Why Financial Planning?

Planning is bringing the future into the present so that you can do something about it NOW.

You have been working abroad and earn a tidy sum. You may be richer than many of your classmates who live in India. You might be able to afford quite a few things which you could not some time back. But that does not mean, you spend money like it is going out of style.

I wrote this post before we heard about CoronaVirus – which is now making everyone realize why it’s important to focus on needs more than wants.

6-ways NRIs should NOT spend their money
Ways NRI should not spend money

Read More – Smallcase Stock Investing For NRIs – Review

Here are a few ways in which one tends to misspend money. These wasteful means of expenditure can surely be avoided –

Excessive Online Shopping

Online shopping is so easy and so addictive. People consider online shopping as therapy even. If you are an NRI from the US or UK, you probably come to India in July-August during the summer holidays in schools in those countries. In many parts of India, it is the time of the monsoon season. You may be stuck at home due to heavy rain. You get bored and go online. You see advertisements for all online stores – Flipkart, Amazon. Most brick-and-mortar shops have an online presence too. They have many clever offers too. It is convenient and tempting to shop. But unnecessary shopping will deplete your hard-earned money. Stay away from online shopping!

As an NRI, you may be tempted to buy the latest traditional wear and accessories as you may not see too much of that in the country you live in. But how much of your purchases will you use? You might be tempted to buy traditional clothes for your children. How many times will they wear those expensive clothes? Moreover, children outgrow their clothes real quick.

What can one do to prevent unnecessary online shopping?

Do not buy on an impulse. Plan your purchases so that you buy what you need and things that are long-lasting and of good quality.

Acquisition of Luxury Brands

As an NRI working abroad for some years, you probably have more disposable income than you have ever had. Moreover, if you earn in strong currencies such as USD or Euro, you have more cash too when you come to India. Most high-end brands are now available in India as well. Malls have seemingly attractive offers. You find it tempting to spend rupees. But do you really need all the latest clothes? Do you have to prove that you are the smart one who took “advantage” of the offers in the mall? It is nice to have a few luxury possessions but it is important not to go overboard with it. For example, Ikea’s founder, Ingvar Kampradany who was a billionaire shopped for his clothes at flea markets!

Plan of action

Save your money from unnecessary expenses. Make a habit of buying things that provide value for the money that you are spending. You should buy what you need and not everything that has an attractive offer in the mall.

Buy an Overpriced House

Most of us want to buy a big house in the right location. We want to decorate the interior of the house as per the latest styles and designs. We want to buy the most expensive furniture too. Owning a house is good. It is also a dream that many want to fulfill. But a house is an expensive proposition. The purchase has to be planned and executed after a thorough research

Do you have to design and decorate the house now? If you are returning after five years, it may no longer be a designer house. The decorations might be out of fashion. It will be a case of throwing good money after bad.

What should I do if I want to buy a house?

Among other things, consider the following points before buying a house –

Location of the house – Will you or your family be living there anytime soon? Will it be a convenient location five years down the line? Plan well before buying a house. If you are over 60 years of age, you may want a house with amenities such as a market and medical care unit nearby. It may not work out if you have to drive a car to go to any place.

Life Stage –  Consider circumstances of your return, your age when you are back, and your future lifestyle before you choose to buy a house. If your kids are going to be studying abroad, you may not need a four-bedroom house.

Price and Time – Price is an important factor in the purchase decision. Check out the price vis-a-vis the prices of other properties. Try to evaluate the price appreciation in the property that you will get. It may not be possible to time the purchase accurately. But check out newspaper reports and talk to a few brokers or people in the real estate industry to gauge the situation in the industry. This will give you a better chance of buying a house at a good price and at the right time.

Check – Wealth Planning Checklist for NRIs

Purchase of Convenience Foods

You usually come to India for a holiday and want to experience everything that you missed. Most Indians miss our amazing food options abroad. We end up buying a lot of packaged food and spend a lot on takeouts and dine-ins. Even if we can afford it, it can play havoc with the budget. Yes! We can indulge ourselves in the food that we missed once in a while. But remember to be mindful of the expenditure on this activity and keep it in control.

How Do I Deal With This?

It might be better for our health and wallet if we avoid buying food from outside all the time. One good idea may be to take up the services of a cook temporarily and ask them to prepare our favorite foods.

Signing up for unnecessary memberships

We live in the Fear of Missing Out (FOMO). For example, sometime back, everyone in India had a Zomato membership which offered great deals. But as an NRI who probably visits once a year, it does not make sense. There was no point in buying the membership (the membership is apparently not as lucrative now as before anyways), Similarly, it may not make sense to join fitness classes, etc. The short timeframe may not make economic sense and you may not always be able to make it to the class. Your time in India is short and you may have many appointments, errands, and visits.

How Do I Make The Most of My Visit to India –

There are many things you can do to make your stay in India pleasurable –

  • You can continue your fitness regime when you are on holiday by going to the nearby park for your morning run or walk.
  • You can visit your apartment complex gymnasium and/or swimming pool and/or health club amenities to have a good time and work on your fitness.
  • You can tag along with friends and family who can use their membership options to get good deals.

NRI Financial Uncertainty

Read – Mr. NRI – How Much Retirement Corpus Is Enough

Payment of Unnecessary Fees

No one likes to pay late fees or re-subscription or reconnection charges. Check the credit cards that you were using in India. You might be getting charged for annual fees. It is not necessary to have too many credit cards in India when you are living abroad. You can have a couple of international credit cards and cancel the others. Similarly, check your utility bills payment and other regular payments that you make in India. You might be paying for services that you do not use. You might have missed a few payments of important services and subscriptions which might result in penalties.

How Can I Avoid Unwarranted Expenses?

Ensure that you cancel credit cards that you do not use. List down all expenses and classify them as important and not important. Take steps to not miss any payment for important expenditure items. You can set up an auto-debit option from your bank account for them. Stop or cancel subscriptions and connections that you do not require.

We are always thinking up of ways and means to earn more.  At the same time, we should strive to spend less.  The formula for financial success is to

  • Maximize your earnings
  • Minimize your expenditure
  • Let go of short-term indulgences
  • Save and Invest for long-term financial success

Avoid the above-mentioned habits or mistakes to build a secure financial future.

“Hiring Financial Planner is not an expense – it’s an investment”

Let’s work on your Financial Plan

If you have any questions about ways NRI should not spend money or observation – add them in the comment section.

Published on March 30, 2020

Hemant Beniwal

Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice in 2009 & is among the first generation of financial planners in India. He also authored Bestseller book "Financial Life Planning". 

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