The Importance of Emergency Funds, Understanding from an Arjuna Fellow
Life came to a standstill for Nisha Millet, a professional swimmer, and her husband, Bikranjit Flloyd Chatterjee after covid put an end to their swimming academy. Liquidating some of their investments in emergency debt funds and tapping into their trade reserves helped them weather the tough times.
Millet is an Arjuna Award winner and was the only Indian woman on the Sydney Olympics swimming team in 2000. The couple run the Nisha Millets Swimming Academy in Bengaluru, which was established nearly 20 years ago after the Millet’s retirement as an active sportsman.
Mint reached out to the couple and Deepesh Mehta, who has been guiding them through their investments since 2017 to understand their personal finance journey. Mehta is a certified financial planner by qualification and an AMFI registered mutual fund distributor.
Learning from the past
Talking about the motivation behind starting her academy, Millet says she wanted to make swimming a fun learning experience, something very different from what she experienced as a child. In addition, his parents did not plan their personal finances well. She tells how they sold their house and spent all the money on her swimming career, without leaving enough for themselves. This made Millet aware of the importance of a pension fund so as not to be financially dependent on her children.
Saving enough to fund the careers of their 8-year-old twin daughters, Adele and Ariana, is another major financial goal for the couple. They would also like to save money to buy a house later.
Unlike their parents, they did not hesitate to give money lessons to their young daughters. When covid hit, they explained to their daughters that the business wasn’t doing well and they didn’t want to use their savings for things like vacations. “Kids have to understand that there are ups and downs in terms of finances and they also have to cut back on what they want,” says Millet.
Navigate through difficult times
The past two years have been difficult for them, both commercially and personally, as Chatterjee lost his mother. Mehta’s suggestion to park money in debt funds proved useful. A combination of tapping into their trade reserves, liquidating investments in debt funds and cutting spending has worked for them. They had 12 months of debt fund expenses as emergency money.
Mehta also pushed them to increase their health and life insurance coverage. Today, Millet and her husband have a ₹2 million life coverage each and comprehensive health coverage for the family ( ₹6 lakh sum assured more ₹15,000,000 serious illnesses). Luckily they didn’t have to use their health coverage during covid. So far, they have also resisted the urge to take out loans.
Disciplined spending, investment
On the business side, Chatterjee points out that around 60% of their revenue comes from the summer months and 40% from the rest of the year. The two waves of covid hit them hard during the summers. Today they are back to 85-90% of their pre-covid revenue and have tightened staff payments and overheads to improve profitability. Given that they run their own business, one of the first things Mehta did was identify their risk appetite.
“We are responsible for four people, our children and our parents, so we don’t like to take too many risks in our investments,” explains Millet. “We don’t have a fancy office and we just work from home. We keep our overhead low,” she adds.
Mehta says that with the exception of the March 2020-22 period, the couple have regularly invested 30% of their savings in mutual funds. Debt funds represent 15%, hybrid funds 20% and diversified equity funds 65% of their corpus. “We’ve never taken gold as a serious investment, except for a few occasional purchases in the past,” Chatterjee says. Mehta says he wanted them to invest 5-10% in gold and international funds by the end of 2020, but they didn’t. t have funds to spare for it.
According to Mehta, the only thing waiting for the family is to write a will. As the couple had to end their mutual fund SIPs for two years, they expect they will delay buying a home for a few years.
Watch their back
Millet says that while her husband was initially dismissive of hiring a professional to handle his finances, he is now happy to have someone watching his back. In the past, these were products that were poorly sold by their bank. Millet says they are well aware of what Mehta is doing for their investments and do not question his judgement. “You have to have that level of confidence and not micromanage,” she adds.