Owning a car is an aspiration for many of your clients. Also, the ones who already have a car aim to upgrade their existing one. In both cases, however, there is a substantial cost involved.
We spoke to a few advisors to understand how they have helped their clients achieve this financial goal.
Tanvir Alam, Fincart, Delhi
In 2014, a techie sought my advice on reducing expenses and investing in mutual funds to buy a Honda City. However, despite a decent salary, she could not save any money due to her high credit card bills.
I recommended a 3-envelope strategy to her to save money. The first envelope was to take care of her necessary expenses, the second envelope for lifestyle expenses and the third for savings and investments.
Though the first three months were difficult for her, she gradually started saving money through this strategy. In fact, by following this, she managed to reduce her lifestyle expenses and started investing more.
Since she wanted to buy a car worth Rs.12 lakh, she started investing in mutual funds through an SIP of Rs.15,000 per month for five years. I advised her to invest in balanced fund and dynamic asset allocation term due to medium term nature of her financial goal.
Thanks to the performance of MFs and her disciplined investment approach, she was able to achieve her target much before the targeted date and bought her first car in 2017.
Now she wants to start a SIPs of Rs.1 lakh to own a new house.
Munnavar Khan, Vision Advisory Services, Bhopal
In 2014, we had organized an IAP for employees of a pharmaceutical company. After the session, an employee approached us and expressed his desire to buy a car. He wanted our help on creating a corpus in 4 years to buy a Hyundai i 20 car which was priced at Rs.10 lakh.
However, after talking to him, we realised that his immediate priorities were his daughters’ marriage and retirement. We advised him to first invest his money in mutual funds through SIPs for his key financial goals and allocate a small amount every month for his car.
He started a SIP of Rs.12,000 for children marriage and retirement. However, his desire to buy a new car encouraged him to cut down his expenses and start another SIP for his dream car.
My only worry was that he would withdraw money from his retirement corpus to fund his car. In fact, I explained to him that redeeming money from such a corpus would affect his financial situation. Following my advice, he continued his investment for the next 5 years and finally bought his desired car in early 2018.
Padmanaban Balasubramanian, Fortune Planners, Chennai
I have a client in his forties who was saving for his daughter’s education and marriage as well as his retirement. This took away a large portion of his salary.
While he wanted to buy a car to travel to his workplace, owning a car on EMI was not a feasible option for him. I advised him to reduce his unnecessary expenses and start another SIP in mutual fund to buy a car in 4-5 years.
His wife topped up the SIP with her savings to Rs.12,000 a month. I allocated their money in mid and small cap schemes as they had a 4-5 year time horizon and high risk appetite.
Thanks to outstanding performance of mid and small cap funds between 2014 and 2017, the couple were able to buy their new car in just three years.
