Does Sushil Kumar (KBC winner) require a Financial Plan ?

POSTED BY manish ON November 17, 2011 COMMENTS (45)

We all know that Sushil kumar has won 5 crores from KBC few days back (actually 3.5 crores after tax) and now he is already being approached by wealth managers, relationships managers to advise him on how to “invest his money”. So I want to just discuss my thoughts with you all on how Sushil kumar should put his money at work ? Does he really need a Financial Plan ? Does he really need an advisor ?

Sushil Kumar 5 crore KBC winner
Let us see what he can do with his money and how I think he should utilize his 3.5 crores. Given his background and education level and assuming that he listens to me, here is what I would suggest Sushil Kumar.ย  Divide your money in 4 buckets A (1 crore) , B (1 crore) , C (1 crore) and D (50 lacs)

Bucket A (Security of future)

The first thing which I would tell Sushil Kumar is that he should just keep things simple and simply keep that 1 crore in a Fixed Deposit and let it accumulate there without any complication. This part of his wealth should be there incase THINGS GO HORRIBLY WRONG ever , he can just leave this part as it is for growth, even if its going to increase at a slower pace compared to equity or anything else.

Bucket B (Regular Income and Security of Capital)

I would suggest him to use the next bucket to generate a regular income along with his capital being secure, again there can be many ways of doing this , but considering his background and assuming that he might not be too sure about financial matters , again I would recommend him to put his next 1 crore into a fixed deposit with a monthly or a quarterly payout of interest . This will make sure that his initial capital of 1 crore is secure and he will start getting an income of Rs 65,000 – 70,000 per month (before tax) .

This income of 65,000 – 70,000 will be more than enough for him to live his regular life, thanks to him not very much addicted to junk foods , extravagance and other useless spendings which our generations have. He will surely be left with a lot of money each month or quarter and thats where he can put some money in equity on regular basis . No stocks , no mutual funds , just plain index funds, so that he does not have to bother about funds not performing every year and does not require a short-term review.

Bucket C (Assets creation , Education , Business)

Once his worst case is covered (bucket A) , his regular income is taken care , now he can use the next 1 crore for building a new house for himself and his family , he can also use some part of his money to fund his education and some part he can use to start a new business which can again open a new stream of income for him) . This purpose of this 1 crore is to take care of all the things which he wanted to do in his life. This part is not to save , but to utilize for his aspirations and his dreams.

Bucket D (Enjoying his Life)

I think he should use the last 50 lacs to just blow off and enjoy his life on regular basis which a lot of people just dream of . He should take a vacation abroad first using 10-12 lacs and then rest of the money he can use to go for a regular vacation each 6 month , with 35 lacs he can get a 2.8 lacs a year as interest income which would be enough for him to take 2 vacations a year with whole family ๐Ÿ™‚ . The focus of this 50 lacs can be purely for enjoyment purpose because his other area’s in financial life are complete.

Other Suggestions

  • Life Insurance is not required for Sushil Kumar because there is no requirement of Life Insurance, There is enough wealth with him and his family incase he is not around.
  • Health Insurance would be something nice to have as it would come at a small cost compared to what he has in life, this would make sure that someday if something goes wrong , his wealth is protected against the unexpected expenses.
  • He should stay away from any relationship manager , Agents or even Financial Planners as there is more for “Allocation” and less to “Plan” . He has already passed the Accumulation phase and only if he takes care of his existing wealth now, he should do good.
  • Because of his less knowledge (assumption) about overall personal finance, he should keep things simple and be with simple products like Fixed Deposits which he understands properly.

Sushil kumar real enemy might not be inflation or ignorance about money, but his own relatives and Bihar goons ! . So what do you think about these suggestions to Sushil Kumar ,? Do you agree with it ? How would you allocate his 3.5 crores if you had to do it ?

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45 replies on this article “Does Sushil Kumar (KBC winner) require a Financial Plan ?”

  1. Anurag says:

    Manish Ji
    Iam Anurag 30 Year ,From Delhi a marketing Background In IT/telecom Company….Earlier i never use to read your articles but once i started reading Now Its my habit to read each of your articles as i have become fans Of your Articles. here is my Personal info Please suggest the right direction For my wealthy life after 10-15 year, For My Child Education Might be abroad after his Graduation+ Marriage Etc

    Monthly Salary 36000/PM-
    Other Incomes 6000/-PM average
    Rented accomodation 7000/-pm
    Dependent Wife & 1 Kid & Parents ( not scholl going now)
    Investment –
    2 Plots (1 In Delhi @ 13 lac & 1 In jaipur @ 4 lac) No bank Loan as on date
    1 LIC jeevan Mitra Tripple Cover Premium is 36000/- Annualy
    Mediclaim From national Insurance( 2 Lac Mine + 2 LAc Wife + 1 :Lac Kid) 6795 Premium Annualy

    Monthly saving around 15kk So Please Suggest Where i can invest For a Wealthy life after 10-15 year , iam planning to buy a home @ 23 lac Which is not loanable property as in delhi , So i am planning so sell out my delhi plot For DP Then Arranging balance from My+ Wife 4 lac saving + From relatives on loan basis + or a personal loan of 2.50 lac

    So Main Goals are-

    Child Education ,Child Marriage,good retirement life ….in One shot a WEALTHY LIFE…

    Here i need your Suggestion …PPF/LIC/MF/ Which One? Which Company ?/ Which Plan ?

    1. Thanks for the link

  2. Ashutosh sinha says:

    Here is an interesting analogy between most of us and Sushil kumar.
    Consider that you earn around 10Laks per year and expect a 10% increment YOY.
    Also, consider the inflation rate to be 10% over the years.
    Your Net Present Value (of all salaries for the next 30 years) would be:
    2.7 Crores @10% inflation.
    3.6 Crores @ 8% inflation
    4.3 Crores @ 7% inflation
    6 Crores @ 5% inflation

    So, I guess we can compare ourselves to Sushil kumar.
    Manish, how would the plans for me differ for Sushil? And what is your idea of inflation rate for future?

    1. Ashutosh

      There are some points to consider here

      Sushil Kumar has the money right now in his hand … You dont have any clarity/guarantee about future .. its highly unsecured and unpredictible
      The 10 lacs is the earning , not the saving .. your expenses has a role to play here .. if I earn 10 lacs and my expenses are 4 lacs a year .. and if you earn 10 lacs , but your expenses are 9.5 lacs .. is the present value of both of us same ?

      Try to find the NPV with the SAVINGs .. that will give a clear picture ๐Ÿ™‚

      Manish

  3. Priya says:

    Hey , have visited this website after a long time as I ws held up wid lots of stuff happening around in my personal life and have loads to read nw! this is an excellently written article, as always….kudos!

    1. Priya

      Yea you are coming after almost 5 months now ๐Ÿ™‚ .. Great to see that you liked this article ๐Ÿ™‚

      Manish

  4. Bhawin Jagad says:

    Manish

    I am sure we need to be counseler’s rather than advisors in todays scenario for general public.

    Bhawin

  5. Bhawin Jagad says:

    Hey Manish,

    Great Article.

    It is better to make life simpler rather than complicating it with various products in life.

    Bhawin

    1. Bhawin

      Thanks .. Yea .. But “complication” is considered as “Better” and “Special” by normal investors .

      Manish

  6. Rajni says:

    Dear Manish,

    I have some doubt…plz clarify this Is Insurance is not for wealthy person??? If YES/NO then why?

    Thanks in advance.

    1. Rajni

      There is nothing like Insurance is for or not for wealthy person , Its for anyone who wants to cover his family from future income and he has no financial assets to cover for it .

      Manish

      1. Rajni says:

        No, I mean as you written “Life Insurance is not required for Sushil Kumar because there is no requirement of Life Insurance”.

        In my opinion every body needs Term Insurance bcz in life nothing is fixed anythng can happen at any time. I think he shd opt for single premium or limited premium term insurance plan.

        whats ur view???

        Rajni

        1. Rajni

          What is the logic behind your opinion ? When he is self sufficient in wealth , there is no requirement of term insurance for him , Life insurnace is taken by people so that they can cover the risk of death because their families will not have sufficient money for their expenses and future goal , but in case of Sushil kumar thats not teh case .

          Manish

  7. Sahil Bhatia (v-2sahb) says:

    Nice Article Manish !

    Especially the part :-
    ‘Sushil kumar real enemy might not be inflation or ignorance about money, but his own relatives and Bihar goons ! ‘
    I really think that he would be in every goon’s mind in India. As soon as the matter settles down and people stop talking about him, then the goons might get into action.
    I like the way you have planned for him. Nice and easy for a guy like him.
    Keep Rocking Man

    Sahil

    1. Sahil

      Thanks for appreciation . THere is more of common sense than any planning in what I did for him ๐Ÿ™‚

      Manish

  8. Mithlesh says:

    Hey manish!!

    Hats off to you on your innovative thinking about coming up with this article :)- excellent dude! cheers!

  9. Krish says:

    It is so sad that no one would advise to invet in business. We all say equity is great and fetches more returns but few would take up entreprenuership or dare to start the stock listed company. Few people have the luxury of mobilizing the capital and here is the one person who has the capital and do not have to depend on borrowed capital.

    I would strongly advise the winner to invest or partner in some business in order to turn it into a listed company one day. Given that he had a single minded focus on winning the KBC and am sure he can be a successful entreprenuer rather than becoming a Bureaucrat consuming tax payer money.

    1. Krish

      I had mentioned that he can use one of his 1 crore in business , but i think he can wait on this and first clam down and let all the excitement drain out in next few years .. he can then take up business

      Manish

      1. Ankur Lakhia says:

        Manish,

        I do not think he would sart a business. It is all about attitude and not so much abot capital. I understand he struggled but thought of starting a buiseness never seemed to occur to him. Even now, he seems only interested in being a babu. I believe, by the time he reaches his retirement, his wealth would have been eroded due to many reasons, one of them is inflation. I feel it is time we start teaching personal finance from high school onwards so that young people are somewhat prepared to handle money, whatever may be the amount, small or big.

        1. Ankur

          I think what a person says in front of TV and what is in his mind is very different , He might not do what he said and might have totally different plans .. While I agree with you that to start a business more than capital what matters is ATTITUDE , but even capital is extremelly important because a lot of great startups in world has died just because of lack of capital /

          Manish

          Manish

  10. yogesh says:

    1 Coroe FD shd be in one bank or divide it into several banks to save TDS,rite?

    1. Yogesh

      Saving TDS does not mean saving tax , its just delaying tax , in one way paying TDS makes sure you are paying tax, which does not happen if you save it because at the end , it might not be in your hands

      Manish

  11. NANDISH says:

    If you donโ€™t distinguish doors you end up walking into walls a lot. The one thought shushil will have in his mind is to live a comfortable life. Everyone including shushil kumar would now think ” LIFE IS GONNA BE COMFORTABLE”.

    I want to share One very important point shushil Kumar or any such winner has to understand even before he plans. It is not about what to invest and where to invest the most important part is who is investing.

    Historically research has shown that regardless of the amount won, most lottery winners return to their original financial state, the reach to the amount they can comfortably handle.

    For Mukesh Ambani handling 5 cr is not at all a big deal because he is very very comfortable with it whereas for shushil it is not. One of the thing he needs to learn is to relax with money, relax with the amount, relax with the expectations, relax with the media attention, relax with everything around him. The more aware he stays with the money he has earned or won the better decisions he will be able to take.

    I wish shushil Kumar all the best with the money he has won.

    All KBC winners should be given http://www.jagoinvestor.com written at the back of their cheque so that they really make the most out of the money.

  12. yogesh says:

    Hi Manish,Ur suggestion he shd put money in debts insturments ,take medical & child insurance policy.

    I think there is no harm in taking term insurance as well.Even though he has waelth but no harm if he can left more for them in unforunate events.

    U r right he shd be away from agents..

    he shd just earn interest and carry on with his profession/business.

    1. Yogesh

      Taking a term pla will not hurt , I agree , but is there a need ? If we go by this logic of “Buying term plan will not hurt” , then every one should buy a term plan for much higher amount than one really needs to , Remember that its not the issue of “capability to pay” , but the “requirement” , He is fully sufficient on his own to provide his family now , so its not needed , I am purely talking from the logic of insurance and nothing else .

      Manish

  13. Ramesh Bonigi says:

    Hi Manish,

    this article is really awesome. This I have to remind for my entire life for a similar allocation. Real kudos to your effort. This is just not for Sushil and for someone who has similar cases. Keep posting.

    1. Ramesh

      Good to hear that you learned things . Keep reading

  14. SnowWhite says:

    I think Sushil Kumar should allocate his 3 Crore in the following funds:
    1.Reliance MIP G – 25%
    2.HDFC MIP LTP G – 25%
    3.HDFC Prudence G – 25%
    4.FT India Dynamic PE Ratio Fund of Funds G – 25%
    Rest of the 50 lacs he should pay his family debt, buy a nice 3BHK Flat or independent house and help his brothers. If he invest his money in such allocation his corpus may have a little capability to keep pace with the inflation. He should also take individual mediclaim policy for him and his wife. Life insurance is not so necessary but if taken, it will be of benefit for him in future believe me considering the inflation and its deadly effect on the corpus.

    SnowWhite.

    1. Snowwhite

      Thanks for your suggestions . While there is no denying that this is one of the ways , but also keep in mind his background , eagerness of investing in X financial product .

      Manish

  15. Vanga Rajendra Prasad says:

    I appreciate you for taking this topic.
    Stay away from any Financial Planners… as there is more for โ€œAllocationโ€ and less to โ€œPlanโ€ -Valueble suggestion. But he must listen to your suggestion

    1. Vanga

      Thanks, yea .. the general myth is that more the money . higher the chances that one needs a planer

      Manish

  16. Bharat Joshi says:

    Manish,

    As always – great article and good tips on how to act savvy on windfall profits.

    I am curious why wouldn’t you include investing in commodity. It would be a good idea to put 10% into precious metals (in case of India – Gold)?

    The article of course helps us understand what a layman’s approach should be towards financial planning and how simply it can be achieved but you have left the nitty-gritties out e.g. lifecycle events (marriage, kids, family obligations) in an Indian’s life esp. given the specific background. I think if we factor them in, the picture portrayed may change.

    Keep up good work.

    Bharat

  17. Asav Patel says:

    Hello Manish,
    Well, the question is not about paying off debt of his brothers (if any). Here the question is about stake. Here the question is about equally or unequally distributing this wealth among the brothers.

    I don’t know the scenario in your state. But here in my state this is the practically difficulty that people encounter in such type of cases and that’s why I mentioned it here.

    Yes. You are right. Not all people blow off their money. I have just given the study reference conducted at Stanford where they came to conclusion that at least 95% of the lottery winners/Game show winners broke financially within 5 years of winning lottery. So it doesn’t mean that in India also these things happen.

    And as far as the thing is about focusing on needs and not wants, it depends on financial IQ of a person.

    In above comment I have just given the top 5 reasons why people go broke after winning lottery/realty shows according to several studies conducted in the Western world on this.

  18. Asav Patel says:

    This is the ideal scenario.
    However, practically its really difficult to implement this plan for him.
    Because you know when person comes from lower background, he has lots of obligations of his other family members and relatives to him.
    I thought in the same way as you have posted in your post here.

    But the practical problem is that – when money suddenly comes in the life and when everybody knows about it, it becomes difficult to manage it.

    In the show, they have shown that he has two brothers who bring him to KBC.
    Now, practically what about the stake of his two brothers?

    Remember that, when money comes with publicity and via Gambling/Lottery Winning, you have to distribute it among all the people to whom you have obliged to reach at that level.

    According to the studies of Stanford University on Lottery/Reality show winners in USA and European countries, 95% of them were financially broke within 5 years of winning it because of any one or more of the following reasons.

    1) Blowing off all the money for Enjoyment (Prime Reason)
    2) Giving it to manage to somebody else (Wealth managers as you have said)
    3) Spending lots of money on Family Members
    4) Borrowing Excessive money (Yes. When your credit line goes up, you actually borrow more)
    5) Lending this money to Friends and Family members who will probably never give it back

    So the above were the top 5 reasons.

    Believe me, Odds are against the Lottery winners/ Realty show winners/ Inheritance / Other Sudden rush of money.

    Most of these people have broke in within 5 years of winning it.

    At least this is the scenario in western countries.
    Don’t know about India.

    1. Asav

      yea , you point some good things in this case .. but given his background , the numbers look very big . How much money does his brothers really would need to pay off the debt and restart something good business ,it would be taken care within 1 crore as I mentioned and I allocated that money because of the same reason .

      Also I dont agree fully with your point that once money comes a person changes and his aspirations goes high , it happens for a lot of people , but not true for everyone , a person can limit himself and really focus on what he really needs .Talking about the same Sushil Kumar ,right now he is in Delhi and now with few friends living at some place preparing for IAS , so you can understand how his daily schedule would look like

      Manish

      1. Muthu Krishnan V says:

        i think key would be to entertain as less people as possible and learn to say a firm NO to each and every sundry request for money. everybody should be taking care of themselves.

  19. Muthu Krishnan V says:

    He is studying for IAS and has proved his wealth of knowledge by winning KBC – 5 crores. Based on this I would not assume that his financial knowledge would be low.

    Instead of investing completely in FDs, I would suggest investing say 1.5Cr in liquid/debt funds so that it is more tax efficient. .5Cr can be in FDs/POMIS etc for regular income.

    It would be interesting to see how he is faring after a couple of years. Would his circle of relatives and friends allow his wealth to be exactly that (wealth) ?

    1. Muthu

      What I wrote was based on some assumptions , if your assumptions are different , then your suggestions will be different and there is nothing wrong in it . But do you really think that just because of high IQ or lot of money he has earned , he would be able to handle the money well ? There are may businessmen and big people who earns crores and still rely on their CA , and banks to give them suggestions .

      Manish

      1. Muthu Krishnan V says:

        hi manish, I read one of his interviews where he says that he is not going to change his life-style just because he earned a few crores. He is going to go to delhi and stay with his friends who are preparing for IAS and pay the same rent as they do around 2000Rs per month. I salute him for this attitude.

        even if people have money, they need to have financial planners, CAs etc. More the money, more the head-ache. I agree with you.

        regarding handling the money, I have said in my previous comment that “It would be interesting to see how he is faring after a couple of years.”

        1. Sohil says:

          The same was said by 1st crorepati harswardan.But in this life its quite easy to get tempted.I wont be surprise if he doesnt take IAS path at all just like what harshwaran did.
          Also now every kid knows he is a crorepati he wont get any discount on medical treatment or will be charge more in life.
          It all depends how he handle his fame.Whether like rakhi sawant that every controversy pays you or like any other idiot just getting tempted

  20. vaz says:

    Kool article as usual Manish.. “Sushil kumar’s real enemy might not be inflation or ignorance about money, but his own relatives and Bihar goons ” Ha ha ha.. funny but a reality….

    1. Vaz

      Yea .. good to hear that you eco that thinking . But I am sure that even with this suggestions , he will have to tweak this plan after 10 yrs , what do you say ?

      Manish

  21. Kevin says:

    Awesome suggestions. I really like your way of thinking. Thank you for interesting articles and emails all the time.

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