Author: Sheo Narayan - SEBI Registered Investment Adviser | Reg. No. INA000022844 | BSE Enlistment No. 2537 | IshaVasu.com
Over the years, financial situations arise where people have accumulated a very large number of investments - several mutual funds from the same category, multiple fixed deposits, and different financial products.
At first, it may look like diversification. But when you look underneath, there can be significant overlap in the underlying investments. The number of products has increased - but the actual diversification may not have increased in the same proportion.
The Borrowing Cycle - How It Starts and Where It Leads
The same pattern can happen with borrowing. Easy availability of personal loans and credit cards can make borrowing feel convenient. The problem starts when multiple EMIs and minimum payments begin consuming a large part of monthly income.
Then the cycle can become:
| Stage | What Is Happening |
|---|---|
| Income arrives | Salary or business income received for the month |
| Expenses paid | Rent, groceries, utilities, school fees - essential outflows |
| EMIs deducted | Home loan, car loan, personal loan - fixed monthly obligations |
| Shortfall appears | Monthly outflows begin exceeding monthly inflows |
| More borrowing | Credit card or personal loan used to bridge the gap |
| More EMI | New borrowing adds another obligation - the cycle repeats |
This is where financial planning becomes important - not only about finding where to invest, but about understanding the complete financial picture.
The Questions That Matter
- How much am I saving? - Not what I intend to save, but what is actually being set aside consistently every month after all obligations are met.
- What do I actually own? - Can I clearly list my investments, their current value, their purpose, and how to access them?
- Do my investments overlap? - Owning many funds or products does not automatically mean being well-diversified. Understanding actual underlying exposures matters.
- How much debt can my cash flow comfortably support? - Not what a lender will approve, but what my actual monthly income can sustain without creating financial fragility.
- How much liquidity do I have? - If an unexpected expense arrived tomorrow, could it be met without borrowing or liquidating long-term investments?
- What are my financial goals? - Are specific goals - retirement, children's education, a home - being planned and funded deliberately, or deferred indefinitely?
The Simple Lesson
Financial planning is ultimately about bringing clarity, discipline, and balance to the money you earn. It is not about perfection - it is about awareness.
Common assumption: "I have many investments - I am financially well-prepared."
Reality: The number of financial products owned is a poor measure of financial health. Clarity about what you own, why you own it, and whether it serves a specific goal - alongside manageable debt and adequate liquidity - is a far more meaningful measure of financial preparedness.
Educational & Informational Purpose: This content is provided solely for general financial education and information. It does not constitute investment advice, recommendation, solicitation or an offer to buy or sell any security or investment product. No specific security, mutual fund, PMS, deposit, loan, asset allocation, investment strategy or financial product is recommended or endorsed. The examples and observations are general in nature and should not be considered advice applicable to any particular individual.
Risk Disclosure: Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Regulatory Disclosure: Registration granted by SEBI, enlistment with IAASB and certification from NISM in no way guarantee performance of the IA or provide any assurance of returns to investors. | Sheo Narayan - SEBI Registered Investment Adviser | Reg. No. INA000022844 | BSE Enlistment No. 2537 | ishavasu.com