Many people look for online advisory, and I know it is a big hit. However, I am too old fashioned perhaps to do it. Also too many of today’s advisers are perhaps impacted by the American websites and hence give advisory different from what I used to say. Or from what the investment Gurus say.

I recently met a couple in deep, deep financial trouble. Caused by various reasons, heavily in debt, but holding on to a Rs. 400,000 bank fixed deposit for ’emergencies’. I quickly used the money and paid off all the personal loans and credit card loans and they were then left with a small car loan and a big housing loan.

I then asked them to build an emergency fund – Rs. 1000 at a time over a 5 year period!

Both had well off parents and obviously did not want to ask the parents for help. That was fine, but when you know that when push comes to shove you can go there, there was no point in paying shylockian rates to the bank, right?

There was another couple who had listened to an American podcast and destroyed their credit cards. Great. I asked them to get new credit cards and use their emergency fund to reduce their debt. Makes no sense to keep your own money in 6% taxable bank fixed deposit while paying credit card debt at 3% on a Monthly reducing basis. Effectively they were paying 42% interest + GST. Not sensible at all.

Found another couple with personal loan, car loan, educational loan, and of course a Housing loan. They had listened to another American podcast and decided that they will start investing ONLY after all the loans were repaid. What were they doing with their surplus? It was sleeping in their SAVINGS BANK ACCOUNT and it was used for an ANNUAL reduction of the HOUSING LOAN – which was their CHEAPEST loan!!

I got them to increase their EMI on their personal loan, and car loan. I got the term EXTENDED (yes you heard right) on their housing loan, and used all the balance to repay all other loans. By 2020 they will be debt free EXCEPT for their housing loan. Hopefully by then their income would have gone up for them to step up their EMI and pay off the HL asap! With the small surplus I have initiated a SIP in a mutual fund. The girl asked me “should we invest when we have debt”. I said good question…but in your case if you wait to start the SIP it is possible that you may not start at all. I did not want that.

I rarely work in the debt reduction / personal finance space…but these 3 young couples were referred to me..and I did it..pro bono of course. I do not seem to have a charging model for such advice. I also realized that all 3 couples had similar problems…but needed completely different solutions. Difficult to automate something solutions which are so subtly different I guess.

What say?