[Podcast] Setting Financial Goals with Swapnil Bhaskar- Part 1

Anupam of the Paisa Vaisa podcast talks to Swapnil Bhaskar, Co-founder of Goalwise about setting financial goals and how you can achieve them.

Listen to the podcast here:

Read the transcript of the podcast (edited for brevity):

Anupam Gupta: On this show of Paisa Vaisa I speak with Swapnil Bhaskar co-founder of Goalwise. The first of a two series on setting goals especially financial goals and how to achieve them. Stay tuned for that.

Folks welcome to Paisa Vaisa I am your host Anupam Gupta, @b50 on twitter, and our show today is going be about setting financial goals.

Money helps you achieve your goals but hitting these goals like in football requires planning, requires strategy and then things go wrong too.

So it requires a nice big team to help you to achieve these goals and then you have unexpected stuff like asset prices, whether it's stocks, real estate, gold interest rates or whatever it is go up and down.

All of these are going to affect your plan and therefore in turn have some impact on your goals in the future.

Now what if you had some help in achieving these goals? Someone who can probably hand hold you through the entire process, maybe even help you through ups and downs of the markets. My guest today is exactly that.

Goalwise is a Bangalore based start-up that helps you achieve your financial goals. I have with me Swapnil Bhaskar who has come all the way from Bangalore here to Bombay to join us in this special recording, for Goalwise.

Swapnil, welcome to the show! Let's start with an introduction to yourself about you, what’s the story? What were you doing? How did you get around to starting something like Goalwise?

Swapnil Bhaskar: Thanks for having me here. Long journey, cut short - basically when I graduated from IIT Kanpur back in 2007 I landed a job with Schlumberger and it was one of the highest paid job at that time and it's an oil field service provider.

My education, I'm a chemical engineer, so a lot of things happened in the last 10-11 years, which led me to start Goalwise. I had worked for a Schlumberger about four years and then mostly outside India and then returned back to India. I joined a bank, State Bank of India as a provisionary officer.

And as a provisionary officer, I worked there for about two and a half years. And then along with other co-founders, we started Goawise. The main pain point for us to start Goawise was that there was no tax savvy, really good, trustworthy financial adviser [in India].

It required a lot of time on our end to manage our hard earned money and how to see the progress on the goals and how to do the whole thing. So we had our own ways of doing that and we set out on a vision to make Goalwise as the most trustworthy financial company by 2025.

Anupam Gupta: How did you, I mean, two questions here, the first is the how did the cofounders meet?

Swapnil Bhaskar: okay.

Anupam Gupta: And any specific examples of miss-selling out there, because I remember 2007, right? Bull market. So any specific things on that and how to and how do the cofounders meet?

Swapnil Bhaskar: Perfect. So, the miss-selling in 2007, I just graduated and had a job, earning for the first time & saving. That's where I met the relationship manager of one of the biggest bank in the world. Now the pitch was very high returns, 20% return, it was in 2007. That was the top of the...

Anupam Gupta: Bull Market.

Swapnil Bhaskar: Yeah, exactly. I didn't know at that time. So the whole pitch was all about the returns and everything. Then I got that product. I took one day off from my job. There was a 200 page booklet thing.

Anupam Gupta: Somewhere it was an insurance product.

Swapnil Bhaskar: Absolutely. It was a ULIP.

Anupam Gupta: Oh! okay.

Swapnil Bhaskar: So that's where I just stopped being an engineer. I wanted to read what I've got. So totally started reading and what I found was whatever those returns were just last one year, two years, three years kind of a thing, and even without any expenses, that's where the real crux was.

So finally found that in overall returns would have been less than 10%. So it was a feeling of being cheated - you promise something when I got the product, then something else. But luckily what happened was I, since I read the whole document, I got to know what a free look period of 15 days. I surrendered that thing, got my money back, just lost 250 rupees. So that was the point.

Anupam Gupta: And did you have awareness of financial products at that point because you are an IIT engineer? Working for Schlumberger so you, okay. So you did the effort of finding out how everything works.

Swapnil Bhaskar: Correct, Correct. Some idea but not to this level because you start with that trust bank is your most trustworthy partner going with because they hold your money, right. So you'll just go ahead with that.

So definitely that was then, when we were starting a Goalwise. So, what happened when I was in SBI, so just, randomly called one of my best friends from college. He is also from IIT Kanpur, a computer science graduate. Ankur and he is one year junior to me. And so I just called him on his birthday just saying, hi .

He was looking at a lot of stuff. He was working with portfolio management, service PMS, then Worldquant (a hedge fund). So he was more into building something at a very scalable level where we can have that advice delivered, execution done. The third co-founder Savitri, she was with Pratham it's a one of the India's biggest yeah, education sector NGO. And she's really good at management and managing people.

Ankur was working with Savitri. So that was the connection. So we all three with that vision, so much of mis-selling happening we all felt bad and finally we set on the path to make something which is trustworthy.

Anupam Gupta: Where did you guys start?

Swapnil Bhaskar: We started in Delhi.

Anupam Gupta: Okay. And which year was this?

Swapnil Bhaskar: This was 2015 October

Anupam Gupta: So you just got three years old, right?

Swapnil Bhaskar: Right right. It initially took a lot of time to take the licenses and because the mutual fund industry was not ready for the whole online thing and required a lot of time on integrations and everything. Then we moved to Bangalore just for the tech.

Anupam Gupta: TECH..!!

Swapnil Bhaskar: Exactly.

Anupam Gupta: all the starts ups are in Bangalore. Let's get down to the basic now. What is Goalwise? I know it’s a website, I know its an app. Goalwise.com. That is G-O-A-L-W-I-S-E.com. What does it do?

Let's, let's, let's get down to this entire thing of setting your goals. Maybe you can tell us some of the more popular goals that you find. Okay. And what does your site do as a service? Tell us that.

Swapnil Bhaskar: Right. So Goalwise is basically a financial planning and goal based investing portal for mutual funds.

So basically we help our investors to achieve their financial goals, like emergency fund, which is a short term goal or can be a long-term goal like retirement, financial freedom, which is so critical. Or it can be any other goals like kids' education, vacation, going on a world to buying an iphone, whatever that thing is.

Our approach is basically whenever you are investing, you should start with an objective because if that objective is missing even outside of investing and even in our normal life, if we don't have an objective, we don't know where we are going. We don't have a plan, we don't know what we are going to achieve. So the whole approach is those goals. And so that's our starting point. And that can be any goals.

Anupam Gupta: Do you have a pre-set list of goals? Oh, can I put in my own goals? Like I want to take my, I don't know, take my girlfriend out for date. Fancy five-star restaurant. That's expensive these days. Very expensive these days. So can I put in my own my own goal?

Swapnil Bhaskar: Yes, you can do that.

Anupam Gupta: That is possible.

Swapnil Bhaskar: Yes, there are pre-set goals and then you can have the full customization of those goals.

Anupam Gupta: Okay

Swapnil Bhaskar: Like let me take an example. If you want to have a long-term goal, retirement or financial freedom, you want to be free financially, that's one of your goal. You have a tool where you calculate how much money you need at the end of that thing. What's that? Basically your target amount is like, is it five crore rupees after 25 years, 10 crore rupees, whatever money you want as a pension thereafter when you just stop earning actively.

Anupam Gupta: So does, does your site help me build in those numbers? Let’s take my own example, let's say I am 25 years old who has just started his job and I put in a goal that I want to retire at 60. That's 35 years. Okay. So then does your site ask me that, what are your monthly expenses? And then I have to project that. So is that how it works, is there a step by step thing?

Swapnil Bhaskar: Yes. So basically there is a retirement tool available where you can just put in the number, your current age or retirement age. Then you can put up basically a monthly expense which you is kind of a pension which you required in today's value. And then there are inflation numbers, which you can just select your thinking 7% 10% whatever. You may have some existing investments for your retirement, like provident Fund, PF.

Anupam Gupta: You take on account all of them.

Swapnil Bhaskar: All of them.

Anupam Gupta: Does it give me an option to choose inflation because I have no idea how inflation will pan out to. It's like, is it a range that it can be you assume as 5%, 7%, 8%, 3%?

Swapnil Bhaskar: the minimum, which we let you to choose is 7%.

Anupam Gupta: Ah! 7%

Swapnil Bhaskar: Yeah!

Anupam Gupta: that you don't even get if you take a sensex return as 15% okay. You assume it's tax free or whatever or take 10% long term capital gains. Now that has been introduced. Okay. So you were saying that at 7% inflation, you have a plan that gives me something that's higher than that.

Swapnil Bhaskar: Absolutely. I mean, that's where the overall, reason for investing in equity comes into the picture. Where equity is one of those tools, one of the methods which can give you real returns over and above inflation. So when we talk about investing in equity, this is the primary reason that our saving should at least earn higher than inflation. So given a, if you look at the historical data and given on an average, the inflation in India has been around 7%.

Anupam Gupta: Okay. What are the most popular goals on your website? The your customers or your clients whoever so far in these last 3 years, what are the top three goals that you've seen most people go in for?

Swapnil Bhaskar: So again, it depends, like different clients or different customers or different investors come at different point of time. And the markets were just going up and up. And so I think that time Tax Saving and the Wealth goal and a hundred percent equity kind of things happening that time. But when it comes to most popular goals, I would say Tax saving, Emergency Fund and Retirement and alongside the Wealth goal, these are the four goals basically.

Anupam Gupta: so, for tax saving is…

Swapnil Bhaskar: ELSS

Anupam Gupta: That’s ELSS ok.

Swapnil Bhaskar: That’s ELSS.

Anupam Gupta: Retirement is simple. The third one you said was wealth creation.

Swapnil Bhaskar: Yes.

Anupam Gupta: Tell us about that. What, how do, how, how do that work?

Swapnil Bhaskar: So basically what we advise our investors how to go about setting up these goals. You start with your essential goals first. Like whenever it comes to investing you need to have a safety net around you, which is the first goal comes is the emergency fund. It's a very short term goal. You need to keep some money aside for your emergency, which can come at any point of time without any alarm.

Anupam Gupta: So what would you say is the size of this emergency fund?

Swapnil Bhaskar: As a rule of thumb, it's a three to six months of your monthly living expenses plus EMIs because which are critical as such. And the rule of thumb is basically if you lose your job and be in emergency situation where you want to apply for another job, need, living expenses you would take out from this emergency fund that’s your thing, otherwise, whatever number gives you the peace of mind is the, is your emergency fund.

Anupam Gupta: Sure. What next?

Swapnil Bhaskar: Sure. What next. So now, so once emergency fund is done, then you go after your next critical thing, which is your retirement, and alongside retirement, you can always think about Tax saving because nobody likes to pay taxes to the government. So, but you can manage it rather than evasion. I would say if you're going to just to save taxes on.

Anupam Gupta: on the benefit of whatever provision is there.

Swapnil Bhaskar: Absolutely. Absolutely. So tax saving is again a very small goal its not you have to save taxes till you earn. So its ELSS mutual funds, which have only the three years lock in period, you can manage it very smartly. You're just start investing for your tax-saving.

Whatever requirement is there, there is a tool you can calculate how much you need to invest for this financial year and invest that much next year.

Also, you invest that much in tax saving 3rd year. But 4th or 5th year onwards you can just revolve that money forever and that's your tax saving goal done and in a three to five year period you’re done.

Then the really important aspect is the retirement because the, it's so critical that the government is not going to pay any pension, neither our employer, right? We need to do something about it and we are the ones who are responsible for it. No one else is going to take that responsibility. So basically the sooner we start with the retirement goal, it becomes really easy to achieve within a realistic timeframe because the power of compounding kicks in and a lot of other things. So that will be a really, really important goal.

Once you're done with these things, right? Emergency fund done, tax saving done, retirement done, then you think about your other goals. It can be any other goal based on your own individual need. It can be kids’ education, marriage, whatever you want to start or maybe vacation or any other goal. Once you're all set with all goals that you're still left with a monthly surplus, what do you do with them?

Anupam Gupta: That was going to be my next question.

Swapnil Bhaskar: That's where you go with a wealth creation goal.

Anupam Gupta: Okay. And in your experience for someone who is starting off, if he takes into account emergency fund, tax saving and retirement, what chunk of office income goes just towards that and typically what is remaining for him?

Swapnil Bhaskar: Right. So, I would say when systematically done wealth goal will not come into the picture because generally when people are starting early, their incomes are on a lower side like what is actually required. So they start with critical goals first. Going forward when the incomes increase, they add on other goals.

And all these goals have a different time horizon, right? So basically, say emergency fund can be finish the next two years? Tax Saving can be finish in the next five years? Retirement is going to be next 20 years, 25 years, 30 years, whatever that period is. Then kids’ education will come in between which will be of about 15 years. Marriage will be about 25 years. Vacation will be an annual thing which is happening.

Now, let's take an example like suppose someone is saving 50,000 rupees. They start with emergency, target like one lakh, two lakh, three lakh rupees. Just get it done. Then five thousand ten thousand rupees for the tax saving for next five years. Again, somewhere around 10-20 thousand for your retirement. The rest of the money, you can think about like 10,000 for kids, 5000 for your vacation. If it's still left for the five thousand or something. You can just go with Wealth building.

Anupam Gupta: What if I have rent to pay or I've got an EMI to pay. Is there space for that in your experience?
I'm saying that does paying a rent or an EMI, I'm using them both as the same thing. Okay. Does that then leave me place for some goal planning in the future?

I mean typically I think rents are about 30% of salaries. Right? And I don't know how much expenses are these days. Maybe 20-30%. So that's another 20-30%. So I'm left with 40% of my salary, which is still a big amount. Well, so there is room, there is room.

Swapnil Bhaskar: There is room, there is always room. It's just that sometimes you are too lazy to think about, should we do anything or we are just burdened with that EMI thing because we don't want to do anything other than that. So I mean there's always a room for that. Emergency fund should always be there no matter what.

Anupam Gupta: Then it should grow also I think.

Swapnil Bhaskar: Yeah. It should be safe.

Anupam Gupta: I agree. Every five years the expenses amount will change.

Swapnil Bhaskar: Correct.

Anupam Gupta: Your Emergency Fund cannot be at the same level that it was.

Swapnil Bhaskar: You have to do a top up.

Anupam Gupta: Okay. So, all of this is done. What do you guys do after that? I mean for me as a customer, I've caught all, all my numbers plugged in. I've put in everything. What happens after that? You choose a certain list of, I mean you're right now only in mutual funds and mutual funds would include debt and equity.

Swapnil Bhaskar: Yes. So mutual fund is a tool.

Anupam Gupta: Okay.

Swapnil Bhaskar: That's to give you the exposure.

Anupam Gupta: Okay. So then what, what, so then you will give me a list of indicator funds saying that this is HDFC Xyz or to be Birla ABC. So is that what happens next?

Swapnil Bhaskar: So if you think about a Goalwise, there are just four things which you tell us.

First thing is why do you want to invest? What is your target amount, what is your time horizon to achieve that goal? And what is your risk profile? There are tools available to assess even your risk profile. There is a questionnaire which you answered. It tells you if yo have a low risk profile, moderate risk profile or a high risk profile. Most of majority of our investors are either low or moderate. And when you tell these four things, the rest of the hard work is done by Goalwise.

Anupam Gupta: Okay.

Swapnil Bhaskar: Which mutual funds to invest in. We do have a data driven mutual fund selection strategy. And then based on the goal type basically we tell you that how much money should be invested in equity funds, how much money should be invested in Debt mutual funds, we call it asset allocation - distribution between equity funds and debt funds for that particular goal.

Now let me take an example, a goal which is a long long-term. Initially you will have a higher exposure to equity funds and as you are moving closer to that goal and the exposure to equity mutual funds in that goal will start going down and debt component will increase. This is part of that risk management. We call it a glide path.

Then another goal, say if you tell me emergency fund, I'm not going to advise you any investment in Equity Funds. It's a hundred percent liquid funds, so now your goal type tells us which funds we can recommend.

Then time horizon of that goal and risk profile tells us what asset allocation should we advise you? And all of these advice is inbuilt into the system so you don't have to think about all this. It's just, your advisor is working in that system.

So once that is done, it will tell you how much SIP you need to do for to achieve that goal. You start your SIP in those funds. We continuously monitor those mutual funds. Then we regularly changed them based on the strategy itself. It picks up the funds. So if they are better funds, have available, then those portfolios will, so basically the recommendation will come to change that portfolio, which is called portfolio rebalancing.

Now, if you were investing in ABC funds earlier, now so there's a D fund which is going to do better, it's kind of a prediction in future it's going to do better than existing funds.

So we take your consent and then SIP changes to BCD funds. Now part of the portfolio rebalancing can be markets have gone up, your portfolio asset allocation will change. So that time we do the portfolio rebalancing by reducing the exposure to equity, reinvesting that money into debt funds opposite when the markets have gone down. So overall if you think in nutshell, you set up the goal, give inputs and rest of the hard work is done by Goawise.

Anupam Gupta: Fantastic. So as of now you are only investing in mutual funds, you wouldn't have exposure to say equities directly?

Swapnil Bhaskar: No, no. See Mutual Fund again is a tool where you have the exposure to equity. Now Mutual Fund has full time professional fund managers right now if you are doing the stocks or equity, we had the fund managers so there will be someone to manage.

We are focusing on the advisory aspect. How we can help you achieve your financial goals. So mutual fund is the tool which we took and a part of our financial planning, which we do when investors have a dedicated financial advisor.

Part of the safety net is Have the insurance in place, basic insurance, term insurance, health insurance, accident insurance to mitigate the risk on those lines. Now we are integrating with the insurance also just to make the full financial planning in place.

Anupam Gupta: Makes Sense. Right? I mean before you start any financial plan, you actually need to enjoy your two biggest thing when it's your own life and one is your health.

Swapnil Bhaskar: Correct.

Anupam Gupta: So you'll be getting this onto the platform.

Swapnil Bhaskar: yeah. That's what we are doing right now.

Anupam Gupta: No gold or no FDs, I'm sure.

Swapnil Bhaskar: Debt funds are equivalent to your FD.

Anupam Gupta: Tell that if someone who wants to buy shin gold or safety of a fixed deposit. I get what you're saying.

Swapnil Bhaskar: Yeah. I don't think any value economic value in gold, its just a...

Anupam Gupta: Don’t talk like warren buffet now. India is the largest consumer of gold.

Swapnil Bhaskar: But you see, I mean it may work in some economic crisis or things like that, but it's just going to match inflation. It’s just a piece of metal. think from.

Anupam Gupta: Well, you are, what say, you are preaching to the choir. I wouldn't. I would buy gold as an expense and not as an investment. You want to buy something for wearing. That's fine and anyway, so I don't want to get into the debate of FDs vs. Debt funds. Your, your research shows you that obviously debt funds that are much more tax efficient way of investing in debt, right?

Swapnil Bhaskar: Yeah. Yeah.

Anupam Gupta: Okay folks, that is a wrap on the first part of this podcast episode with Swapnil Bhaskar co-founder at Goalwise.

In the next part you're going to talk about how exactly is Goalwise is different. I'm sure you, if you've been listening, your questions will be there to why I can't just go ahead and hire a financial advisor or do my own planning. That's what you're going to answer in the second part of this two part series with Goalwise.

[No material on the show should be considered as financial advice. The material on the show is for informational purposes only. Please consult a financial advisor before taking any investment decision.]