Seeking Financial guidance in a crisis situation


(Deepen Thakkar) #1

I am 38 yrs male residing in Mumbai married blessed with a child. The intention of writing this post is seeking some future financial guidance from sharp, analytical and brilliant minds who are esteemed members of this forum.

My family consists of my parents, younger brother, my wife and my child. My brother is single , MBA finance placed in a reputed financial firm having presence worldwide . Ours is a middle class family whereby we got decent education I graduated in commerce from a top ranked commerce college of Mumbai in 2003 and joined my father in family business started by my grandfather. Till last FY 2017-18 our monthly avg income was 70k ,prior to that for 3/5 years the income was in the range of 1lac/1.3lacs per month. I had an kidney ailment from last 2 years named FSGS but suddenly in the period of jan-mar 18 it worsened considerably and my kidneys gave up and I was put on dialysis in the month of apr-18. My father donated his kidney and I had a transplant in the month of june . But all this cost around 16-17 lacs and post surgery medication and check up has already cost me around 2lacs in last 6 months.

Now coming to the main purpose of this mail. Suddenly from April this year my business has collapsed and from last 6 months my profit has just been able to cover my business overheads. Me and my father have decided to close our long standing business for 60 years .It is a very tough emotional decision for us but staring at the bleak future prospect of our business we hav concluded that it is the right step. At present I am staring at 5lacs rs loss in business in the event of wind up .i have taken 8 lacs loan from my relatives for my surgery .At present we are majorly surviving on my younger brothers salary which both me and my father feel terribly repentant for . I have another loan of 4 lacs pending too . Our basic household expenditure is 50k per month and additional 20k per mth I require to pay for all the policies and mediclaim already taken by us. Now coming to the asset side I have my a small office whose value would be around 20lacs fetching me 10k rent per month. I have an investment of 20 lacs done 4 yrs ago in an under construction project in bhandup, the market value of which can be roughly estimated to be 40lacs today .But I don’t think there will be any buyers in market for that project at present because of its under construction status. The builder can give us that amount but thinking about the liquidity strain the whole sector is it also seenms difficult that he will bail us out. I have a 3BHK residence at where we are residing today fetching me 2.5 crs . Have some investment in shares today which at present would give me 12 lacs ,and MF investment of 4 lacs. My portfolio can fetch me 15 lacs but in last cpl of mths I am in a huge loss of 2.75 lacs in Yes Bank Futures ,I have not yet closed the trade and rolling over my position .

I have thought of 2 scenarios for my future
Scenario 1: Because of my physical condition and constraints will seek help from my friends/relatives to place me in a job/business proposal which can give me a monthly income for 30k/50k . Looking at the present market conditions it looks very tough have already thought upon many proposals and even met some of my friends/relatives but nothing concrete seems to emerge. But still will give a year or two and try hard and look something works out.
Scenario 2 : Looking to sell my residence and move to a tier 2 city like nasik, baroda which will effectively live me with 1.75 crs in my hand ,some of which can be kept in FD and remaining can be used for buying a franchise or some other venture or even investing in markets .although will have to work out the mix of the above 3. Small tier 2 city would be good for my health also because travelling in Mumbai through public transport and also the dense population I am prone to more infection which isn’t good for me because I will be on immunosuppresants for probably rest of my life. Shifting to small city will hopefully live me with more income/less struggle but wife ,mother might understand /not understand is difficult to say. Also my Brother who has a well paying job here wont live Mumbai and will have no property to stay .

So this tough times and how to come out of it is constantly worrying me ,I request forum members to help me out with there inputs so I can come out of this Chakravyuh of my life.

If moderators find this post is against the guidelines of this forum they can remove this post


(Niraj Kumar) #3

My advise would be to wait out for 2 years before desposing your real estate assets. Also repay all your loans and dues and keep 6 months expenditure as liquid asset like fixed deposit etc. Rest whatever money is left with that invest in stocks and try to grow it. Left amount is not important but your focus and deteination to grow is more important. If you don’t have enough money to repay the debt than you can thing of desposing under construction property even if it fetch you not much profit at current real estate scenarios. Also don’t try to play future and option etc till the point you have corpus of atleast 5 cr rupees as one wrong call can compound your problem. God bless and all the best.


(Ashish) #4

Hello Deepen,

Sorry to know of your trouble. Life can be difficult at times.

As of now, liquidity and debt free status is most important for you. I am no expert in futures trading but I believe it is extremely risky and you should get out of it immediately. Further, I would say, immediately dispose off your under construction property even if it means booking a small loss. Use this to pay off all your debts and built some cash flow for next 6 month’s worth of living expenses. Please terminate whatever policies you can after evaluating your benefits / surrender value.

Over a period of next 6 months, execute your plan to move to find a good job in Mumbai or move to a smaller city. In case you need to move out then you can take a small flat on rent for your brother which he can fund from his salary. You may decide to repay his contributions later once your situation improves.

All above are just suggestions, please use a professional help before executing the plan. We have numerous financial planners in India now.


(Rohit) #5

If I were at your place , I would have chosen the second scenario. At this point of time , your first priority should be health. If you are healthy , earning again is not difficult. Remember the old adage , Health is wealth.

I personally find Mumbai highly overrated. Initially your family may feel bad because life in tier 2 cities is slow and you must be used to Mumbai’s life style. But its anytime better than Mumbai or other metros.

You have liabilities of approx 20 lakhs (5 business loss +8 loan +4 loan+2.5 equity fut loss). If you sell your 3 BHK worth 2.5 crores and pays this 20 lakh liabilties , you will be remaining with 2.3 crores. In a good tier 2 city , you can easily get 2-3 BHK around 50-60 lakhs. Or you can do this by selling under construction property also.

In my home town Indore , you can easily get a 3 BHK under 40 lakhs ( I am not sure about Nasik , Baroda). So assuming you buy a 60 lakh property out of 2.3 crores , you will still be left with 1.7 crores.

If you take on conservative basis and puts everything in FD , it can fetch you around 1 lakh rs per month which is enough to take care of your monthly expenditures (70 thousand , it will come down to around 50 thousand in tier 2 city). I wont suggest to sell 20 lakh office property , because its fetching you a rental yield of 6% (1.2 lakhs per annum on 20 lakhs) , which is v good.

You can also take a flat on rent in tier 2 city ( you can easily gets under 10-12 thousand) , instead of purchasing. Since you already have a under construction property in Mulund. Once you get the possession , you can return back , if you wants to. Once you settle down there try exploring other opportunities like franchisee , work from home , free lancing or anything which can fetch you a decent monthly income without pressurizing your health.

Please note that I am not a certified financial planner , its just suggestions that , what I would have done in such a situation.

All the best.


(Deepen Thakkar) #8

Thx Niraj for your valuable advise . The key takeaway I would keep in my mind is no F&O till I reach 5 cr mark . Yes also thinking of cashing in on my under construction property and converting those to fixed return generating instruments . Have given 2/3 calls for a meeting with builder but he hasn’t responded yet . Let’s hope something works out there .


(Deepen Thakkar) #9

Ashprit thx for your valuable suggestions .


#10

I wish and pray God blesses you with good health I am not knowledgeable enough to say anything else.


(cathene) #11

Just my suggestion if you find it inappropriate please delete my post.

Selling the house and sharing the value between the brothers.

Making a fixed deposit in bank.

The interest generated is used for 1)for monthly expenditures and 2) the rest of the interest alone for equity investment or mutual fund (based on your comfortability with allocation would be a good idea).

Keep the rental property and the under constructed property which is valuable 1)generates rental income 2) can become valuable asset when once the project is completed and the liquid crunch decreases in the market ( which would take a very long time maybe even decades).

Be careful with capital and always remember the warren buffet’s 2 important rules

  1. never loose you money
  2. don’t forget the first rule

This rule is what the share market taught me with tuition fees in 1.5 years of my investing journey.

Consult an financial expert but make your own decision as final since all the risk is borne by you and your family alone. Hope at least one word in the corner of this you could find something valuble to take away.

And lastly I add the timeless wisdom that my father taught me over the years.

“Either increase your income or decrease your expenses”

Wish you prosperous days ahead :blush:


(Niraj Kumar) #12

Under construction building is not home whatever it’s future price appreciation potential. So emotionally it is much easier for you to dispose which is also not likely to cause any disagreement within family neither it is likely to desrupt current life of any other member of your family which is also very important. Locating to any new place may take anybody atleast 1 year to adjust and there is no guarantee that it can keep everybody happy in new situation and add to that your medical issues which can get better care in your existing home as you are well versed with all facilities. After 2 years of situation warranted you can always able to sell your residential property and shift to other location but before that give your best and also take best support from family members like your younger brother if he can support in running the family with his salary income till situation improves .


(Deepen Thakkar) #13

Rohitsharma ,
Your thought process is almost similar to what I have envisaged . The reason behind nasik is its proximity to Mumbai and also I can carry on my line of business for another 3-5 years( since the product which we deal in is facing extinction ) and earn around 4/5 Lacs per annum with a very miniscule investment.Baroda I have couple of very close relatives which can guve some solace in tough times plus I also like the vibes of city . At both places I have inquired about prices a 2 BHk would cost around 30 Lacs . I am planning to buy 2 adjoining 2BHKs there . Sale of my current property will fetch me 2.5 crs - 60/70 Lacs for 2 2 bhks costing 60/70 Lacs would live me with 1.75/1.9 crs . Half of which or approx 1 cr goes to FD giving me 6.5/7lacs annually or approx 55k monthly which is my basic expenditure over here . The rest I am planning to buy a shop and get a dealership/franchise of a good brand or start a retail venture on my own which can give near to 18%annually . But my mom seems very resentful on idea of living Bombay . My wife is also a bit apprehensive but I have explained that is best option with us for our child’s future if we stay in Bombay we will be playing with his future.
I have 5 lac business loan + 4 lac loan + 8 lac loan total 17 Lacs loan to dispose off. Yes Bank f and o loss has been provided already by selling my delivery stocks .
I am also willing to give a dash for 2 years in Bombay to see if I can survive and stand up again but it seems very very difficult. In that case I require 10 Lacs more ( 5 Lacs expenditure per year ) . I have bad debts nearing to 15 Lacs I hope if I shut down my business and devote enough time for it I can recover 5 Lacs . I can sell some shares ,gold for 5 Lacs rupees and wait if some business proposal comes my way and works ( Seems very tough again I have nothing left to invest )
Your observation of Mumbai being overrated I also feel the same. I also think 5/10 years down with the traffic worsening , pollution no open space ,Mumbai might become impossible to live and many people would go to other cities and prefer living peacefully there .


(Deepen Thakkar) #14

Jamit ,
Have talked with my brother and he is happy to give whole 1.75 crs to me to take care of me and my parents . I feel my obligation at least to pay his rent for his Mumbai stay from the interest amount I receive from my FD . At present also he is providing 50k or thereabouts from his salary and I feel guilty because I feel I should not be a burden on him . I know I have it in me I will payoff all my external liabilities it’s just a matter of time. But the debts of my parents and brother I am sure I will have to take many births just to pay them .


(Deepen Thakkar) #15

Chaitanya C my gratitude to you
Cathene and Niraj I have given an elaborated reply to Rohit Sharma and Amit Jain somewhere echoes the same topics which you have drawn .

Thanks to all of you for taking your time out and also showing genuine concern and inputs from your side . Last 6/8 months have been a turmoil on all fronts physical,financial and emotional


(sincyvarghese) #16

Deepen, I am sorry for the terrible things you have gone through. My prayers that you will be restored to complete health and you be able to take care of yourself and your family. I also pray that God will show you a vocation where you will be able to use your business talents and experience.

When I did a quick calculation I saw that you have assets worth 326 lakhs including the house where you are staying. You have about 17 lakhs of loans and 2.75 lakhs of Yes bank derivative losses. Basically about 20 lakhs of liabilities.

Net on net you have about 306 lakhs of assets. Out of this only 16 lakhs are in mutual funds/stocks which are fully liquid. The best option would be that you get the 40 lakhs from the under construction property. So along with your MF & stocks you will get about 56 lakhs out of which you can pay off your loans worth Rs. 20 lakhs. You will have about 36 lakhs in liquid cash. This can yield something like 25-27000 @9%.

In that case how about giving your Mumbai house on rent? Will it fetch Rs. 62,500 per month considering net yield of 3%? You can easily get a decent 2BHK house on rent for 15,000 per month in tier 2/3 cities. Your other expenses are also taken care of. I would suggest surrender all policies except the medical insurance and the term plans. Probably you can save some money on that front.

In the worst case scenario where you are unable to liquidate the under-construction property you may go with the option of asking businessmen friends of giving you a job. That along with the rental income should take you through for some time till the under construction property is ready for liquidation.

Above all my prayers and best wishes. May God give you the wisdom to navigate through these tough times.


(s) #17

Preservation is the base… Growth and Return are higher layers. Focus on deleveraging and building on stable return and remainder to be used for Growth. Please check on tax implication on LTCG and its impact on any sale decision.


(Deepen Thakkar) #18

Dear sincy , I am overwhelmed with the response that I have received from all of you generous souls after my post . Sincerely I was in a dilemma whether to post this here or not for many months . I also explored upon the thoughts mentioned by you ,at present my residence is fetching me a rental yield of 45k. I can easily gat 2 BHk residence in smaller cities in the range of 10k-12k . 5/7 people I know have assured me that they can give me around 2 Lacs each of them so that I can take care of my expenses for at least cpl of years,but they are not ready to commit on business/job prospect as there business is also going through some rough weather .
Friend your post really moved me and presence of many such well wishers has kept me in positive frame of mind. For 40 years God has taken care and I am sure he will take good care of me ,it’s just a matter of 2/3 years.
One thing that I noticed in past 9 months how fast the tables of destiny can turn and one more observation I want to share here , those who think it’s too much of gyaan can please excuse and ignore. This is a forum for investing or building wealth which we all aspire for but in this agonising moments of life one big lesson that I learnt is it is very essential to invest in relationship ,we just tend to emphasise on building bank balances and assets that we ignore this side of life . Everyday I am in tears when I think about my brother’s selfless dedication and contribution ,for my mom and my dad who just gave me another lease of life for my relatives friends who stood like a rock behind me never letting me falter or collapse. So I really request to you pls treasure and cherish the selfless poeple that you have around you more than your bank balance or wealth .


(sincyvarghese) #19

Deepen, I wanted to mention about your brother in the previous post. He is indeed a great human being. God will be greatly kind to him. As you said the greatest investment should be in meaningful relationships. It is not a gyaan, it is an advice everyone should remember from time to time. God bless.


(Abhishek) #20

While you post here seeking help, you have also provided inspiration! Your resilience and faith is admirable. Free advice is not worth much so I will refrain from giving it. I hope God gives you the courage to fight your illness and financial problems and come out a much stronger human being on the other side! All the best and good wishes.


(Rohit) #21

The reason behind nasik is its proximity to Mumbai and also I can carry on my line of business for another 3-5 years( since the product which we deal in is facing extinction ) and earn around 4/5 Lacs per annum with a very miniscule investment.

If you can generate 4-5 lakhs per annum , you need not to sell your 3 BHK home. you can give it on rent which will fetch you 40-45 K approx + 40 K around you can generate. This will take care of your monthly expenses. To pay loans , you can think about selling your under construction property , gold etc. You have enough assets , choose the ones which you think will not show much growth in upcoming years or some depreciating assets ex. car , two wheeler or any stuff which you use rarely. Pay high interest loans first.

At both places I have inquired about prices a 2 BHk would cost around 30 Lacs . I am planning to buy 2 adjoining 2BHKs there .

I would say don’t be in hurry to buy new property. Take some place on rent for 6-8 months. Do market research , than make a decision. Property prices are not going to increase much in next 1 year. Also,try to avoid stock markets for some time , till you again start generating monthly income and are in comfortable situation again. Derivatives should be big NO.

At this time , your first preference should be preserving your capital and try to generate stable income either by business or job. Don’t get tempted by equity returns. Even if you are so much interested , Dont put more than 10%.

But my mom seems very resentful on idea of living Bombay . My wife is also a bit apprehensive but I have explained that is best option with us for our child’s future if we stay in Bombay we will be playing with his future.

Yeah , I know this would be difficult for them to adjust initially. But small cities have more peace of mind compared to metros. I have lived in Bangalore , Mumbai , Pune and Indore. And I would prefer to stay in Indore anytime due to less pollution , less travel , less traffic etc.

Though small cities have less income opportunities but cost of living is also less. In small cities you can get a big bungalow in 2.5 crores. But same amount will give you a v congested space in Mumbai.

And don’t get disheartened or demotivated. Our Bad times shows us who are our real friends and family. This too shall pass.

Read this.