Children’s marriage – a life goal?

When I was in college doing my Engineering and later on my MBA, my sister was engaged in doing her MBBS. One of the hot topics of discussion that my parents were often subjected to was when they were planning to get my sister married. This was despite the fact that she was doing a professional course in Medicine which would not be over till she was about 24 years old. My parents and I were asked about my marriage about a few years later, after I had done my MBA and worked for 3 years or so.

I was reminded about the above as I was recently having a discussion with my friend about the life goals I had and he pointed out that my children’s marriages did not seem to figure in them. When I told him that it was not really one of my life goals, we went into a rather long debate about whether it should or should not be a goal in life. I am happy to say that by the end I was able to bring around my friend to my viewpoint.

Now do not get me wrong – I am quite clear that marriage is an important step in the lives of my children and they should definitely have it as one of their goals in life. I will be happy to offer my opinion on it and even organize stuff for the marriage, financially or otherwise. However, I do not see it as my responsibility to decide when they should get married and who they should get married to. They are already adults, taking many important decisions on their own, and I hope they will be able to take the right decision at the right time in this issue too. I will be more than happy to be a guide to them, as I have always been, but I am quite certain that I have been able to bring them up in a manner which will enable them to take this responsibility and do it well.

Most Indian parents, unfortunately, take it on themselves to decide who their children should marry, when it should happen and how the marriage should be conducted. In fact, a lot of our social evils stem from this as the expectations from both sides are set at an absurdly high level and, more often than not, lead to disillusionment and problems. Marriage today has become an occasion for both the groom’s and the bride’s side to show off their actual or perceived status and a display of consumerism, sometimes in a vulgar way. A lot of the associated social evils are a direct consequence of this.

Another issue that comes out clearly is how we still differentiate between out sons and daughters even in this day and age. When I explain my views on children’s marriage the most common reaction is – ” well that is ok for your son but surely you need to need to think of getting your daughter married?”. My answer to this is simply that unlike most others, I genuinely do not differentiate between my son and daughter. I have brought them up in exactly the same manner and have the same expectations from both of them. My life goal for them is to help them grow up into well educated and capable individuals who will be able to do well in life for themselves and others. Fortunately, both my children are well on their way to achieving this and once they do my goals will be achieved. Of course, I want them to marry, have a family, do really well in their careers etc. But, these are their life goals and not mine.

At the end of the day, if I have not been able to inculcate the right values and attitude in them, then I have failed as a parent. Whatever they choose, as long as they live happily with their choice I am quite happy with it too. Even in the unfortunate situation that they are not happy, it is something that they will be responsible for. As parents we can always offer our opinions and guidance, but it should be in a neutral manner, not to be taken as an imposition. My daughter will probably get married in 5 years time and my son in 8-10 years time. I feel quite confident that by them they will be completely capable of a good decision in terms of their life partner.

To complete the story of me and my sister – she got married after completing her MBBS and internship, to a fellow student of another Medical college in Kolkata. Though my brother-in-law is not a Bengali, we were very happy at the marriage and it has really turned out well for them. They currently live in UK. My marriage to Lipi was made somewhat complex by the fact that she was from a different caste, but all ended well and has remained so for the last 22 years and more.

So is children’s marriage a life goal for me? No way, though I do hope they are as happy, or possibly even happier, than my sister and I.

Higher education expenses – Graduation costs

I have been engaged in an overall financial audit for myself since the last month. While auditing my investment portfolio is a major part of it, one of the significant expenditure areas which I am trying to get a fix on is my son’s Graduation expenses. I wanted to share some of the data as many readers may be benefited by a real life example.

To give some background, for the people who are unaware, my son Ranajoy is presently doing a 5 year dual degree course, comprising Msc Maths and BE Computer Science from BITS Goa. He is presently in the second year, so we have paid his fees till the 4th semester. As the increase of fees in BITS is quite regular and predictable, it is possible o estimate the total cost of the course and also what is the amount we will still need to pay over the next 3 years. Note that I am only talking about expenses paid to BITS directly here.

  • Year 1 expenses were in the range of 2.4 lacs
  • Year 2 expenses were in the range of 2.7 lacs
  • Admission expenses and PS1 expenses were in the range of 80,000.
  • Year 3 expenses are likely to be in the range of 3 lacs
  • Year 4 expenses are likely to be in the range of 3.4 lacs
  • Year 5 expenses are likely to be in the range of 3.8 lacs

Total projected expenses for the course are therefore in the range of 16.1 lacs. If I add about 1 lac a year for his other expenses, inclusive of travel etc then the total expenditure comes to about 21 lacs. Of this I have only paid about 7 lacs so far, therefore a long way to go yet.

How do I plan to manage the payments now and in the future? I have taken a simple approach here – kept some FD in his account for the next 2 semesters and will keep doing this as time progresses. Essentially, I do not look upon this money as part of my cash flow, it is like a separate account maintained for my son. Even for his own expenses, I transfer some money periodically, as and when the account dips to below 10,000.

Apart from the convenience and peace of mind that I get from it, my son is also becoming more responsible about money by handling his own account. He knows how much money comes in, how he is spending it and how much fees are being paid to BITS.

With BITS increasing fees by 12 % and more every year a 4 year course will be 40 lacs in 6 years, 80 lacs in 12 years and 1.6 crores in 18 years. This may sound rather fantastic but is quite likely to happen so it is better to be prepared.

I for one am glad that my daughter has finished her college now and my son is well into it!!


Education loan – considerations and decisions

As the regular readers of my blog will know by now, my daughter Sharodiya ( Rinki ) has got admission offers from both XLRI and IIM Kozhikode for their MBA program. She may also get into IIM Lucknow when they come up with their latter lists in the next 2 weeks or so. However, as of now, we have got her admitted to XLRI for their BM program.

Rinki was home for the weekend from Bangalore, where she is doing an internship, to get all the papers etc in order and in between the catching up and celebrations we had some serious discussions too about funding the course. Based on what I have always advised my children, they are quite comfortable about taking an Education loan for funding their PG education. So, her first reaction was that we will take a loan from SBI or some equivalent bank, I could pay the interest till she graduates and she will start paying the EMI after she gets a job. While that was my earlier idea as well, this time I took a closer look at all the data and the different options of funding the course.

The relevant facts for consideration are as follows:-

  • The course fees for XLRI are at 21.04 lacs for the duration of 2 years.
  • These will need to be paid in 6 installments. The first one was for 5.42 lacs which I have paid out of my resources. The remaining amount is therefore 15.62 lacs.
  • Rinki is very keen to pay off the loan quickly. At current rate of interest at 9.55% the EMI for the entire amount loan will be nearly 33,000 per month, if the payment period is 5 years.
  • The above should be a breeze as the median salaries at XLRI are around 20 lacs and I certainly expect her to be there if not at a significantly better position.
  • SBI does have an option of paying back the first installment amount but as of now we are not considering that.
  • Assuming an EMI of 33,000, total interest paid by her will be nearly 4.38 lacs.
  • There is pre-payment penalty of 2% applicable in the current rules, after MCLR based lending norms have been in place.
  • The interest for the pre-EMI period will be around 1.4 lacs.

One of the issues I could see with the loan is that, while it is definitely convenient, it does not come cheap in any way. Even with paying it off in 5 years, the overall interest comes to nearly 6 lacs. If we do not pay the interest in the pre-EMI period this goes more obviously. Of course, this is a boon for people who are not able to fund the education otherwise.

For me the question boils down to this essentially – if I take the loan for all installments and start paying the interest today, am I likely to earn more than 9.55% on my money? In the present circumstances of the markets this will be a little optimistic at least in the next year or so. Also, will it be easier to pay a couple of installments more, reduce the loan to about 11 lacs and ask my daughter to pay me back if and when I need the money in future?

There are no easy answers to this but the decision I have currently reached is this:-

  • Take a loan provision of about 17 lacs from SBI.
  • Try and pay the next 2 installments, due in August and November this year, out of my own resources. These will amount to 5.02 lacs.
  • For the remaining 11.6 lacs the EMI will be 24,391 for a 5 year paying period and interest paid will be 3,03,460.
  • Interest to be paid before the EMI starts is 81000.
  • In other words by paying the 5 lacs now, I am reducing the total interest outgo by about 2 lacs overall.

I have always held that no loan is really a good loan, while some of them are necessary. Education loans availability is a great thing for many people who would not be able to afford the expensive quality education otherwise. However, it does come at a price and the students need to build themselves up to ensure that they are able to pay it back without getting into any real problems.

For colleges like the top 6 IIM’s , XLRI, FMS ¬†and a few others in the second tier this is not really an issue as most students will get pretty decent jobs and should be able to pay off the loan in 5 years. Caution is to be exhibited in good measure for other colleges.

My Debt portfolio – using PPF

With the rate reduction in PPF scheme and the knowledge that it is likely to be aligned to market rates every quarter from now on, is it still a good idea to have it in my portfolio? In my audit of investments for this FY that was the main question I was faced with regarding my PPF investments.

Now in terms of personal finance every issue and decision is contextual and the situation of the individual makes all the difference. In my case I have a PPF account since 1994 and my wife has started a second account in 2013 after the first one was matured in 2004. Some details of these accounts are as follows:-

  • My present maturity is in 2019 April and current balance is about 20 % of our total debt portfolio.
  • My wife’s account will mature in 2028 and currently is about 3.5 % of our debt portfolio.
  • Contribution of 1.5 lacs is made every year in the first week of April to both accounts.

Given the tax treatment of PPF at EEE, I see no reason to stop my investments in it even though the interest rates have reduced to 8.1% currently. I think the returns on PPF will go down further to about 7.5% or so, but even that is not a bad rate for an EEE instrument. In the coming years the interest rate cycle is very likely to turn around and at that point in time, PPF will immediately get benefited as the rates are market linked now.

With the investment decision taken, the next issue is how to use the money in the account. So far I have not withdrawn any money out of my account since 1994 and do not plan to do so till the current maturity in April 2019. The same goes for my wife’s account. Her first PPF maturity amount had helped us greatly to boost the down payment that we were able to make for our apartment in Chennai.

So after a lot of thought these are the conclusions I have come to:-

  • Continue my account after 2019 for another 5 years while being open to withdrawals for any emergency post 2019.
  • Assuming that my daughter gets married in the period beyond 2019, such withdrawals can fund her marriage expenses to the extent needed. Even though I have investments in equity for it, a hedge against market crashes is prudent.
  • Withdrawals can also be used for discretionary purposes such as replacement of white goods, vacations outside India etc.
  • As I will normally not need the PPF account withdrawals for my regular expenditure at least till 2024 or so, in the absence of any of the above the money will simply grow.
  • As far as my wife’s PPF account goes it will grow to 40 lacs plus by 2028. At this point if the returns are decent we will continue it. Note that we can withdraw 24 lacs in the subsequent 5 years from her account.
  • Assuming that I can withdraw about twice that amount from my account in 5 years, the total withdrawn amount in 5 years will be 72 lacs. This can be used for a variety of purposes as explained earlier.

How will I fund the 3 lacs per year? As of now, I am doing it from my Consultancy income and hope to do so for the next 6-8 years. Beyond that or in case the income is insufficient in a year, I have plans to fund it through the redemption of debt funds such as FMP etc that keep happening every year.

In the end what does the PPF investment mean to me? Well, it is something from which I can withdraw any time I have an exceptional expense whether due to an emergency or due to an indulgence that we need to do. It also gives me the cushion of not having to redeem my equity investments for fulfilling a goal, when the markets are in a bad situation.

In short it contributes a great deal to my peace of mind.

The magic of Matheran

Summer has indeed started early for India this year and Hyderabad has been badly affected by it. The temperatures soared in March itself, forcing us to switch on the AC more often than not, which was quite unprecedented. April started in a worse note and we really needed a break. A long vacation in North India was out of the question as our daughter Rinki was waiting for her B School admission results. We therefore needed a quick getaway in southern or western India and Matheran was an appropriate choice.

Though I had never been to Matheran, Lipi and I had always wanted to visit it. The basic premise of an ecologically protected forest area where vehicles were not allowed had it’s own share of romanticism and excitement in equal measure. However, the planning proved to be a little difficult as one has to travel to Neral from Pune and then onward to Matheran. As an experienced traveler, I found out the best mode possible, in the absence of confirmed bookings in trains. We first booked a return journey from Karjat on the day when tickets were available in 2nd AC by Hyderabad express. The going part was easier as Shatabdi from Hyderabad to Pune is usually not full. The Westend hotel in Matheran seemed good for a 3 day package inclusive of food which we booked.

To cut a long story short on the travel – we went by Shatabdi express to Pune, spent the night in the retiring rooms there, took Sahaydri express early morning to reach Neral and then took a taxi to Dasturi Naka as the toy train ticket line was daunting. Once at Dasturi Naka, the choices were to ride a horse, go by a hand carted rickshaw or walking. We chose the latter option and it was quite rewarding , both for the views that we could watch in a leisurely manner as well as the interesting trek along the railway line. One surprising thing about Matheran is that one should really not call it a hill station.It is only at an elevation of 800 meters and the day time temperatures were in the mid thirties for all the days we were there. But then Matheran is unique in many ways as we found out to our delight, during our stay of 4 days there.

In simple terms Matheran is a small settlement with a main street having pretty much everything from the Railway station, markets, hotels, travel arrangements etc. Apart from this you have several treks which lead to the ubiquitous viewpoints here. From reliable sources you have about 38 of these points and you should definitely see the better known ones, which are probably a dozen in number. Your mode of transport can be horses that will take you quite close to the points, hand carted rickshaws with one person pulling and the other pushing or restraining it on a downhill slope or walking. I recommend you try all 3 when you are there but my favorite mode was walking.

Before that though, a word about the hotel where we stayed. Westend hotel is a very nice one with well appointed rooms, a small swimming pool, pretty good housekeeping and great food options by the pool side. The dining area also happens to overlook the surrounding forest area and the fenced off sylvan background adds to the general ambiance of the place. The day we arrived was a Sunday and there was a fair bit of crowd, I suppose mainly from Mumbai. For the other days though, we pretty much had the hotel to ourselves and it was a very peaceful feeling. The hotel was a tad expensive but it was money well spent.

Peace is something you will find in abundance when you are in Matheran. The absence of vehicles make a huge difference and you are suddenly transported to an era 100 years back when there were no motorized vehicles. As a reminder of that age, you will see an abundance of horses here. They come in all shapes and colors and are generally quite healthy – I suppose the vigorous exercise that they have regularly is the secret. The railway station is one of the major activity hubs here, there are trains to Neral taking about 2 hours and also a shorter ride to Aman Lodge which is close to Dasturi Naka. As we did not have the chance to take the train on our arrival, Lipi and I took a ride to Aman lodge and back on one of the days. It is a great feeling as the train chugs along fairly deep woods, the longer ride may be well worth it some other time.

Matheran is the ideal place to relax as even when you are seeing the points you are not rushed. The walking or riding a horse are done at a leisurely pace and the rickshaw, though a somewhat more hectic mode as compared to the other two, only travels for short distances before letting you get off and see things at your pace. Though the day time temperatures are high, the dense woods with the taller trees forming some sort of a canopy ensures that you are shielded from the effects of the direct rays of the sun as you walk. The chirping of the birds in the early morning or late afternoon is a constant reminder as to how different the place is compared to where we usually reside. The views of the hills and the valleys are downright spectacular and quite unique in our country. The hill sides are normally having rocks that have multiple colors, I have not witnessed so many shades of brown and black in my life before. Almost any point is worth seeing but some of the ones definitely not be missed are Sunset point, Alexander point, Louisa point, Monkey point, Charlotte lake and Celia point.

The best thing about Matheran though is you really do not need to do much. While the points are worth viewing, it is really how you can relax there that makes it unique. There are a whole lot of places where you can get a good drink and the flavors are simply mind boggling. Sipping one of those drinks and watching the views from a point, can make you forget that you have to get back to normal life soon. It is a place where you can be quite alone with your thoughts and combine it with long walks in the woods. Robert Frost had said, “The woods are lovely, dark and deep”, and he might well have been speaking of Matheran. I am very regular with my morning walk and have done it in many places in India and outside. However, Matheran is easily the best place in my book for a morning walk, or for that matter a walk at any point of time during the day.

As it typically happens in a great holiday, the return from it was quite abrupt. We were soon waiting for Hyderabad express in Karjat station, where it was very hot. Fortunately once we were in the train the AC worked well. We also reached Hyderabad early morning and learnt that there have been some rains of late, hopefully that will bring down the temperature by next week.

To sum up, Lipi and I had a great holiday in Matheran – it had everything from nature walks, good accommodation, unique transport modes, delectable food and the luxury of doing things at our own pace. As I said before, Matheran is really not a hill station, but it is definitely a place with a fair bit of magic. You will find it enchanting and want to come back for more in future. We definitely want to do so in the coming years.