Amit and Ajay were had graduated together in college but were out of touch. One day the friends ran into each other at a shopping mall and decided to meet later in the weekend. Both had similar kind of jobs with a similar pay scale, but their lives looked different after the gap of 12 years. Amit looked much confident in his finances while Ajay was doubtful about his financial condition and also the future plans.

Both of them entered a job by the age of 23 soon after their graduation in two companies with a basic pay of R15,000. Neither of them had made any investments till around the age of 26. They got married at the age of 28. Now at the age of 35, both of them receive a salary of around R40,000. Then what made the difference?

Amit is married to Anagha who is a lecturer with a monthly income of R20,000. They have a 2-year-old kid Amal. Amit and Anagha have a combined monthly income of R60,000. Amit and Anagha had a plan to have a kid only after two years. Anagha would leave her job for the duration of two years when they have a child. Amit foresaw this in advance. By two years they had saved enough money to compensate for the loss of the family income and also to meet the medical expenses in the duration. They had gone in for less risk investments on the advice of Anagha?s father who is a stock broker. By the time Amit was 30 they had their kid and their expenses increased and income became lesser. But the advance planning helped him save the situation.

Amit and Anagha then had plans to move into a bigger house in eight years. Amit also planned to invest for his child?s education and marriage and also his retirement. He had started investing in different schemes for realising his goals. On the advice of his father-in-law he had invested a major portion of his investment in equity. Though the risk is higher in equity investments the returns are also high. But the risks reduce highly if the investment time is bigger. Their goals were clear and the time to fulfil those goals was also very specific.

The child?s education and marriage were to be met in 16 and 26 years later. He had plans to retire at the age of 65. He had allotted a percentage of his salary towards these investments since the age of 30. He had also allotted a portion of his income in to an emergency fund. By the time he was 32, his wife started earning again. This increased the money allotted to the investments. By the time he was 35 he was confident about the future and his plans.

At present, Amit has spread his income across different needs for:

A bigger house R15,000

Child?s education R4,000

Child?s marriage R3,500

Retirement R8,000

He has allotted these amounts to achieve the future value of the expenses. His allotment to getting a bigger house is lesser than the required amount as he plans to sell the existing house to get the new one. So a lower allotment would be enough.

Ajay had got married to Nina who was working in a bank with a monthly income of R20,000. They have a net monthly income of R60,000. Though Ajay wanted to save for the future and had his dreams, he never thought beyond his bank savings account and few debt instruments. This hardly gave him scope to increase his returns. Better late than never ? so goes the saying.

Amit offered a helping hand to Ajay in scheduling a proper investment plan for the future. With the help of his father-in-law Amit helped Ajay figure the proper investment instruments that he can opt for. He also found out a better way to manage and close off his existing loans. Ajay transferred more portions of his investments from debt instruments into appropriate equity in order to get better returns. He also started to create an emergency fund to tackle any emergency situation that may arise. Since Ajay started investments later his monthly allotments had to be higher than that of Amit?s. But the savings in the debt instruments helped him reduce this to some extent.

Ajay realised that it was better late than never in his case. He also realised the kind of value he lost for starting late and had to make up for it by shelling out more money.