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NRI Zone
Financial Planning For Non-Resident Indians
Proper Financial Planning helps to realise all the financial goals and to achieve financial freedom.
Financial Planning for NRI’s is in no way different from Financial Planning for resident Indians. In case of NRI’s, due to better cash flow and other benefits, much planning is required for common goals such as buying a car etc.

But, proper planning is vital for long term goals such as Children’s Education, Marriage and Retirement. Another important goal for NRI’s is to plan for periodical travel to India and for related expenses in India during their temporary stay in India.

For our planning purpose, we classify NRI’s in three categories:
  • Those who want to settle abroad permanently even after retirement.
  • Those who want to settle in India after retirement.
  • Those who want to return to India after few years of work abroad. Now, let us see what can be the goals and what the best possible way to meet them is:

01. Contingency Planning:
Contingency Planning or Emergency Planning is the first and foremost thing every NRI has to do. Without contingency planning the entire financial position may derail. The need for contingency planning for NRI’s arises mainly due to the following reasons:

a). Job Change/ Job Loss: It is quite common now a days to shift jobs due to various reasons and the main reason being better prospects in the new job. There may be a time gap of one or two months between quitting the present job and joining the new job. In this gap, your income flow may be temporarily disrupted but you have to meet all your expenses. In order to pass on this period smoothly without any financial problem, it is advisable to keep three months expenses as contingency fund. This three months is minimum requirement and it should be used for such emergencies only and it should be always continued. Now a days, it is quite common to get “Pink Slips” all of a sudden. In such circumstances it may take longer period than expected to get new job. If you are having a contingency fund, it will help you to manage the period of income loss without any pain. Normally, we recommend a contingency fund equivalent to your 3 month’s expenses and it is advisable to make it equivalent to your 12 months expenses. The expenses should contain all your non-discretionary expenses such as rents, school and college fees, insurance premiums, loan and credit card EMI’s, normal routine medical expenses, monthly living expenses and expenses required for searching new job such as travelling expenses etc.,

b). Being an NRI, you are staying at a far away place but all your family memebrs might be staying in India. Due to some untoward incident or sudden family function such as marriage, you may have to travel all of a sudden with short notice. If your entire family is travelling it is a huge expenditure. Since this travel is not expected, you have to redeem some of your existing investments or to borrow. By having a travel contingency fund you can avoid additional burden on your resources. This travel contingency is in addition to normal contingency for NRI’s.

02. Periodical Travel to India
This is common goal for all the categories of NRIs. Normally, many people travel to India once in 3 years for a short vacation and alternately want their parents to visit their place at periodical intervals. These travelling costs are a huge expenditure and if planned properly it eliminates biggest worry of funding the same. If NRIs visit India, they have to spend considerable amount on gifts, functions, ceremonies and with proper planning this can be funded very easily. If a person of 30 years age is at abroad and he works till 60 years, he want to visit India once in every 3 years, he has to travel 10 times till his retirement and the funding required for these travel expenses can be easily accumulated through SIP route in Mutual Funds.

(Please refer to NRI Travel Plan calculator in our downloads section to arrive at approximate travel cost for different time periods)

02. Children’s Education:
Since better educational facilities are available abroad, all the NRI’s want their children to pursue higher education abroad only. If the present higher education cost per year is $30000 and average education inflation assumed at 5%, the amount required at various time periods will be as follows:

Years From Now Future Cost
For Higher Education Per Year
5 $38,288
7 $42,213
10 $48,867
12 $53,876
15 $62,368
16 $65,486
17 $68,761
18 $72,199

If your child’s higher education is say 15 years away, you require approximately $250000/- for a four year graduation course. The best way to achieve this corpus is by investing monthly through SIP route in Indian Mutual Funds. Till date, the average return given by Equity Mutual Funds over a 10 year period is 25%. Even if we consider a lesser return of 20%, the above corpus of $250000 can be achieved with a monthly SIP investment of Rs.10000/- i.e. $200 per month.

So, the best way to build a corpus for children’s higher education is to invest in Indian Mutual Funds on Repatriation Basis.

The process is same as above for your other goals such as Children’s Marriage etc.

03. Retirement Planning:
Retirement is one of the most important life events many of us will ever experience. From both a personal and financial perspective, realizing a comfortable retirement is an incredibly extensive process that takes sensible planning and years of persistence. Even once it is reached, managing your retirement is an on-going responsibility that carries well into one's golden years.

While all of us would like to retire comfortably, the complexity and time required in building a successful retirement plan can make the whole process seem nothing short of daunting. However, it can often be done with fewer headaches (and financial pain) than you might think - all it takes is a little homework, an attainable savings and investment plan, and a long-term commitment.

Without a well-planned retirement corpus, you may be forced to liquidate your assets in order to cover your expenses during your retirement years. This could prevent you from leaving a financial legacy for your loved ones, or worse, cause you to become a financial burden on your family in your old age. As we know, life tends to throw us a curve ball every now and then. Unforeseen illnesses, the financial needs of your dependents and the uncertainty of social security and pension systems are but a few of the factors at play.

Regardless of the challenges faced throughout your life, a secure nest egg will do wonders for helping you cope. Financial hiccups can be smoothed out over the long term, provided that they don't derail your financial plan in the short term, and there is much to be said for the peace of mind that a sizable nest egg can provide.

Setting of retirement goal comes under retirement planning which is the most important element in financial planning. Post-Retirement life span is increasing day by day and on an average one lives for 20 to 25 years after retirement and is a considerable period. By having proper retirement planning, you can choose your retirement period i.e. your retirement is in your hands. Normally, people think of retirement age as 60 years, but if you want to retire early and pursue your hobbies or any other activity as per your wish, you can do so by having a proper planning. Proper retirement planning gives you flexibility and ensures you a happy post-retirement life. Moreover, one can get financial support or loans for any other purpose such as Children’s Education, Children’s Marriage, for buying a house, car or for that matter any legal purpose or need. But, once you retire, nobody will look at you and you cannot get any support. Hence, retirement planning should be your prime goal. Unfortunately, in India many people including highly educated never give importance to retirement planning which make them suffer most after quitting their work life. The importance of retirement planning is necessitated due to the following factors:
    Advent of nucleus families and disintegration of joint family system.
  • Increase in life expectancy due to advanced medical facilities
  • Due to nucleus families, children are staying at a faraway place and also due to changed life style, not able to support their parents to the full extent when they need most.
  • To live with self-esteem and not to depend on anybody including children.
With a few hundred dollars per month you can achieve many of your goals by investing in Indian Mutual Funds. Indian Mutual Fund industry is one of the best regulated by SEBI and Govt. and you can derive the benefits of Power of Compounding, Rupee Cost averaging etc. by regularly investing in mutual funds.

(To have an idea on the approximate amounts required for various goals at the time of goal maturity, please use our calculators provided in Calculators Page)

(For details about performance of Mutual Funds across various time slabs and various schemes please refer our downloads section, where we provided the research reports of CRISIL)

Key Points to Remember:

01. Identify your goals and time horizon for each goal.
02. Quantify your goal in today’s money terms.
03. Decide where you want to achieve the goal i.e. in your present country or in India.
04. Open NRE and NRO account in India.
05. You can make Investments which are to be repatriated through NRE account.
06. You can make investments which are not to be repatriated through NRO account.
07. All your investments in any asset class such as Mutual Funds, Equity, Debt can be made through this account and the redemption proceeds can also be routed to this account freely.
08. The balances lying in the accounts are fully repatriable and interest earned on these accounts are fully exempt from taxes.
09. You can also make local payments through these accounts.
If you are not having an NRI account, we recommend you to have one due to the following reasons:

  • We at FINPRO help you to quantify your various goals and suggest you a road map to achieve the same through our NRI Financial Planning Services.
  • We can help you in opening investment accounts in your name which can be opened and operated online by you.
  • We will periodically monitor the investment portfolio and suggest changes in asset allocation if any required so as to ensure that the investments perform as per the plan.
For further details such as documents required for opening investment accounts and data gathering form for Financial Planning or for any other information please contact nri@myfinpro.com.
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