give yourself 3–4 years ago, what would it be?
SB: I think since I was earning less at that point in time I was doing well because my expenses were low. I did not have much expenditure and I could not plan to purchase items that were expensive. Currently, if you compare that there are instances of impulsive purchases or certain decisions that I can afford to take because of my financial stability relatively.SD: So no specific advice then?
SB: Considering how much I was earning I think I was doing okay. In fact I was saving more than I w am doing currently as a % of my total income. I think then I was saving 40% of my income. But I wasn’t investing in any products because I did not have any knowledge. So if I could turn back the clock I would start investing at a slightly earlier age as is also suggested by Nandish Desai in his books. That figure of 45 (age) would have come down to 42.
This interview is broken into two parts. The first part of the interview talks about Som’s family, background, income, expenses, and payments.
Credits
- Interviewed and transcribed: Soumitro Datta
- Analyzed and published for Medium: Geetika Shukla, Dharmesh Ba
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About the Research
This documentation is a result of the in-person interview, along with the participants’ consent. The interviews might be conducted in their native languages and translated to English in the best possible way to reach a large audience.
Disclaimer: The identities of people and places in this documentation have been changed to honour the privacy of the participants.
About D91 Labs
This research was executed and documented by D91 labs. D91 labs is an open-source initiative by setu.co to help Bharat build great fintech products. We organize and publish user research, insights, and frameworks for fintech in India. Please follow us on medium for more exciting stories and insights on Bharat.
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