Some of the best lessons in life are learnt when everything that can possibly go wrong, goes wrong at the same time. This is a story about a friend of mine who had to learn about how uncertain life is the hard way.
The protagonist of this incident is college friend who ran a printing business. Things were going well and he had a family of 5 - wife, 2 kids, and his father. He had worked for about 7 odd years after his post-grad and set up a business that provided end to end printing solutions to small businesses. He financed his business from whatever money he had saved when he worked.
This was 2006 and things were going well, he managed to save up some money and purchased an apartment by taking out a loan. Things were equally good on his business front and all seemed well but life as always had a rude surprise in store. In 2007 the subprime mortgage bubble popped and soon turned into the global financial crisis and brought developed and developing nations alike to their knees. Although relatively well off, the Indian economy also had to bear the brunt of the crisis.
The Indian economy was nicely chugging along up until second half of 2008. The GDP which was at 9.8% in Q1 of 2008 cratered to 3.1% in Q1 of 2009. There were widespread job losses and countless small businesses shut shop. Although the economy recovered quite nicely, it was a much harder slog for the Indian middle class.
During this chaotic time period, my friend’s business rapidly slowed and he had to let go of a few employees. Even as these tough times were unfolding his personal life suffered greatly. His apartment was foreclosed as he could no longer afford the interest payments. You know the saying “When it rains, it pours definition” and pour it did.
As these things were unfolding, in 2009 his second son fell ill and was hospitalized. We Indians have a long tradition of deluding ourselves into thinking that we are invincible and as such don’t require any insurance. My friend was no exception and his family did not have a health insurance.
He scraped whatever little money he could find and paid the initial costs but as the costs mounted, he had to look for help and he turned to his friends. I vividly remember the day we spoke and listening to it was like a strong punch in the gut.
The bills were mounting and he was running out of options. But what happened next can only be described as providence. Rummaging through some stuff one day he came across a statement from HDFC which turned out to be an MF statement. My friend during his good days had invested some lumpsum amount in an MF scheme and had forgotten about it. Since he moved into a new apartment and had failed to update his address he no longer received the account statements.
By the time his son was ready to come home, the hospitalization costs had mounted to about Rs 60000 odd. His investment in mutual funds had grown to about Rs 35000 given the favourable market conditions. He redeemed his investment and with some help from friends including me he was able to pay the bills.
Remembering this whole episode even after 9+ years gives me goosebumps. Life is uncertain as it is and not having a safety net makes it infinitely harder in the face of adversity that life so often has a habit of throwing at us
During this time I had some of my money invested in direct equities. I had chosen a few stocks based on my research but my portfolio was not properly planned with specific goals. This whole episode was a rude awakening for me. I consulted a financial advisor shortly after and was able to plan my finances with specific goals and to be prepared for such unforeseen circumstances. I still have the SIPs I started back then running and I religiously renew my insurance policies - term and health every year.
In this day and age with the information and resources, we have access to making safe investment choices is not rocket science. Initiatives like Varsity, Freefincal, AMC websites, Subramoney have made learning about markets and personal finance as easy as possible. If you don’t put in the effort to learn and financially secure yourself there is no greater fool.
Just thought of sharing this story which changed the way I look at finances and I hope it gives you some perspective.
