How financial planning with your spouse can save you both from a crisis
When Deepika Ahuja and Om Prakash Singh both lost their jobs on the same day in September 2018, it was unexpected, to put it mildly. It would have been a rude shock to any couple, but they took it in their stride. It was because of the self-built financial backup and their belief that one company can’t determine their fate in the long run, they could do this. Deepika explains how this is just a temporary set back thanks to their investing habits.
At the beginning of our marriage, Om tried to discuss money management, I was reluctant to learn. But now, I am getting involved in money management. It is his consistent effort to invest and his ability to cut spending that has enabled us to be comfortable with our lives in the last six months without jobs. Today, I am proud to say that we can manage without a job for another 12-18 months at the current lifestyle. It did not come easy.
Building a financially sound marriage
I married Om in 2007 and we bought our first house in 2008 in Gurgaon. At that time we had a combined income of about ₹40,000 per month, our EMI was around ₹20,000. One thing that Om did consciously was to make sure that we did not take more than 30% of loan to asset value, which means we saved and did downpayment of 70% of the value of the house we bought. We also ensured that we constantly checked the interest rate and actual interest outgo to keep it at minimal levels, which usually people tend to ignore.
Between 2013 and 2016, Om worked in Dubai, stayed alone without us, he diligently saved 60% of what he earned while he was there. This helped us in clearing our home loans for our houses we owned in Gurgaon and Bahadurgarh, he quit and came back to join my company, a general insurance firm. My son is 9 now, I adopted a girl in April 2018, went on adoption leave and joined work in August and we were let go in September. It came out of the blue because I had just got back from adoption leave and Om was the company’s best performing manager and we got caught in politics, but it was ok.
Going debt free:
It was ok because we had planned our money well from day one. Today after 12 years of marriage, we own three houses, two in Gurgaon, one in Bangalore. We live in a rented apartment in Bangalore as this apartment has all the amenities we need and we have rented out all three apartments which are earning us some passive income.
The two houses in Gurgaon and Bahadurgarh fetches us ₹15,000 per month and the house in Bangalore is fetching us ₹32,000 and we are paying ₹5,000 extra for the house we live in. Om does stock trading now, he is still learning, he is getting better. It sometimes earns us ₹4,000, sometime last week it earned us ₹29000. I have started my own firm, where I do corporate training. It is a startup, so it will take some time for the business to get established.
At 35, it is quite satisfying to see that, our efforts have borne fruit. When Om insisted that we saved, I did complain, in fact, I went to the extent of calling him a miser, but I am thankful he did what he did. Initially, I felt the company was ruthless to have asked us to leave on the same day, but our severance package was reasonable. I got eight months of my salary and Om got six months of the salary he earned. I got more because I had spent five years in the company, whereas Om had spent 2 years. We used about 50% of our severance package to clear the final home loan we had. This made us totally loan free.
Eggs in different baskets:
Besides investing in property, we have also made investments in mutual funds and stocks over the last decade. While people tend to think stocks are high-risk investments, a good high yield investment fetches about 18% average returns over 3-4 years, which I feel is a good return. What people do is park their funds in banks which gives a lower rate of interest, lesser than inflation.
Rainy day plan:
Another important factor that cushioned us during the low time was the fact we had put away six months of our salary in a separate savings account to be able to sail through a rainy day. Early on, we had decided not to take loans to finance our luxuries. For instance, a car is a depreciating asset, we did not buy an expensive one, which we could have afforded by taking a loan.
But we decided not to take it, instead opted for cash down, because the interest you pay on the car loan is high and car depreciates making it a negative return asset. We ensured that none of our home loans lasted beyond seven years because assuming if a property doubles its price in seven years, the interest outgo on a home loan is so high that at the end of it the returns are again negative.
Savings, the seed to investments
We are also minimalistic in our spending, Om and I believe in minimal living. We love to invest in experiences, not on things. I am not saying we are spending at the same levels as we did when he had a job, we have definitely rationalized our spendings. My credit card bills used to be₹60,000-70,000, now it is at ₹15,000-20,000. Om makes sure I write down the expense, it helps me think through why I spend on what I spend. My son has also realised that his parents don’t have a job. His demands have gone down without us asking him to do so, which I think is a good thing.
There is enough for everybody’s needs, we are nimble enough to cut our expenses when there is a need and go all out spending when we can. I know when either of us gets a job tomorrow, Om will be even more careful in spending and I will still go ahead and spend on things I would like to buy.
When things are good, money seems a tedious topic and we tend to put it off till possible. A lesson that I have so well learnt is when there is a crisis, especially a financial one there is no grand miracle that will save you. It is rather the small steps taken consistently that take you very far and in our case gave us a peace of mind that is priceless.