R2I Chapter 2. Money Matters - Money makes the world go around

My Return to India (R2I) story > R2I Chapter 2 

Most of us migrate to the west in search of ‘opportunities,’ which really is all about earning more – in Dollars, Dhirams, Pounds or Euros. After settling in adopted homelands, people of Indian origin sometimes think of moving back. Not surprisingly, money matters are at the front and center of any Return to India decision, and folks indulge in detailed debate about money and finances while contemplating such a move.

Paraphrasing the old song from the untouchable “while money makes the world go around, money is what keeps us going around.”


How much money do I need before planning to Return to India?

This is among the most popular questions on RTI forums, and as is to be expected, the responses are all over the place. A common statement one might hear at a desi party or get together is “If I had a million dollars, I’d leave everything and move back to India.” Of course, this is just a notional moving target for some – it might start off as a goal to save $100 K, a million dollars or $10 million as one surpasses one career goal after another, but in the meantime, other life priorities take over. Spouse might have a career goal, kids might want to finish schooling or go to college and so on.

Many people I know set their Return-to-India targets against goals for savings or investments, but very few people setting such targets make the move for this reason alone. I know of one guy, Kesh, who did just that. 

Kesh moved to the US on an H1 work visa in early 2000s and set a simple but clear target of saving $200 thousand in 10 years at the end of which he would return “home.” As a mid-level technical analyst, he was earning about $80 K annually and led a rather simple (a.k.a frugal) life with his wife living in a 1-bedroom apartment driving a 10-year-old Toyota. He invested his savings in CDs that were offering over 5% in the 2000s. With the compounding of interest of his savings, he was able to meet his financial target in about 9 years and decided to move back to Bangalore ahead of schedule.

His goal after returning was rather straightforward – spend about half of his savings on renovating the house his dad had built a couple of decades ago. At the time, his dad was living in the house with Kesh’s brother and sister-in-law. They built an additional floor on top of the building which is located in Koramangala, a suburb that has become the heart of tech startups in the city. Kesh converted the other half of savings into Indian Rupees and invested that in a portfolio of annuities and mutual funds that yield a decent living allowance.

With housing and basic household expenses taken care of, Kesh spends time tutoring Math and Science to his kids along with their cousins and kids from neighborhood. Living in a “joint” family, Kesh now supplements the living allowance from his passive investments with occasional consulting in the gig-economy.

I took this example to illustrate its rarity. Not all of us can actually do what Kesh did – simplifying and downsizing requires a conscious effort and strong will. Many of us might find such audaciously sounding simple-goals, but other life priorities and goals begin to take precedence. 



A framework to assess financial goals and aspirations 

In the previous chapter, I explained how Suja and I decided to move back. After taking the decision, we began looking at the logistics. For us, the question “how much money do I need?” was moot since our move wasn’t predicated on financial targets.

While it is important to stay grounded on financial targets, I have come to realize that it really comes down to life’s other priorities besides a financial number. 

 While planning our RTI, I decided to dust off my ‘finance 101’ knowledge from my MBA days by aggregating our data from the various accounts into a spreadsheet. My framework was rather simple and focused on a few key topics: 

  • Taking stock of finances and investments 
  • Budgeting for relocation expenses 
  • Resettling expenses – liquid funds for at least the first six months
  • Contingency – set aside some money for additional six-month’s living expenses 
  • Budget for healthcare and medical expenses 
  • Longer term planning - Planning to manage investments and assets remotely 

Taking stock of finances and Investments

During the decades living in the west, I had built my little nest egg, which I had diversified a bit. I also had some savings in India including my remittances and ESOPS from my stint at Infosys.

In the US, I banked with a popular credit union that held my mortgage, and other accounts including some savings balances and CDs. We also had a couple of brokerage accounts, 401K and IRAs. Spread across these accounts, I invested in mutual funds, EFTs and some stock that I dabbled in. We had also contributed in full to Social Security that may or may not be available by the time I came of retirement age. Among our ‘liquid’ assets in the US was some gold and jewelry that we had to account for.

While the finances were fairly liquid, the key decision was about the house: what to do with it? In the five years since we had bought our house, I had been paying down the mortgage with some excess savings too. It was nearly 75% paid off and per my calculation, we had 5 more years before the mortgage was paid off. I didn’t want or need to liquidate the asset if I could retain it and generate rental to pay off the mortgage.

I contacted a local property manager referred to me by a friend who explained the basics or being a remote landlord. They would keep 10% or rental as management fee and would contact me to approve renewal of rentals, service and maintenance requests. The property manager also gave me comps – comparative estimate of rentals in the neighborhood. Based on a rough calculation, I could break even after apportioning the rent towards mortgage, HOA, property tax, insurance, and a contingency for maintenance. We would continue to build equity by paying up the mortgage.

The house would be paid off by the time Vijay got ready for college. Assuming he decided to come back to the US for higher education, this would be his ‘college fund.’ The property manager assured me that all this could be managed remotely over emails or via their online portal, which sealed the deal for me.

While reviewing our bank, brokerage and credit card accounts, I decided it was time to simplify and consolidate. In addition to our investment accounts, we had half-dozen credit card accounts opened while chasing low interest rates and other incentives. I decided to cancel most of them while retaining an AMEX and Visa for each of us along with debit card linked to the savings account.

I had been dabbling in stock market for most of my working life in the US, going back over two decades, and I periodically squirrel some savings into my brokerage account. I have been conservative with a percentage of my savings and generally move a larger fraction into mutual funds and EFTs. The rest is apportioned as “play money” to dabble in individual stocks which I could continue to monitor and manage even after we moved to India.  Later in this chapter, I narrate my experience with one such stock, Blackberry, that had remained in my brokerage account for years after I returned to India.  

Gold and Jewelry

Like many Indian wives, Suja has a collection of gold jewelry, some of which she had bought prior to marriage and some we had acquired during special occasions like wedding anniversaries during the years past. Most of it was 22 K and had sentimental value and wasn’t really considered as an ‘investment.’

In addition to jewelry, I had also been investing in some bullion and gold coins during our stopovers in Singapore, Dubai and London. I had gifted a few ounce-coins to my mother during my parents visit to America but most of it was squirreled away. These bullion coins were of various kinds – Canadian Maple Leaf, American Eagle and African Krugerrand, all weighing the standard ounce.  I also had a few Suisse hallmark bars.

As far as Suja’s personal jewelry went, I was confident we could carry it safely during our trip. However, I decided to liquidate some of my bullion investment for a couple of reasons. Over the years, the price of gold had been steadily rising and was hitting “all time highs,” and it would be prudent to diversify. The other factor was the hefty customs duty that I might have to pay if we carried bullion with us.   

I called around a couple of bullion dealers in town who explained the process of verification and valuation but didn’t assure me that they would be able to offer the ‘spot trading price’ without deducting a ‘fee.’ During a weekend visit to Raleigh, I carried a couple of coins and decided to stop by the local Indian jewelry store. I explained that I had bought the coins during a stopover in Dubai. The jeweler took a coin to his workstation and did a quick verification before offering me the day’s trading price for 24 K gold – in cash!

I accepted the offer and returned back the next weekend with rest of our coins and bars and liquidated them. The cash would come handy during our relocation and could easily be exchanged for Indian currency instantly. 

Additional sections:


Takeaway

Reading about my experiences in managing finances may sound familiar to you, perhaps with a few twists and variances. The amount you and your family need while returning to India is a very subjective number and it really comes down to your personal financial situation, net-worth and personal preferences for a lifestyle you wish to pursue.

Your financial goals may also be tied to your life pursuits.  There are some like my friend Kesh who are content to lead an idyllic life with some savings on hand. A few others I know decided to transform themselves as philanthropists or social activists, while some like me continue to explore corporate opportunities. 

Planning for life’s needs while relocating also requires one to stay updated on contemporary life in India. The rate of inflation in India has traditionally been higher than in the west. Even considering currency-exchange parity, price of goods and services in India have been rising faster than in the west, and the dollar-rupee exchange could give some NRIs a sticker shock.

The internet enabled tools, with the right security and controls have made it extremely easy to manage financial accounts and assets remotely. With the right service provider, one can also manage property and other assets remotely. Financial service providers also bend over backwards to accommodate the needs of Expats like me living and working thousands of miles away.

Financial targets may also be tied to one’s assets, savings and remittances. Many expatriate Indians also send regular remittances to family back in India and actively invest in houses, flats and property. Till the first half of the decade, such investments gave handsome dividends as the real-estate sector was booming. The currency demonetization, new RERA regulations and the pandemic has led to a prolonged slump in this sector.

All this comes down to a simple message: while you take inputs from friends and relatives, do your own homework and plan accordingly. 




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