How Our Memories Shape the Way We Think about Money
Personal Finance
Jul 25, 2022
On paper, Varun and Nidhi’s finances in Delhi looked fine. Varun earns ₹41 lakh a year and Nidhi ₹35 lakh; their son is 14. They had a net worth of ₹2.21 crore, a ₹60,000 monthly SIP and a ₹2.2 crore property bought with a ₹1.65 crore loan.
Underneath, money was leaking in 5 places, and the biggest risk was about to arrive: rising EMIs were pushing the family towards pausing the SIP for 2 years.
This case is 1 of 4 in 1 Finance’s 2026 research report on the value of personalised financial advice. Names and some details have been changed.
The 5 leaks
| Leak | What it was costing | The fix |
|---|---|---|
| 4 LIC endowment policies | Returns under 5% | Surrendered; money moved to equity, after term cover was in place |
| An overdraft | 12% interest | Paid off |
| A ₹10 lakh FD | 4.5% after tax | Moved to a more tax-efficient option |
| ₹6.5 lakh set aside for EMIs | 4.5% after tax, against a home loan costing 8.5% | Used to prepay the loan, saving about ₹26,000 a year |
| Varun’s trading | About ₹1 lakh a year, counting losses, costs and what the money could have earned elsewhere | Replaced with a systematic plan |
None of these leaks was dramatic on its own. Together, they tied up money in products earning less than the family’s own borrowing cost, at a time when cash flow was getting tight.
The leak hidden inside the policies
The 4 LIC policies had a bigger problem than low returns. Between them, they gave the family just ₹16 lakh of life cover. That is less than a year of household income, for a family with a teenage son and a ₹1.65 crore home loan.
A ₹1 crore term plan replaced them for a fraction of the premium. This is the order that matters: new term cover first, surrender second. Surrendering a policy before replacement cover is active leaves a family uninsured, and surrender values in the early years of an endowment policy can be well below premiums paid, so the decision has to be worked out policy by policy.
Why the SIP was the biggest risk
A 2-year pause sounds harmless. It isn’t, because the contributions skipped are the ones with the longest time left to compound.
| SIP pause, illustrated | Amount |
|---|---|
| Monthly SIP | ₹60,000 |
| Contributions skipped over 2 years | ₹14.4 lakh |
| Value of those contributions by 2039, at 12% a year | About ₹56 lakh |
The report puts it simply: a 2-year pause would have left a gap that 13 years of compounding could never make up. The SIP survived on the cash freed by fixing the other leaks: no overdraft interest, a smaller loan, and premiums cut from endowment policies to a term plan.
The hardest conversation
The report singles out the trading as the hardest part. Varun believed it gave him an edge. Rather than argue the point, the advisor kept showing him his own numbers, with costs and opportunity cost included, until the habit gave way to a systematic plan.
What it was worth
The report values the advice at 236 basis points of net worth a year before fees, against a fee of 14 basis points. Net value is 222 basis points, about ₹4.9 lakh a year, or 17 times the fee.
| Dimension | Value (bps) | Value (₹ a year) | What it covered |
|---|---|---|---|
| Course correction | 65 | ₹1.4 lakh | Policies surrendered and reinvested; overdraft closed; the FD moved; loan prepaid from the EMI deposit |
| Goal planning | 41 | ₹0.9 lakh | ₹1 crore of term cover; the son’s education funded in Nidhi’s name; a buffer for the SIP; a hold-or-sell plan for the property; retirement mapped to 2039 |
| Behavioural coaching | 100 | ₹2.2 lakh | Keeping the SIP alive when a 2-year pause loomed; ending the trading |
| Continuous monitoring | 30 | ₹0.7 lakh | Tax harvesting, rebalancing, property tracking, EMI monitoring and prepayment timing |
Check your own household for the same 5 leaks
- Traditional policies: What is the actual return on each endowment or money-back policy, and how much life cover do they give in total?
- Revolving debt: Are you paying overdraft, credit card or personal loan interest while holding low-yield deposits?
- Idle deposits: What does each FD earn after tax, and is there a better use for it?
- Money parked against a loan: If a deposit earns less after tax than your loan costs, prepaying may be the better return.
- Trading: Have you ever added up your trading result after brokerage, taxes, losses and the return the money could have earned elsewhere?
And before pausing a SIP, look for leaks to plug first. The cash to keep it running is often already in the household.
Source: 1 Finance, What personalised financial advice is actually worth, 2026 research report. Names and some details have been changed. The SIP illustration is our calculation at the report’s assumed 12% long-term equity return, compounded monthly over 2 years and annually for 11 years after. Figures are estimates and do not predict future returns.
