Randy Komisar on Leadership and Management

BY Kermit Pattison

  

In the life of a company, every dog has its day. So says Randy Komisar, a veteran Silicon Valley venture capitalist and entrepreneur who has spent the last 25 years launching technology startups. Komisar is a partner at Kleiner Perkins Caufield & Byers where he specializes in working with technology entrepreneurs. "I'm not attracted to them because of the bottom line," he says. "I'm attracted to them to them because of the top line--they change they can make." His own pedigree: co-founder of Claris Corporation, CEO of LucasArts Entertainment, CEO of Crystal Dynamics, founding director of TiVo, senior counsel at Apple Computer, author of two books, and "virtual CEO" to an array of fledgling companies. In this Q&A, he warns of the classic mistakes of manager-wannabe-leaders, the perils of too many bullets and not enough Zen, and why CEOs are like dogs. 

 Kermit Pattison: What are the classic pitfalls you see entrepreneurs making over and over again? 

Randy Komisar: Mistaking the difference between leadership and management. A lot of people believe the two are the same and believe that, because they have been effective or excellent managers, that they're capable of leading. While the two ideally come together, the qualities and attributes of a leader and a manager are not exactly the same.

In your mind, what's the difference between management and leadership? 

Management is more operationally focused. It's more of a supervisory role of setting priorities, allocating resources, and directing the execution. Leadership is more forward thinking, more about enabling the organization, empowering individuals, developing the right people, thinking strategically about opportunities, and driving alignment. Mind you, the line is not black and white. But it's a classic mistake that because someone is a good manager that they'll necessarily be a good leader. 

In early stage projects, the CEO oftentimes is effectively a project manager. I've seen some of those people over-think leadership--literally start to compound the challenges by thinking too big and not immediate enough. 

They start to think, "Oh, I've got to be a leader, I've got to start reading books and learning theory?"

Exactly--I need a vision statement, I need to define my culture in five bullet points. When I started running companies 20-something years ago, I learned that the first thing to do was to define my culture, which meant sitting down and writing up a cute little vision statement. What I realized, after being involved with enough companies, is that these vision statements all look alike, the words are gobbledygook and they're not very meaningful. 

Now what I usually say is, "We're going to come up with a culture statement a year after we formed." Put it on the calendar. Why after a year? Because then we can actually see what out culture is--what we don't like about it and what we do like about it. 

How much of leadership is natural versus a discipline that can be learned?

The first thing to realize is how many different styles of leadership can be successful. There isn't one style of leadership that is innately more successful than others. There are certain skills sets, which are learnable, that are very important. You need to be able to communicate. If you can't communicate well, you won't be able to inspire, motivate and attract the resources necessary for success. 

Prioritization is a really important skill. You've got to know what's more important than the other thing. It's amazing how many really smart people can't prioritize. Only a minority of people can effectively prioritize and focus. 

And you need to have effective interpersonal skills. That doesn't mean you need to be social and it doesn't mean you need to be outgoing. But it means that when you sit down in your office with somebody who's relying on you for leadership, you've got to be able to emphatically communicate with them around their challenges, figure out how to help them be more successful and resolve their conflicts so they can do their job better than they thought they could.

You say companies need different breeds of leaders at different stages. How are CEOs like dogs?

I call the first CEO the retriever--the leader who has to go out and assemble the resources. They have to go out and find the people, the money and the partners. That person is really great sales person--they have sell the vision every day. They're asking people to believe in something that doesn't exist and take a substantial leap of faith. 

The next is the bloodhound CEO. You got to find out where that value proposition is going to find paydirt so you can actually build a business around it. You've got something now, but how do you optimize it? You've got to sleuth that out. 

The husky is the next one. Now you've got a product, a value proposition, and you've figured out your business model. Now you've got to pull this sled as it gets heavier with people, products and customers up a hill, which is essentially the hill of building a big successful business. 

The one dog you never really want pulling your company is the St. Bernard. 

The rescue dog.

Right. Because at that point you know you've got big trouble. 

Even a great leader, if the wrong breed at the wrong time, can be a mismatch?

Absolutely. There are different talents in the creation of businesses and running of businesses that need to be taken into consideration. A mistake often made in the venture investment business is rushing to bring in a big CEO into what is still a small venture. The mismatch of skills is severe. The big CEO needs resources, needs a strong sense of direction and momentum, and is not very effective day-to-day with a bunch of people putting bits and bytes together. The other mismatch that's harder to foresee is the small company with momentum. You say, great, let's bring in the guy who can grow it to $100 million and take it public. The problem is that you may face yet another significant right or left hand turn in your business which that CEO may be completely unqualified to do. 

I liken it to a story a friend of mine told me many years ago about driving through the Sahara. For three nights the road through the sand was dead straight to the south. On the third night, there was a right hand turn. At the base of that turn, it's full of crashed trucks. I think about that CEO the same way. If you're not an agile, venture CEO you are very likely to end up crashing at that turn. 

What episode earlier in your career were formative experiences on leadership?

At Go Corporation I worked for Bill Campbell, who has absolutely been formative to me. Bill showed me, first and foremost, that business was worth doing. At that point, I was a lawyer and I certainly had no inclination to go into business. To me, business was about buying low and selling high--a fun game, but not an interesting life. Bill taught me the high art and that what was interesting are the people you work with, the people you sell to, the constituents and stakeholders you bring together, the art of being able to manage them all together to succeed, and to create potential beyond the obvious. I just found that mesmerizing--that's why I do what I do today. 

If you look at the ranks of CEOs today, who strikes strike you as being particularly thoughtful about leadership?

When I read interviews with CEOs lately around leadership, I've got to tell you, the stuff that gets published seems awfully conventional. I'm not seeing any brilliant insights about leadership lately from the leaders who get a following out there. 

I've given up on the guru model and think more in the Zen model: things will change and that's okay. What we need is a set of constant provocations. What I like to read are those things that really challenge my assumptions, authors who are willing to think differently, no matter whether I agree with them or not, because they at least broaden my own thinking. What I don't like reading is the pablum--the 10 habits of great leaders or whatever. Those are constraining and not very effective for the average person. 

Speaking of bad advice, what's the worst advice about leadership you ever heard?

One of the most important lessons I learned is that people are not fungible. I've had bosses who said, "We're not going to pay well, incent, or develop our people because there's always somebody to take their place." The problem with that logic is, while it might be statistically true, it fundamentally indicates a culture that is not going to invest in anybody. Nobody is going to become very effective. 

The other piece of leadership that somebody tried to teach me, which I dismissed, is manage by the numbers--if you manage by the numbers everything else takes care of itself. Just get people to execute, measure, hold people accountable, and that's enough. That's not enough. Yes, it is important to instill accountability in organization, it's important to have good metrics, to discipline the process, reward people, and withdraw those rewards when they're not being effective. But that won't get you greatness. 

So what does get you greatness?

When I am most successful, it's because the people around me have made me successful. It comes down to the fact that success is created by a group of people and not by any single individual. How do you get people to come together around a goal and objective and be great? It's establishing a sense of common purpose. Greatness doesn't come from a tactical sense of execution. Greatness comes having a vision that goes beyond yourself and even beyond the organization.

Source: Fastcompany.com Click here for page url

Creative people are just high functioning schizophrenics

New research shows a possible explanation for the link between mental health and creativity. By studying receptors in the brain, researchers at Karolinska Institute have managed to show that the dopamine system in healthy, highly creative people is similar in some respects to that seen in people with schizophrenia.

High creative skills have been shown to be somewhat more common in people who have mental illness in the family. Creativity is also linked to a slightly higher risk of schizophrenia and bipolar disorder. Certain psychological traits, such as the ability to make unusual or bizarre associations are also shared by schizophrenics and healthy, highly creative people. And now the correlation between creativity and mental health has scientific backing.

"We have studied the brain and the dopamine D2 receptors, and have shown that the dopamine system of healthy, highly creative people is similar to that found in people with schizophrenia," says associate professor Fredrik Ullen from Karolinska Institutet's Department of Women's and Children's Health, co-author of the study that appears in the journal PLoS ONE.

Just which brain mechanisms are responsible for this correlation is still something of a mystery, but Dr Ullen conjectures that the function of systems in the brain that use dopamine is significant; for example, studies have shown that dopamine receptor genes are linked to ability for divergent thought. Dr Ullen's study measured the creativity of healthy individuals using divergent psychological tests, in which the task was to find many different solutions to a problem.

"The study shows that highly creative people who did well on the divergent tests had a lower density of D2 receptors in the thalamus than less creative people," says Dr Ullen. "Schizophrenics are also known to have low D2 density in this part of the brain, suggesting a cause of the link between mental illness and creativity."

The thalamus serves as a kind of relay centre, filtering information before it reaches areas of the cortex, which is responsible, amongst other things, for cognition and reasoning.

"Fewer D2 receptors in the thalamus probably means a lower degree of signal filtering, and thus a higher flow of information from the thalamus," says Dr Ullen, and explains that this could a possible mechanism behind the ability of healthy highly creative people to see numerous uncommon connections in a problem-solving situation and the bizarre associations found in the mentally ill.

"Thinking outside the box might be facilitated by having a somewhat less intact box," says Dr Ullen about his new findings.

Source: Dosenation.com click here

Never panic

In a shop, a man asked for 1/2 kg of butter. The salesperson(a young boy) said," Only 1kg packs were available in the shop."

But the man insisted on buying only 1/2 kg. So the boy went inside to the manager's room and said ,"An idiot outside wants to buy only 1/2 kg of butter". To his surprise, the customer was standing behind him. and so the boy added immediately, "And this gentleman wants to buy the other half!!!!!!".

After the customer left, the manager said to  the young boy, "You have saved your position by being clever enough at the right time. Where do you come from?" To this the boy said, "I come from Mexico . The place consists of only prostitutes and football players!!!!!"

The manager replied coldly, "My wife is also from Mexico." To this the boy asked excitedly, "Oh yeah? Which team does she play for?"

Moral: Presence of mind helps. Never panic!!!!!!!!

Interview Etiquette Manners-Meals and Interviews

Interviews are often stressful - even for job seekers who have interviewed many times. Interviewing can be even more stressful when you are expected to eat and talk at the same time. One of the reasons employers take job candidates out to lunch or dinner is to evaluate their social skills and to see if they can handle themselves gracefully under pressure. 

Dining with a prospective employee allows employers to review your communication and interpersonal skills, as well as your table manners, in a more relaxed (for them) environment. Table manners do matter. Good manners may give you the edge over another candidate, so, take some time to brush up your dining etiquette skills. 

Interview Dining Tips:

• Are you really nervous? Check out the restaurant ahead of time. That way you'll know exactly what's on the menu, what you might want to order and where the rest rooms are located.
• Be polite. Remember to say "please" and "thank you" to your server as well as to your host.
• Is the table full of utensils? My British grandmother taught me an easy way to remember what to use when. Start at the outside and work your way in. Your salad fork will be on the far left, your entree fork will be next to it. Your dessert spoon and fork will be above your plate.
• Liquids are on the right, solids on the left. For example, your water glass will be on the right and your bread plate will be on the left.
• Put your napkin on your lap once everyone is seated.
• Remember what your mother spent years telling you - keep your elbows off the table, sit up straight, and don't talk with your mouth full!

During the Meal:

• Don't order messy food - pasta with lots of sauce, chicken with bones, ribs, big sandwiches, and whole lobsters are all dangerous.
• Don't order the most expensive entree on the menu.
• Do order food that is easy to cut into bite-size pieces.
• The polite way to eat soup is to spoon it away from you. There's less chance of spilling in your lap that way too!
• Break your dinner roll into small pieces and eat it a piece at a time.
• If you need to leave the table, put your napkin on the seat or the arm of your chair.
• When you've finished eating, move your knife and fork to the "four o'clock" position so the server knows you're done.
• Remember to try and relax, listen, and participate in the conversation.

To Drink or Not to Drink:

• It's wise not to drink alcohol during an interview. Interviewing is tough enough without adding alcohol to the mix.

After the Meal:

• Put your napkin on the table next to your plate. 
• Let the prospective employer pick up the tab. The person who invited you will expect to pay both the bill and the tip.
• Remember to say "thank you." Consider also following-up with a thank you note which reiterates your interest in the job.

Source: About.com

What lies on the other side of death

A sick man turned to his doctor as he was preparing to leave the examination room and said, "Doctor, I am afraid to die.Tell me what lies on the other side". Very quietly, the doctor said, "I don't know". Sick man said, "You don't know? You, a Christian man, Do not know what is on the other side?" 

The doctor was holding the handle of the door.On the other side came a sound of scratching and whining. And as he opened the door, a dog sprang into the room, leaped on him with an eager show of gladness. Turning to the patient, the doctor said, "Did you notice my dog? He's never been in this room before. He didn't know what was inside. He knew nothing except that his master was here, and when the door opened, he sprang in without fear I know little of what is on the other side of death, But I do know one thing................ I know my Master is there and that is enough."

Play to achieve your Goal

There once lived a great mathematician in a village outside Ujjain . He was often called by the local king to advice on matters related to the economy. His reputation had spread as far as Taxila in the North and Kanchi in the South. So it hurt him very much when the village headman told him, "You may be a great mathematician who advises the king on economic matters but your son does not know the value of gold or silver."

The mathematician called his son and asked, "What is more valuable - gold or silver?" "Gold," said the son. "That is correct. Why is it then that the village headman makes fun of you, claims you do not know the value of gold or silver? He teases me every day. He mocks me before other village elders as a father who neglects his son. This hurts me. I feel everyone in the village is laughing behind my back because you do not know what is more valuable, gold or silver. Explain this to me, son."

So the son of the mathematician told his father the reason why the village headman carried this impression. "Every day on my way to school, the village headman calls me to his house. There, in front of all village elders, he holds out a silver coin in one hand and a gold coin in other. He asks me to pick up the more valuable coin. I pick the silver coin. He laughs, the elders jeer, everyone makes fun of me. And then I go to school. This happens every day. That is why they tell you I do not know the value of gold or silver."

The father was confused. His son knew the value of gold and silver, and yet when asked to choose between a gold coin and silver coin always picked the silver coin. "Why don't you pick up the gold coin?" he asked. In response, the son took the father to his room and showed him a box. In the box were at least a hundred silver coins. Turning to his father, the mathematician' s son said, "The day I pick up the gold coin the game will stop. They will stop having fun and I will stop making money."

The bottom line is :

Sometimes in life, we have to play the fool because our seniors and our peers, and sometimes even our juniors like it. That does not mean we lose in the game of life. It just means allowing others to win in one arena of the game, while we win in the other arena of the game. We have to choose which arena matters to us and which arenas do not.

We live in a Nation where...

We live in a Nation...

Where Pizza reaches home faster than Ambulance, police and firetruck.

Where you get car loan @ 5% and education loan @ 12%

Where rice is Rs 40/- per kg but sim card is free

Where a millionaire can buy a cricket team but don't donate any money to charity

Where the foot wears and inner wears, we wear, are sold in AC showrooms, but vegetables and fruits, that we eat, are sold at footpath

Where everybody wants to be famous but nobody wants to follow the path to be famous

Where we make lemon juices with artificial flavors and dish wash liquids with real lemon

Where people standing at tea stall reading an article about child labour from a newspaper and say, "yaar bachhon se kaam karvane wale ko to phansi par chadha dena chahiye" and then they shout "Oye chhotu 2 chaii laa..."

Do think about it!

13 Ways to Cheer Up

If you’re like most people, you experience moments of feeling down, depressed, or blue. First of all, it’s okay to feel that way. We all do sometimes. Some of us may feel down more often than others, and that’s okay too. If you’re experiences are preventing you from functioning in your home, work, or social life, you may need some extra help. If this is the case, please contact a mental health professional in your area.

If you’re just having a bad day (or week) and need to cheer up, try some of the following. I hope you feel better soon!

1. Make your own CHEER UP book. If you’re experiencing lots of days of feeling down, you might benefit from creating your own “Cheer Up” book. Create a list (like this one) of every activity you can think of that will cheer you up. Type it up, add some pictures, print it out, and have it bound. I created a book like this for my husband, and it has worked out very well. Whenever he’s feeling, he just grabs his book and within a few activities, he’s feeling much better about life.

2. Breathe. Deep breathing is a relaxation technique that releases tension from the body and clears the mind. You tend to breathe shallowly or even hold your breath when you are feeling anxious. Many people do this and are not even aware of it. Shallow breathing limits your oxygen intake and adds further stress to your body, creating a vicious cycle. Breathing exercises can break this cycle.

What to Do:

1. Sit up straight. First exhale completely through your mouth. Place your hands on your stomach, just above your waist. Breathe in slowly through your now, pushing your hands out with your stomach. This ensures that you are breathing deeply. Imagine that you are filling your body with air from the bottom up.

2. Hold your breath to a count of two to five, or whatever you can handle. It is easier to hold your breath if you continue to hold out your stomach. Slowly and steadily breathe out through your mouth, feeling your hands move back in as you slowly contract your stomach, until most of the air is out. Exhalation is a little longer than inhalation.

3. Water. Drink some water. Mmmmm…water. Dehydration can cause a variety of problems, including imbalances in your noggin. So fill up a glass with that clear liquid and take it down. While you’re at it, why don’t you take a multivitamin just for good measure? Don’t stop at that one glass. Be sure to have a few through the rest of the day.

4. Hugs. If a friend or loved one is available, go snag a hug from them. You have to give a hug to get one. Sometimes all we need is a good old fashion hug. A study by University of North Carolina researchers found that hugs increase the “bonding” hormone oxytocin and decrease the risk of heart disease. Touch also releases two feel-good brain chemicals, serotonin and dopamine.

5. Play with a dog. If you don’t have one, go get one! When I say play, I mean really play. Get down on the ground, chase her around, throw her “ball” and have a good old time. You’ll be spreading some love, exercising, and making both you and her feel better.

6. Caffeine. Go get a soda or coffee (iced or hot). Caffeine is a natural mood enhancer. J Not only does it taste good in coffee and soda and make you feel better – it also helps to get out of the house to get some fresh air. For a couple dollars, this is a cheap and pleasurable pick-me-up.

7. Call a friend. Open up that cell phone, and start going down the contact list. If you’re not willing to call them (unless it’s a professional contact), then maybe you should delete them. Family members and friends should be available to support one another. A good old-fashion chat will add a new perspective on life in general, and it might provide some pleasant distraction from whatever is getting you down.

8. Watch a funny movie. If you have the time, slip in one of your favorite comedies or go rent one. And when you get to the funny parts, give yourself permission to laugh and laugh hard. Laughter is very good for you, especially when you don’t think you can.

9. Go for a walk. You know yourself best. Do you feel good around green trees, water, or lots of people? Go for a walk near something that rejuvenates you. Yes, even if you have to drive there. Commit to just 15 minutes, and you’ll be surprised how much you’ll want to keep going after your 15 minutes are up. The fresh air, rejuvenating surroundings, and exercise are all things that are sure to cheer you up.

10. Bath Time. Draw yourself a bath – with candles, music, bubbles, and duckies. Time to spoil yourself! You can soak, relax, and have a little fun while you’re at it. Who says bubble baths are only for kids and ladies??

11. Cheap fun. Go to the dollar store and buy 5 fun items. You have such a variety of options! Decorations, cards, games, stickers, ribbons, bags, books, food, glasses, toys, coloring books, and SO MUCH MORE!! If you can’t spare $5, allow yourself to spare $2 or $3. And pick something fun!

12. Music. Do you enjoy music? Slip in your favorite tunes, turn the volume up, and sing your heart out. Feel the music surround you, and just let the good stuff soak in. Bathe yourself in the songs that makes you feel good.

13. Dance. Along the lines of music – put on some of your favorite up-beat tunes, close the blinds, and dance. If you’re home alone, dance around the whole house. If you think this is stupid, set the timer for 5 minutes. Commit to only 5 minutes, and see how you feel afterwards. If you don’t feel better, stop. If it works, you don’t have to tell anybody.

Source: happylists.wordpress.com (click to visit the page)

INCREDIBLE INDIA.

India/ Mumbai/ Dharavi- Asia's largest slum with concrete huts, sometimes two-three floors, standing cheek-by-jowl

It is home to more than a million people.Houses generally have no door numbers.
Everyday,there are at least 4,000 ordinary letters to be delivered, a hundred registered ones, 150 speedposts, at least four parcels and about 15 money orders. There are some company annual reports as well to be delivered. Rather than numbers, it is the locals and shopkeepers who help postmen to locate the addressee.
No wonder, each postman, covering about 25 km every day, takes about two years to be a pro.

It is also home to several thriving small-scale industries such as embroidered garments, leather goods, pottery and plastic. According to reports, Dharavi's products sell domestically and abroad. It's annual business turnover is estimated at more than $650m.

Bibliography: Article on 'Times of India->How postmen sort Dharavi maze

The loser's guide to getting lucky

Why do some people get all the luck while others never get the breaks they deserve? A psychologist says he has discovered the answer.

Ten years ago, I set out to examine luck.

I wanted to know why some people are always in the right place at the right time, while others consistently experience ill fortune.

I placed advertisements in national newspapers asking for people who felt consistently lucky or unlucky to contact me.

Hundreds of extraordinary men and women volunteered for my research and, over the years, I have interviewed them, monitored their lives and had them take part in experiments.

The results reveal that although these people have almost no insight into the causes of their luck, their thoughts and behaviour are responsible for much of their good and bad fortune.

Take the case of seemingly chance opportunities. Lucky people consistently encounter such opportunities, whereas unlucky people do not.

I carried out a simple experiment to discover whether this was due to differences in their ability to spot such opportunities.

I gave both lucky and unlucky people a newspaper, and asked them to look through it and tell me how many photographs were inside.


I had secretly placed a large message halfway through the newspaper saying: "Tell the experimenter you have seen this and win £250."

This message took up half of the page and was written in type that was more than two inches high.

Anxiety

It was staring everyone straight in the face, but the unlucky people tended to miss it and the lucky people tended to spot it.


Unlucky people are generally more tense than lucky people, and this anxiety disrupts their ability to notice the unexpected.

As a result, they miss opportunities because they are too focused on looking for something else.

They go to parties intent on finding their perfect partner and so miss opportunities to make good friends.

They look through newspapers determined to find certain types of job advertisements and miss other types of jobs.

Self-fulfilling prophecies

Lucky people are more relaxed and open, and therefore see what is there rather than just what they are looking for.

My research eventually revealed that lucky people generate good fortune via four principles.

They are skilled at creating and noticing chance opportunities, make lucky decisions by listening to their intuition, create self-fulfilling prophesies via positive expectations, and adopt a resilient attitude that transforms bad luck into good.

Towards the end of the work, I wondered whether these principles could be used to create good luck.

I asked a group of volunteers to spend a month carrying out exercises designed to help them think and behave like a lucky person.

Dramatic results

These exercises helped them spot chance opportunities, listen to their intuition, expect to be lucky, and be more resilient to bad luck.

One month later, the volunteers returned and described what had happened. The results were dramatic: 80% of people were now happier, more satisfied with their lives and, perhaps most important of all, luckier.

The lucky people had become even luckier and the unlucky had become lucky.

Finally, I had found the elusive "luck factor" .

Here are Professor Wiseman's four top tips for becoming lucky:

• Listen to your gut instincts - they are normally right
  
• Be open to new experiences and breaking your normal routine
  
• Spend a few moments each day remembering things that went well
  
• Visualise yourself being lucky before an important meeting or telephone call. Luck is very often a self-fulfilling prophecy

Quotes in the article-:

Those who have succeeded at anything and don't mention luck are kidding themselves Larry King

Everything in life is luck -Donald Trump

Luck is believing you're lucky Tennessee Williams

I am a great believer in luck, and I find the harder I work, the more I have of it
Thomas Jefferson

By Professor Richard Wiseman
University of Hertfordshire
source url: http://news.bbc.co.uk/2/hi/3335275.stm

My Deaf Wife !

My Deaf Wife!! (Thought for the day)
A man feared his wife wasn’t hearing as well as she used to and he thought she might need a hearing aid. Not quite sure how to approach her, he called the family Doctor to discuss the problem.

The Doctor told him there is a simple informal test the husband could perform to give the Doctor a better idea about her hearing loss.

Here’s what you do, said the Doctor, “Stand about 40 feet away from her, and in a normal conversational speaking tone see if she hears you. If not, go to 30 feet, then 20 feet, and so on until you get a response.”

That evening, the wife is in the kitchen cooking dinner, and he was in the den. He says to himself, “I’m about 40 feet away, let’s see what happens.”

Then in a normal tone he asks, ‘Honey, what’s for dinner?”

No response!

So the husband moves closer to the kitchen, about 30 feet from his wife and repeats, “Honey, what’s for dinner?”

Still no response…

Next he moves into the dining room where he is about 20 feet from his wife and asks, Honey, what’s for dinner?”

Again he gets no response…

So he walks up to the kitchen door, about 10 feet away. “Honey, what’s for dinner?”

Again there is no response…

So he walks right up behind her. “Honey, what’s for dinner?”

“John, for the FIFTH time I’ve said, CHICKEN!!!”


MORAL OF THE STORY: The problem may not be with the other person as we always think, could be very much within us!

Family Budget-recommendation by Prerana Salaska

Basic Financial Planning

Since Mr Suman is the only earning member with two dependents, including a one-yearold infant, we feel that he needs to scale up his cover so that he is capable of meeting at least 15 years expenses. That means a sum assured of at least Rs 25 lakh more. This could cost Rs 6,500 p.a. He would also need to be covered for health insurance, which would entail a yearly premium of Rs 6,000.
His savings bank balance and time deposit should serve as a cushion for any emergency needs, should they arise. His current investments are skewed towards debt investments returning fixed returns. His current asset allocation is almost 80% in debt, which needs to be changed to 70% equity for his age, goals and long-term planning. He could look at directing his investment in ELSS and bank deposits maturing in the coming months towards equities to better returns.

Goal-Oriented Planning

Since for the purchase of the car, down payments and instalments will be wholly-financed by salary arrears and future incremental income, the impact on current financial flows could be considered irrelevant till the time of completion of EMI payments. However, one needs to consider that a car entails additional expenditure such as fuel costs, maintenance, servicing costs and insurance, which could amount to around 30-50 % of EMI costs. Keeping his various goals in mind, he could consider looking at a cheaper car range, which could take care of the ancillary expenses. Alternatively, he could defer purchasing the car till a further improvement in income, if he thinks buying a house is more important.

Purchasing a House

A house worth Rs 35 lakh will involve a down payment of nearly Rs 7 lakh and an EMI of Rs 20,000, for a 20-year tenure. Assuming that he opts to not buy the car and considering the current surpluses, he would still be short of EMI payments by approximately Rs 5,000, three years hence. We suggest that this decision could be deferred for another five years or until there is a marked improvement in salary. We have assumed that he presently stays with his parents and there will be no saving on rent by buying his own house.

Child Education Planning

Assuming that he would need a corpus of Rs 25 lakh for his kid in his 18th year, he should create an inflation-adjusted corpus of Rs 67.31 lakh in 17 years. Various investments in MFs would materialise to Rs 11.55 lakh, 17 years hence or in the childs 18th year. Considering his current cash flows, he could take an education loan then.

Retirement Planning

Maintaining his current lifestyle means Rs 2.40 lakh p.a, which translates into Rs 13 lakh p.a in his 60th year, after 29 years. Assuming a life span of 90 years, he needs to plan for the next 30 years at 13 lakh p.a (Rs 1,08,000 p.m), adjusting for inflation. This means a retirement corpus of close to Rs 2.26 crore when he is 60. His current investments would yield a corpus of around Rs 1.79 crore, which means that currently there is a deficit of Rs 48 lakh. Surplus after the recommended Rs 3,500 SIP in ELSS, is around Rs 3,500 p.m. Out of this, Rs 3,000 can be invested in balanced fund SIPs to yield Rs 48 lakh in 29 years at 8% p.a return.

Rationalising between goals

His current shortfall in retirement corpus needs to be revisited yearly and the plan tweaked accordingly. If he feels that buying a house or providing for his childs education constitute more pressing issues than planning for a comfortable retirement, he could utilise a portion of retirement allocation towards these needs, as required. Shortfall in retirement corpus, if any, could be met through means such as reverse mortgage in future.


By Prerana Salaskar-Apte , a certified financial planner, is a partner with The Tipping Point
source: Economic times dated 12th Jan.'10
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