Business Standard Case Stuies

8/19/2019 Business Standard Case Stuies

1/52

CASE STUDY Business Standard analysesone family’s finances andsuggests a way forward

>FAMILY PROFILE

THE GEORGEsMathew(29), Father (63), Mother (60)

RESIDEIN

Dahisar, nearMumbaiNET ANNUAL INCOME

~7.80 lakhRATING

4/10

Mathew is a software engineer with a leading company in

Mumbai. Originally from Kerala, he has been working inMumbai for three years. His parents live in their spacious housein Thiruvananthapuram and are not really dependent onMathew for monthly expenses. Mathew’s father worked in theGulf for three decades and has saved enough for his retirement.Still, Mathew sends a small amount to his parents every month.He intends to move and settle in Bengaluru in a couple of yearsfrom now. His immediate goal is marriage in the next one year.Then, he wants to buy a house in Bengaluru and also start hisretirement planning simultaneously.

>GOALS

>FINDINGS

Asset

s ~

Savings account 45,000

Fixed deposits (FDs) 3,50,000EPF 2,80,000Equity funds 3,00,000Tot

al 9,75,000Net w

or

th 9,75,000

>RECOMMENDATIONS

EMERGENCYFUND:Apart from maintaining the present savings

account, he needs to maintain ~1 lakh of FD separately forcontingency

LIFE INSURANCE:Mathew needs an additional insurance cover of ~50 lakh, at present. A suitable term plan for 30 years will cost~10,000 per annum

HEALTH INSURANCE:He should take an individual health cover of

~3 lakh sum assured, for which the premium will be around~8,000. Since his parents are also healthy, he should increasetheir existing cover to ~5 lakh. This will cost him an additionalpremium of ~16,000

ACCIDENT INSURANCE:A personal accident policy of ~25 lakh, with~7.5 lakh as TTD benefit, is recommended for Mathew. Theannual premium for this should be ~4,000 per annum

Current annualretirement expenses:

~3 lakh

Future annualexpenses:

~24.40 lakh

Corpusrequired:

~4.93 crore

RETIREMENT PLANNING(2045; Inflation: 7%; Life expectancy: 85 years)

Basic expenses (~) Permonth (~) Annual (~)

Household 20,000 2,40,000House rent 10,000 1,20,000

Dependantparents 5,000 60,000

Insurance premium 5,333 64,000

Total 40,333 4,84,000

Monthly income:~65,000 Net monthly surplus:~24,667

EMERGENCYFUND: Adequate amounts maintained in savingsaccount and fixed deposits for any contingency

LIFE INSURANCE: Mathew is covered for ~5 lakh through acombination of endowment and Ulip (Unit-linked insuranceplan) plans. He is underinsuredHEALTH INSURANCE: Employer provided health cover of~2 lakh. His parents have their own mediclaim cover of~3 lakh each

INVESTMENTS: Though most investments are in debt, Mathewhas started investing in equity mutual funds over the past two

years. The present allocation is good, considering his goalsLIABILITIES: No liabilities at present

>PLANNING FOR GOALS

MARRIAGE IN THE NEXT 1 YEAR (2015)Mathew can use~2.5 lakh from his FD and his father has decided to contribute~2 lakh from his side for the wedding. For the balance amount,he needs to do a recurring deposit (RD) of ~ 17,000 a month

Rate of return on RD: 7.5% posttax

BUYING A FLAT IN BENGALURU (2018) Mathew will only beable to start saving for this goal after his marriage, as most of his surplus will go towards his marriage. Even if he invests thesurplus of ~24,000 a month in short-term debt funds from2015 onwards till 2018, he will be able to accumulate only

around ~10 lakh. His equity funds will have to be moved tobalanced, and debt funds gradually, which will fetch ~4 lakh.That leaves a big gap of ~46 lakh, for which the equatedmonthly instalment (EMI) will be ~49,500, which at this pointlooks difficult. Mathew should revisit this goal after hismarriage, so that a clear understanding can be derived afterconsidering his spouse’s income, too

Rate ofreturn: 10% in mutual funds portfolio for 4-year term,

8% in short-term debtfunds

RETIREMENT PLANNING (2045)Mathew should have an EPFcorpus of ~2 crore at retirement, considering a modest five percent annual increase in his basic salary. That leaves a huge gapof ~2.93 crore. To cover this, he needs to invest ~5,000 a month

in diversified equity funds. This looks achievable at this juncture

Rate ofreturn assumed: 8% in EPF, 14% in equityfunds

MARRIAGE IN THE NEXT 1 YEAR(2015) (Inflation 10%)

Current value:

~6 lakhFuture value:

~6.60 lakh

BUYING A FLAT IN BENGALURU(2018) (Inflation 10%)

Current value:


~62 lakh


2/52


>FAMILY PROFILE

THE NAIRsRajeev (42), Sejal (40), Priyal (9)

RESIDEIN

ThaneNET ANNUAL INCOME

~37.20 lakhRATING

8/10

Rajeev works at a senior level with a corporate law firm, whilehis wife is a software engineer. They have created good realestate assets in the past 10 years. The couple has not faced anyserious financial crisis so far, as they both come from financiallysound families. The sudden death of one of Rajeev’s colleagueshas set him thinking of evaluating their financial situation. Thecouple wants to ensure their loans are paid off in five years andto focus on their daughter’s education. They also intend tocreate a good corpus for her marriage and their own retirement

>GOALS

>FINDINGS

Asset

s ~ Liabilities ~

Savings account 2,45,000 Home loan 1 45,00,000Fixed deposits (FDs) 6,00,000 Home loan 2 40,00,000EPF 18,00,000Equity funds 5,43,000Self-occupied property 2,24,00,000Rented out property-1 90,00,000

Rented out property-2 48,00,000Tot

al 3,93,88,000 85,00,000Net wor

th 3,08,88,000

>RECOMMENDATIONS

EMERGENCYFUND:Savings account balance and FDs can take careof four months of expenses. This should be maintained

LIFE INSURANCE:Rajeev needs an additional insurance cover of ~1 crore, which should cost ~20,000 for a term insurance for20 years. Sejal is adequately covered

HEALTH INSURANCE:They should take a top-up policy of ~15 lakh,

with a ~5-lakh deductible. This will cost them ~6,000 yearly ACCIDENT INSURANCE:A personal accident policy of ~1.5 crore,with ~15 lakh as TTD benefit, is recommended for Rajeev and~50 lakh, with ~15 lakh TTD benefit, for Sejal. The premium forthis should be ~24,000 per annum


~ 9.74 lakh


~32.92 lakh

Corpusrequired:

~6.65 crore

RETIREMENT PLANNING(2032; Inflation: 7%; Life expectancy: 85 years)


Household 80,000 9,60,000

Daughter’s education 10,000 1,20,000

Home loan -1 70,800 8,49,600

Home loan -2 43,600 5,23,200

Insurance premium 21,000 2,52,000

Total 2,25,400 27,04,800

Monthlyincome:~3,10,000 Net monthly surplus:~84,600

EMERGENCYFUND:Adequate funds maintained in bothsavings account and FDs

LIFE INSURANCE:Rajeev is covered for ~1.30 crore through acombination of term and Ulip (unit-linked insurance plan)policies. He also enjoys a cover of ~2 crore from his company.Sejal is covered for ~1.05 crore through term and endowmentpolicies

HEALTH INSURANCE: Family floater mediclaim cover of ~5 lakhprovided by Rajeev and Sejal’s employers separately. Theyalso have separate individual health covers of ~5 lakh

INVESTMENTS: The couple have created good assets so far butthere is a very high concentration of real estate in theirportfolio. The couple should focus on increasing their

proportion towards financial assetsLIABILITIES:Currently, paying a total equated monthlyinstalment (EMI) of ~1,14,400 towards two home loans.Total loan dues are ~85 lakh

>PLANNING FOR GOALSPAYING OFFBOTH HOME LOANS (2019)There is a good surplus(~84,000 per month) and the couple can raise their respectiveEMI’s to ~96,000 and ~85,000. This will help them clear thehome loans by 2019. The rent on the second property, expectedfrom 2015 onwards, will also increase the surplus

Intereston home loan: 10.25%

DAUGHTER’S EDUCATION (2022 TO 2026) The couple shouldstart invest ~53,000 a month in large-cap and balanced MFs.After increasing their EMIs, they might not be able to invest theabove amount. They can start with ~20,000 a month now andincrease the investment gradually

Rate ofreturn: 12% in mutual funds portfolioDAUGHTER’S MARRIAGE (2029)Need to save ~21,000 a monthin multi-cap funds. Currently, this is not possible due toallocation of surplus for other goals. Once the additional rentstarts next year, that amount can be invested for this goal

Rate ofreturn assumed: 12% on mutual funds portfolio

RETIREMENT PLANNING (2028):Rajeev and Sejal should havean EPF corpus of ~2.15 crore at retirement, considering amodest five per cent annual increase in their basic salary. Of thethreeproperties theycancontinueholdingtwo onefor

PAYING OFFBOTH HOME LOANS(2019) (Home loan interest 10.25%)

Present dues:

~85,00,000

DAUGHTER’S EDUCATION(2022 TO 2026) (Inflation 9%)Current value:


~1.40 crore

DAUGHTER’S MARRIAGE(2029) (Inflation 10%)Current value:


~1.04 crore


3/52

CASE STUDY Business Standard analyses

one family’s finances andsuggests a way forward

>STATUS & GOALS

THE SINGHsManju (38), Neelam (11)

RESIDEIN

Navi MumbaiNET ANNUAL INCOME

~10.20 lakhRATING

5/10

Manju Singh is a financially independent woman, who

recently got divorced from her husband. She stays in herself -owned house with an 11-year daughter. Manju hasdecided not to take any alimony benefits from her husbandand intends to fund her daughter’s educational andmarriage expenses on her own. Her marriage was a non-starter from its early years and her smartest move was to buy

the home in her own name. Even her investments are in herown name, with her daughter as nominee. She also intendsto start investing for her retirement, for which she is seekingexpert advice.

>GOALS

>FINDINGS

>RECOMMENDATIONS

EMERGENCYFUND:The existing savings balance and FDs can bemaintained.LIFE INSURANCE:Manju needs an additional insurance cover of ~75 lakh. A suitable term plan for 15 years is suggested, whichwill cost ~15,000 per annum.

HEALTH INSURANCE:Manju should maintain the existing coverand buy a top-up health insurance of ~10 lakh, with ~3 lakh

deductible. The premium for this will be ~4,000.ACCIDENT INSURANCE:A personal accident policy of ~25 lakh, with~5 lakh as TTD benefit, is recommended for Manju. Thepremium for this should be ~ 3,500 per annum.

Assets ~ Liabilities ~Savings account 85,000 Home loan 6,00,000Fixed deposits (FDs) 2,50,000 Personal loan 2,75,000EPF 2,34,000Equity mutual funds 2,57,000Self-occupied property 58,50,000Total 66,76,000 6,00,000Net worth 60,76,000

Current annual retirementexpenses (consideringhousehold expenses andinsurance premiums):

~3.70 lakh


~16.40 lakh

Corpusrequired:

~3.31 crore

RETIREMENT PLANNING(2036) (inflation 7%) (Life expectancy - 85 years)


Household 30,000 3,60,000Daughter’s education 5,000 60,000

Home loan 13,080 1,56,960


Total 50,163 6,01,960

Monthlyincome:~85,000 Net monthly surplus:~34,837

EMERGENCYFUND:Good amount of funds maintained in liquidform, mainly in savings account and FDs, which can take care

of about six months of expenses.LIFE INSURANCE:Manju is covered for ~ 4 lakh, throughtraditional insurance policies. She is highly underinsured.

HEALTH INSURANCE:Family floater health insurance of ~5 lakh.

INVESTMENTS: Investments are well diversified in both debt andequity but lack a continuous investment of surpluses.

LIABILITIES:Servicing a home loan taken in 2008, with balancedues of ~6 lakh.

>PLANNING FOR GOALS

DAUGHTER’S EDUCATION (2021 TO 2025): Need to save around~12,000 per month in balanced mutual funds for this goal

Rate ofreturn assumed 11% in balanced mutual funds

DAUGHTER’S MARRIAGE (2028):Need to save ~9,000 a monthin the ratio of 70 per cent equity and 30 per cent gold in

mutual fundsRate ofreturn assumed 12% in equityand 9% in gold

CLEARING HOME LOAN (2016):Manju should increase herhome loan equated monthly instalment (EMI) to ~22,700,which will ensure her loan gets over in 27 months.

Home loan interestrate: 10.25%RETIREMENT PLANNING (2036):Manju’s Employees' ProvidentFund (EPF) will fetch ~87 lakh at retirement, while her mutualfunds will be worth ~26 lakh. To bridge the shortfall, she willneed to invest ~20,000 per month in a 60:40 ratio in equityand debt mutual funds. Once the home loan is over in 2017,she will be able to invest the entire EMI saving for herretirement goal, which should be comfortably achievableRate ofreturn assumed: 8% in EPFand 10% in mutual funds portfolio

Steven Fernandes, Certified Financial Planner

Chief Planner, Proficient Financial Planners.

DAUGHTER’S MARRIAGE (2028)(Present floating rate interest 10%)

Current value:

~10 lakh

Future value:

~38 lakh

Current dues loan:~6 lakh

DAUGHTER'S EDUCATION(2021 to 2025) (Inflation 10%)

CLEARING HOME LOAN (2016)(Present interest rate is 10.25%)

Current value:

~15 lakh

Future value:

~33.60 lakh


4/52



>STATUS & GOALS

THE GUPTAsNitin (46), Kavita (40), Somesh (8)

RESIDEIN

Mira Road, nearMumbaiNET ANNUAL INCOME

~13.20 lakhRATING

4/10

Nitin Gupta is a store manager with a retail firm and his wife

works in the logistics department of a shipping firm. Thecouple’s high spending habits have ensured huge credit cardbills to pay every month. In most cases, they end up payinginterest payments. They have taken a personal loan to cleartheir credit card dues. With meagre savings, Nitin wants to sethis financials right. Their primary goal is to clear all their loans

so that they can focus on their son’s education and their ownretirement. They also want to buy a 2-BHK flat in five years, if financials permit.

>GOALS

>FINDINGS

>RECOMMENDATIONSEMERGENCYFUND:Apart from maintaining the present savingsaccount balance and FDs, they should switch ~1 lakh fromtheir equity MFs to a liquid fund for contingency purposes.

LIFE INSURANCE:Nitin needs an additional insurance cover of~1 crore, while Kavita should take a ~40-lakh cover. A suitable

term plan for 20 years, for both, will cost ~ 32,000 per annum.HEALTH INSURANCE:They should take a family floater health policyof ~5 lakh sum assured, with a premium of about ~15,000

ACCIDENT INSUR

ANCE:A personal accident policy of ~50 lakh, with~10 lakh as TTD benefit, is recommended for Nitin and ~25lakh, with ~5 lakh TTD benefit, for Kavita. The annual

premium for this should be ~10,000 per annum.

A

sset

s ~ Liabilities ~

Savings account 49,000 Home loan 9,80,000Fixed deposits (FDs) 75,000 Personal loan 2,75,000EPF 4,89,000Equity mutual funds 3,16,000Self-occupied property 42,00,000

Tot

al 51,29,000 12,55,000Net wor

th 38,74,000

Current annual retirementexpenses:

~5.64 lakh


~14.54 lakh

Corpusrequired:

~2.93 crore



Household 47,000 5,64,000

Son's education 5,000 60,000Home loan 16,581 1,98,972

Personal Loan 10,108 1,21,296


Total 80,356 9,64,268

Monthly income:~1,10,000 Net monthly surplus:~29,644

EMERGENCYFUND:Present savings account and FDs can meetonly 1.5 months of expenses in emergency. This is very low.

LIFE INSURANCE:Most of the policies of Nitin and Kavita havelapsed. At present, Nitin has a ~4-lakh insurance cover, whilehis wife doesn’t have any life cover, which is dangerous.

HEALTH INSURANCE:Family floater mediclaim cover of ~3 lakhprovided by Nitin and Kavita’s employers separately. Theydon’t have separate individual health covers.

INVESTMENTS:The investments are much less, considering theirage and income. The high equity investment in their portfoliois due to forced saving in ELSS schemes for saving tax.

LIABILITIES:Paying a total EMI of ~26,689 towards home andpersonal loans. Total loan dues are ~12.55 lakh.

>PLANNING FOR GOALS

PAYING OFFHOME LOAN (2018): Since personal loan is beingserviced at 13 per cent interest, it makes sense to pay off thisloan first. Nitin should pre-pay ~1 lakh (from MFs) so that the

loan gets over in 18 months. He should simultaneouslyincrease his home loan EMI to ~25,000. This will reduce histenure to four years and the couple can be free of debt by 2018

Intereston home loan: 10.5% and on personal loan: 13%

SON'S EDUCATION (2023-27):The couple should start investing~13,000 per month in large-cap and balanced MFs

Rate ofreturn: 12% in MFs portfolio

SON'S MARRIAGE (2033):Need to save ~3,000 a month in amulti-cap fund

Rate ofreturn assumed: 12% on MFs portfolio

BUYING A 2 BHKFLAT (2019):The existing flat, which will be

debt-free by 2018, will fetch ~68 lakh in 2019. Personal loanEMI, which will get over in 18 months, can be invested inshort-term income funds for 42 months to fetch ~5 lakh.Similarly, home loan EMI saving from 2018 can be invested inan RD for one year to fetch ~3 lakh in 2019. There will still be ashortfall of ~25 lakh, for which loan EMI will be ~35,000 permonth for 10 years. If lifestyle expenses are reduced and

consciously cashflow is managed month-on-month, it ispossible to save more and reduce the loan component.

RETIREMENT PLANNING (2028): The couple should have an EPFcorpusof~40lakhatretirement consideringamodest five

SON’S MARRIAGE(2033) (inflation 10%)Current value:


~25.70 lakh

Current value:


~101 lakh

SON'S EDUCATION(2023 to2027) (inflation 9%)

BUYING A 2-BHKFLAT(2019) (inflation 10%)

Current value:


~38 lakh

PAYING OFFHOME LOAN(2018) (home loan interest 10.50%)

Present outstanding loan:

~9,80,000


5/52


>STATUS & GOALS

THE PAGAREs Yogesh (39), Sharda (38), Smriti (8)

RESIDE IN

PuneNET ANNUAL INCOME

~12 lakhRATING

6/10

Yogesh works as a manager with an information technology

company in Pune and his wife, Sharda, is a homemaker.The couple stay in their own 2BHK flat, which they hadpurchased six years ago with the help of a home loan. Thecouple lead a very simple lifestyle but have big plans fortheir daughter’s education. Considering the spirallinginflation and job insecurity, Yogesh wants to assess his

present financial situation and would like guidance on howto achieve his goals of daughter’s education, marriage andhis own retirement

>GOALS

>FINDINGS

>RECOMMENDATIONSEMERGENCYFUND:The present savings account balance can bemaintained and additionally ~1 lakh from the existing FDsshould be placed in a flexi FD account

LIFE INSURANCE:Yogesh needs an additional insurance cover of

~65 lakh. A suitable term plan for 20 years will cost ~13,000 perannum. Insurance cover not suggested for Sharda

HEALTH INSURANCE:Currently, the health insurance cover isadequate

ACCIDENT INSURANCE:A personal accident policy of ~50 lakh, with~10 lakh as TTD benefit , is recommended for Yogesh. The

annual premium for this should be ~6,700 per annum

A

sset

s ~ Liabilities ~Savings account 84,000 Home loan 800,000Fixed deposits 290,000 Car loan 275,000EPF 612,000PPF 164,000Equity mutual funds 536,000Self-occupied property 7,360,000Total 9,046,000 1,075,000Net wor

th 7,97

1,000

Current annual retirementexpenses:

~3.84 lakh


~17 lakh

Corpusrequired:

~3.5 crore



Household 31,000 3,72,000

Home loan 17,137 2,05,644

Car loan 8,500 1,02,000

Daughter’s education 5,000 60,000


Total 67,387 8,08,644


EMERGENCYFUND:Sufficient money maintained for emergencyneeds in savings account and fixed deposits (FDs)LIFE INSURANCE:Yogesh has two insurance policies, acombination of term and traditional policies, giving him acover of ~1.05 crore. Sharda has a small cover of ~2 lakh

HEALTH INSURANCE:Family floater mediclaim cover of ~3 lakh,provided by Yogesh’s employer, and a separate floater policy

for family of ~5 lakh, which is adequateINVESTMENTS:The couple have saved well in the past few yearsand equity allocation is good, considering the overall portfolio

LIABILITIES:Currently, paying a total equated monthlyinstalment (EMI) of ~25,637 towards home and car loan. Totalloan dues are ~10.75 lakh

>PLANNING FOR GOALSDAUGHTER’S EDUCATION (2024 TO 2028) Allocate ~2 lakh fromthe existing equity funds for this goal and start SIPs of ~24,000in a mix of diversified equity and balanced funds for this goal

Rate ofreturn assumed 12% on this portfolio

PAYING OFFHOME LOAN (2018)Yogesh should increase his EMI to ~20,500, which will ensurehis loan dues get over in the next four years. Any bonuspayments received should be used to pre-pay a part of theloan

DAUGHTER’S MARRIAGE (2032)Need to save ~5,000 per month in large-cap diversifiedequity mutual funds and ~25,00 per month in goldexchange-traded fund

Rate ofreturn assumed on equityMF-12% and gold- 9%

RETIREMENT PLANNING (2035):Yogesh should have an EPF

corpus of ~93 lakh at the time of retirement, considering amodest five per cent increase in his basic salary. His PPF andequity mutual funds should give him ~11 lakh and ~40 lakh,respectively, at the time of retirement, assuming a nominalinvestment of ~50,000 per annum in PPF. To make up for theshortfall, SIPs of ~ 15,500 per month are required to beinvested in a ratio of 70 per cent in equity mutual funds and30 per cent in debt fundsRate ofreturn assumed: 8% in EPFand PPF, 12% in equityfunds, 8% indebtfunds

DAUGHTER’S MARRIAGE(2032) (inflation 10%)

Current value:


~56 lakh

DAUGHTER’S EDUCATION(2024 to2028) (inflation 9%)

Current value:


~95 lakh

PAYING OFFHOME LOAN(2018) (home loan interest 10.25%)

Present outstanding loan:

~8,00,000


6/52

CASE STUDY Business Standard analysesone family’s finances andsuggests a suitable way forward

>FAMILY PROFILE

>PLANNING

THE DUTTsSarvesh (47), Kajal (38), Natasha (10), Vihan (6)

RESIDEIN

MumbaiNET ANNUAL INCOME

~11.52 lakhRATING5/10

BUYING A FLAT (2017):From the existing surplus, SIP of ~15,000should be allocated to short-term debt funds for 3 years. The

existing house should fetch ~84 lakh after 3 years. Frompresent FDs ~2 lakh can also be used. The balance shortfall of ~22 lakh can be in the form of a home loan for a period of 10years which will result in an EMI outgo of ~29,685

Rate ofreturn assumed:8% on debt funds, 10.5% on home loan.

EDUCATIONALFUNDING OFDAUGHTER (2023 - 2027):For this

goal, SIPs of ~15,000 needs to be invested in balanced fundsRate of return assumed: 11% in balanced funds

EDUCATIONALFUNDING OFSON: SIPs of ~12,000 are suggestedin a 80% equity and 20% debt MFs portfolio for this goal

Rate of return assumed: 12% on this portfolio

RETIREMENT PLANNING (2039):As the entire surplus will get

allocated for property and children's goals, Sarvesh will be able toallocate surpluses towards retirement only from 2018 onwards.Gradually, PPF investments should also be increased along withrise in income. Expecting an allocation of ~50,000 a year in PPF (from 2017 onwards) and continuity of job till retirement, their PPFand EPF should fetch a corpus of ~17.6 lakh and ~36.4 lakh,respectively. For the balance corpus ~32,000 needs to be invested

per month in a 70% equity and 30% debt portfolio which iscurrently not possible. Home loan if not prepaid beforeretirement can force the couple to go for a reverse mortgageoption. If the income does not rise at the rate of 10% (as expectedby the couple), hard decisions will have to be taken later onwhether children's post-graduation funds should be used forretirement and take educational loan instead.

Sarvesh works with an IT firm, while his wife works for adomestic aviation company. Their late marriage has put them

in a dilemma, as their childrens’ education will extend beyondtheir employer-stipulated retirement age especially forSarvesh. Most of the family's savings were utilised for Sarvesh'sfather's medical treatment till he died last year. The couple'sexpenses are also on the higher side as they do not follow anybudgeting discipline. Even though the cashflow indicates a

surplus on paper, the actual expenses are higher due to whichthe desired surplus is not there. As their kids are growing up,they are contemplating buying a 2BHK house. Their priority ischildrens’ education and own retirement

>GOALS

Current annualretirement expenses

~3.32 lakh


~9 lakh

Corpusrequired:

~1.82 crore

RETIREMENT PLANNING(2041, inflation 7%, Life expectancy - 85 years)

DAUGHTER’S EDUCATION(2023 - 2027, Inflation - 9%)Current value:~16 lakhFuture value:~44 lakh

BUYING A FLAT (2017, Inflation 9%)Current value:~90 lakh Future value:~1.16 lakh

SON’S EDUCATION(2026 - 2030, Inflation - 9%)Current value:~16 lakhFuture value:~56.5 lakh

>PRESENT STATUSEMERGENCYFUND:Sufficient money maintained in savings

account and fixed deposits for emergency purposeLIFE INSURANCE:Sarvesh has a total insurance cover of ~14 lakh,while Kajal has a cover of ~6 lakh through traditional and Ulipinsurance plans. Both are highly underinsured

HEALTH INSURANCE:Family is covered by employer-providedgroup health cover of ~3 lakh, along with a separate familyfloater of ~5 lakh

INVESTMENTS:Most are forced investments such as PF and PPF.No equity exposure

LIABILITIES: No liabilities, which is a positive

A

sset

s ~ Liabilit

ies ~

Self-occupied property 65,00,000Fixed deposits 3,75,000EPF 6,40,000PPF 2,54,000

Savings account 85,00078,54,000 0

Net worth 78,54,000

Basic expenses (~) Permonth Annual

Household 36,000 4,32,000

Childrens education 10,000 1,20,000Insurance premium 9,833 1,18,000Total 55,833 6,70,000Monthlyincome:~96,000Net monthly surplus:~40,167

>RECOMMENDATIONSEMERGENCYFUND:

Sarvesh should allocate 3 months of expenses, around ~1.7 lakh, for contingency purpose.Considering the present savings account balance of ~85,000,a separate FD of ~90,000 needs to be maintained

LIFE INSURANCE:Sarvesh needs an insurance cover of ~80 lakh,while Kajal needs to take a cover of ~25 lakh. Both need to buy aterm insurance plan for a period of 15 years which will cost ~25,000

p.a. Stop traditional plans which have more than 10 years tomaturity and use the premium saving to buy term insurance

HEALTH INSURANCE: They should buy a top-up health cover of ~10 lakh with a deductible of ~3 lakh. It will cost approximately~7,000 p.a

ACCIDENT INSURANCE:A personal accident policy of ~50 lakh

with ~10 lakh as TTD benefit is recommended for Sarvesh.Kajal should purchase a cover of ~25 lakh with ~5 lakh as TTDbenefit. The total premium for this should be ~10,000 p.a

Plan by Steven Fernandes, certified financial planner, chief planner, Proficient Financial Planners


7/52

CASE STUDY Business Standard

analysesone family’s finances andsuggests a way forward

>FAMILY PROFILE

THE BHAGATsSwaroop (42), Varsha (40), Nidhi (13), Varun (9)

RESIDEIN


~22.44 lakhRATING

5/10

Swaroop is a production manager of a mid-sized breweries firm,with its corporate office in Mumbai. Varsha is a homemaker. Inspite of good income, the couple lacks financial discipline. Themonthly expenses are on the higher side and they are servicing ahuge home loan, taken three years ago for their self-occupiedproperty. The couple wants to close their home loan soon andfocus on their children’s education. Retirement is their last priority

>RECOMMENDATIONSEMERGENCYFUND:Current savings account balance and FDs cantake care of six months of expenses. Swaroop can maintain~2 lakh in savings account and move the rest to FD. He canmaintain ~3 lakh overall in FDs for contingency purpose

LIFE INSURANCE:Swaroop needs an additional cover of ~1.5 crore,which should cost ~30,000 for a term insurance for 20 years.Varsha doesn’t require further cover at this point

HEALTH INSURANCE:The present cover is adequate

ACCIDENT INSURANCE:A personal accident policy of ~1.5 crore,with ~15 lakh as TTD benefit, is recommended for Swaroop. Thepremium for this should be ~18,000 per annum

Basic expenses (~) Permonth (~) Annual (~)Household 47,000 5,64,000

Home loan 70,847 8,50,164

Car loan 10,871 1,30,452

Children’s education 8,000 96,000


Total 1,46,635 17,59,616


>PLANNING FOR GOALS

PAYING OFFHOME LOAN (2021)Use ~3 lakh from FD and ~2 lakhfrom equity funds to pre-pay the car loan. This will enable amonthly surplus of ~51,000. Stop a few small traditional andulip policies and use the surrender value of ~6.5 lakh for initialpre-payment of home loan. Increase the EMI to ~92,000, whichwill reduce the loan tenure to seven years. Also, utilise allbonuses and incentives and it will enable loan closure by 2020

Intereston home loan: 10.25%

SON’S EDUCATION (2019 TO 2023) The existing MFs should beutilised. Further, the couple needs to invest ~47,000 a month

in balanced MFs. Currently, they can only allocate ~28,000 permonth for this goal

Rate ofreturn: 12% in mutual funds portfolio

DAUGHTER’S EDUCATION (2024 TO 2028) They need to invest~39,000 a month in diversified equity MFs, not possible due toallocation of surpluses for other goals. Annual increments

should be allocated for this. After the home loan gets over in2020, a major part of the EMI saved should be invested for this


DAUGHTER’S MARRIAGE (2031)Need to save ~8,000 a month inmulti-cap funds for this goal. Here, too, the investments can bedone post-2020, after the home loan gets over

Rate ofreturn assumed: 12% on mutual funds portfolioRETIREMENT PLANNING (2037)Swaroop should have an EPFcorpus of ~1.17 crore at retirement, considering a modest five percentannualincreaseinbasicsalary Fortheshortfall heneeds

>GOALS

Assets ~

Savings account 3,49,000 Home loan 60,00,000Fixed deposits (FDs) 6,00,000 Car loan 5,00,000EPF 4,67,000Insurance cash value 6,54,000Equity funds 14,00,000Self-occupied property 2,14,00,000

Tot

al 2,48,70,000 65,00,000Net w

or

th 1,83,70,000


~5.64 lakh


~26.73 lakh

Corpusrequired:

~4.51 crore

RETIREMENT PLANNING(2037)(Inflation: 7%; Life expectancy: 85 years)

PAYING OFFHOME LOAN (2021)(Home loan interest: 10.25%)

Present loan dues

~60 lakh

SON’S EDUCATION(2019 to2023)(Inflation 9%)

Current value:


~80 lakh

DAUGHTER'S EDUCATION(2024 to2028) (Inflation 9%)

Current value:~44 lakh

Future value:~1.22 crore

DAUGHTER'S MARRIAGE(2031) (Inflation 10%)

Current value:


~46 lakh

>FINDINGSEMERGENCYFUND:Adequate funds maintained in savingsaccount and FDs to meet any contingency

LIFE INSURANCE: Swaroop is covered for ~1.12 crore through acombination of term and Ulip (unit-linked insurance plan)policies and also enjoys a cover of ~50 lakh from his company.Varsha is covered for ~3 lakh via endowment policies

HEALTH INSURANCE: Family floater mediclaim cover of ~5 lakhprovided by Swaroop’s employer. They also have a separate

family floater policy for a sum assured of ~10 lakhINVESTMENTS: The present portfolio is well-balanced, withequal weightage in debt and equity (primarily mutual funds)

LIABILITIES:Currently paying a total EMI of ~81,718 for bothhome and car loans. Total loan dues are ~65 lakh


8/52


>FAMILY PROFILE

THE KAPOORsRohit (47), Seema (45), Priyanka (17)

RESIDEIN

DelhiNET ANNUAL INCOME

~31.80 lakhRATING

6/10

Rohit is a professional business coach and trainer, while Seema

works in the accounts division of a public sector bank. Rohit hashis own office and staff. He has been in this business for thepast five years. Their daughter, Priyanka, is studying in the firstyear of college. The couple are staying in a house theypurchased two years ago, with a ~80-lakh loan. Their priority isto focus on Priyanka’s education, followed by prepayment of their

home loan. Rohit would like to work till he is fit and, hence, wantsto plan retirement at 65 years.

>RECOMMENDATIONSEMERGENCYFUND:The savings account balance can safely take

care of three months of emergency expenses. They should opena flexi FD account to get the benefit of better interest on thissavings account balance

LIFE INSURANCE:Rohit needs an additional insurance cover of~1.5 crore. A suitable term plan for 10 years will cost ~60,000 perannum. Additional insurance cover not suggested for Seema

HEALTH INSURANCE:They should take a top-up health cover of ~15 lakh, with ~3 lakh as deductible. The premium for this willbe around ~7,000

ACCIDENT INSURANCE:A personal accident policy of ~1 crore, with~15 lakh as TTD benefit, is recommended for Rohit. Seemashould take ~25 lakh of cover, with ~5 lakh as TTD. Thecombined annual premium for this should be ~16,000.


Home loan 87,196 10,46,352

Daughter’s education 15,000 1,80,000Insurance premium 34,500 4,14,000

Total 1,94,696 23,36,352


>PLANNING FOR GOALSDAUGHTER’S EDUCATION (2016 TO 2020) The first three years’requirements can be funded from the FD maturities. For thepost-graduation expenses, Rohit needs to allocate ~10 lakhfrom his equity funds and shares and invest ~50,000 a month

in mutual funds (MF), in a ratio of 50% equity and 50% debtRate of return assumed: 7% post-taxon FDs and 10.5% on themutual funds portfolio

PAYING OFFHOME LOAN (2020)Rohit should increase his EMI to~1,07,000, which will reduce his loan tenure to nine years. Yearlyincremental income should be used to do part-payments, else

the goal of paying off the loan by 2020 won’t be possibleRate ofreturn: 12% in mutual funds portfolio

DAUGHTER'S MARRIAGE (2024)Some of Rohit and Seema’sinsurance policies are maturing in 2022 and 2024, amounting to~ 15 lakh, which can be used. For the balance, ~16,000 needs tobe invested in balanced MFs, currently not possible. Once homeloan is paid in 2020-2021, the EMI savings can be invested

Rate ofreturn assumed on balance MF-12%

RETIREMENT PLANNING (2033) Seema’s EPF should be worth~57 5lakhatretirement Thiscanbeinvestedfurtherforseven

>GOALS

Asset

s ~ Liabilities ~

Savings account 6,49,000 Home loan 75,00,000Fixed deposits (FDs) 12,00,000EPF 8,15,000PPF 6,32,000Insurance cash value 27,00,000Equity funds 8,34,000Equity shares 13,75,000Self-occupied property 2,14,00,000

Commercial property 87,50,000To

t

al 3,83,55,000 75,00,000Net w

or

th 3,08,55,000


~7 lakh

Future annualvalue:

~25.52 lakh

Corpusrequired:

~4 crore

RETIREMENT PLANNING (2033)(Inflation: 7%; life expectancy: 85 years)

DAUGHTER’S EDUCATION(2016 to 2020) (Inflation 9%)

Current value:


~62 lakh

DAUGHTER’S MARRIAGE(2024) (Inflation 10%)

Current value:


~47 lakh

>FINDINGSEMERGENCYFUND: Sufficient money maintained in savingsaccount and FDsLIFE INSURANCE: Rohit has 18 insurance policies, mostlytraditional endowment and money-back policies, giving hima cover of ~1.3 crore. Seema is covered for ~21 lakh throughtraditional insurance policies. Their combined annualpremium is ~4.14 lakh

HEALTH INSURANCE: Rohit’s family is covered through Seema’semployer health insurance cover for ~3 lakh. They also have aseparate health insurance cover of ~5 lakh each

INVESTMENTS: The couple have created a good investmentportfolio, well balanced between equity and debt. They havepurchased insurance policies considering it to be investment,

where the yield is very lowLIABILITIES: Paying a total equated monthly instalment (EMI) of ~87,196 towards home loan. Present due amount is ~75 lakh.

PAYING OFFHOME LOAN (2020)(Home loan interest: 10.25%)

Present dues

~75 lakh


9/52


>FAMILY PROFILE

THE PRADHANsHarsh (29), Manjiri (27)

RESIDEIN


~10.68 lakhRATING

5/10

Harsh works in the underwriting department of a private

insurance company, while his wife, Manjiri, is a secretary to themanaging director of an automobile ancillary company. Thecouple recently got married and moved into a new house, whichHarsh had purchased during the under-construction stage threeyears ago. The couple wants to plan for their coming child’seducation and a bigger house, followed by retirement.

>RECOMMENDATIONS

EMERGENCYFUND:Apart from maintaining the present savingsaccount, the couple needs to maintain ~50,000 in fixeddeposit (FD) and ~1 lakh in a liquid fund

LIFE INSURANCE:Harsh needs an additional insurance cover of

~30 lakh and Manjiri should take a cover of ~25 lakh. A suitableterm plan for 30 years will cost ~9,000 per annum

HEALTH INSURANCE:The couple should take a separate familyfloater cover of ~3 lakh. Premium for this should be ~7,000

ACCIDENT INSURANCE:A personal accident policy of ~25 lakh, with~5 lakh as TTD benefit, is recommended for both. The annual

premium for this should be ~8,000


Home loan 23,213 2,78,561

Personal loan 6,825 81,900


Total 67,038 8,04,461

Monthlyincome:~89,000 Net monthly surplus:~21,962

>PLANNING FOR GOALSCHILD’S EDUCATIONALFUNDING (2032)The couple needs toinvest ~11,000 per month in diversified equity large and multi-cap funds

Rate of return on this portfolio: 15% posttax

FOREIGN VACATION (2017) From the existing FDs, ~2.60 lakhcan be invested in short-term debt funds

Rate of return on this portfolio: 8% post tax

BUYING A 2-BHKFLAT (2020)The couple's self-occupied

property will be worth ~64.42 lakh after five years. Home loandues will be ~16.40 lakh. Net receivables after sale will be ~48lakh. Present income surplus of ~10,000 can be invested inbalanced funds to fetch a corpus of ~8 lakh. They will have totake a home loan of ~45 lakh to cover the shortfall, for whichthe equated monthly instalment will be ~50,000 per month


CHILD’S MARRIAGE (2031)Need to save ~8,000 a month inmulti-cap funds. The investments can be done post-2020, afterthe home loan gets over

Rate ofreturn assumed: 12% in balanced mutual funds portfolio

RETIREMENT PLANNING (2045)Harsh should have an EPFcorpus of ~85.40 lakh at retirement, considering a modest

five per cent annual increase in his basic salary. Thatleaves a huge gap of ~4.16 crore. To cover this, he needs toinvest ~32,000 per month in a 70 per cent equity and30 per cent debt MFs portfolio. Currently, it’s not possible toinvest this amount on a monthly basis. As and whenincomes go up, the additional increments can be investedfor this goal

Rate ofreturn assumed: 8% in EPF, 13% in mutual funds portfolio

Plan by Steven Fernandes, certified financial planner, chief planner,

Proficient FinancialPlanners

>GOALS

Asset

s ~ Liabilities ~

Savings account 69,000 Home loan 20,00,000Fixed deposits 4,50,000 Personal loan 2,77,000EPF 1,63,000Equity mutual funds 1,15,000Self-occupied property 40,00,000Tot

al 47,97,000 22,77,000Net wor

th 25,20,000


~3.72 lakh


~21.60 lakh

Corpusrequired:

~5.01 crore

RETIREMENT PLANNING (2041)(Inflation: 7%) (Life expectancy: 85 years)

CHILD’S EDUCATIONALFUNDING (2032) (Inflation 10%)

FOREIGN VACATION (2017)(Inflation 10%)

Current value:

~2.50 lakhFuture value:

~3.05 lakh

Current value:


~1.01 crore

BUYING A 2-BHKFLAT

(2020) (Inflation 10%)

Current value:

~63 lakh

Future value:

~1.01 crore

>FINDINGSEMERGENCYFUND:Adequate amounts maintained in savingsaccount and fixed deposits for any short-term emergency

LIFE INSURANCE:Harsh is covered for ~50 lakh through a terminsurance, while his wife is covered for ~6 lakh through a unitlinked-insurance plan. Both are underinsured

HEALTH INSURANCE: Group health cover of ~3 lakh throughHarsh’s employer. They don’t have any other health coverINVESTMENTS:Small portfolio, considering they have just startedtheir married life

LIABILITIES:Servicing a home loan and a personal loan, withtotal dues of ~22.77 lakh


10/52


11/52



>FAMILY PROFILE

THE MISHRAs Vrajesh (59), Kusum (52)

RESIDEIN


~21.72 lakhRATING

8/10

Vrajesh works as a technical director with a chemicals

manufacturing firm in Mumbai, while his wife, Kusum,works as a senior accountant in a public sector bank. Theirtwo children are married and settled abroad. Due to histechnical expertise and years of experience, Vrajesh’semployer has requested him to continue till health permits.He would like to get retired in the next six years when his

wife, too, retires.

>RECOMMENDATIONS

EMERGENCYFUND:Vrajesh and his wife can continue to

maintain the present account balanceLIFE INSURANCE:Since the couple do not have any dependentsand as both are independent, no life insurance cover issuggested

HEALTH INSURANCE: The couple should take an individualhealth cover of ~5 lakh each. The premium for this should be

around ~18,000 ACCIDENT INSURANCE:A personal accident policy of ~50 lakh, with~15 lakh as temporary total disability (TTD) benefit, isrecommended for Vrajesh. For his wife, a cover of ~10 lakh,with ~5 lakh of TTD, is suggested. The annual premium for thisshould be ~10,000



Total 77,333 9,28,000

Monthly income:~1,81,000 Net monthly surplus:~1,03,667

>PLANNING FOR GOALS

HOUSE RENOVATION (2015)Vrajesh can utilise the requiredamount for this goal from his fixed deposits

Rate ofreturn on Fixed deposits: 6.5% posttax

RETIREMENT AT AGE 65 (2021)The Employees' Provident Fund

(EPF) corpus of the couple in 2021 will be around ~58.50 lakh,while the gratuity benefits will be around ~18 lakh. Shares andmutual funds will be around ~9 lakh and ~51 lakh,respectively, considering they will invest ~85,000 per monthin a mutual fund’s portfolio of 50 per cent debt and 50 per centequity. The fixed deposits balance after spending on houserenovation can be reinvested and it will fetch them around

~36.47 lakh. The Public Provident Fund will be worth ~37.25lakh, considering an annual investment of ~1.5 lakh.Therefore, the couple can easily create the desired corpus

Rate ofreturn assumed: 8% in EPF& PPF, 11% in mutual funds,

15% in shares, 6.5% in FD's


Proficient Financial Planners

>GOALS


~8.16 lakh


~12.24 lakh

Corpusrequired:

~2.06 crore

RETIREMENT AT THE AGE OF65 (2021)(Inflation: 7%) (Life expectancy: 85 years)

HOUSE RENOVATION (2015) Current value:~10 lakh

>FINDINGSEMERGENCYFUND:Adequate funds maintained in fixeddeposits (FDs) and savings account to take care of anycontingency

LIFE INSURANCE:Vrajesh is covered for ~12 lakh through

unit-linked insurance plans (Ulips) and endowmentplans, while his wife is covered for ~3 lakh throughendowment plans

HEALTH INSURANCE:Group health cover of ~5 lakhs throughVrajesh’s employer and ~3 lakh through wife’s public sectorbank. No other health policy

INVESTMENTS:Very good investment portfolio at this age. Welldiversified into equity and debtLIABILITIES:No Liabilities


12/52


>FAMILY PROFILE

DESAIs (48)Pritam (48), Rashmi (46), Priya (17)

RESIDES IN


~37.56 lakhRATING

7/10

Pritam is a soft skills trainer and his wife is a homemaker.Their only daughter, Priya, is studying in HSC. Pritam wouldlike to plan for his daughter’s post-graduation andmarriage. He also wants to work, as long as his healthpermits, at least till he turns 65 years old.

>GOALS

>FINDINGS

>SUGGESTIONS

EMERGENCYFUND:Pritam needs to open a flexi FD facility in hisbank and maintain ~6.8 lakh

LIFE INSURANCE:Pritam needs to take an additional life cover

of ~1.5 crore, for which the premium will be approximately~60,000 for a term insurance policy. Wife doesn’t need anyadditional cover

HEALTH INSURANCE: The couple should take a super top-uphealth cover of ~15 lakh, with a ~5-lakh deductible. Thepremium for this should be around ~ 12,000

ACCIDENT INSURANCE:A personal accident policy of ~1 crore,with ~15 lakh as TTD benefit, is recommended for Pritam .Theannual premium for this should be ~ 12,000

Current dues:~63 lakh

HOME LOAN REPAYMENT (2020) (home loan interest 10.25%)

A

sset

s ~ Liabilities ~

Self-occupied house 2,15,00,000 Home loan 63,00,000Savings account 2,15,000PPF 13,26,000Fixed deposits 14,35,000Stocks/shares 7,54,000

Mutual funds 18,75,0002,7

1,05,000 63,00,000Net wor

th 2,08,05,000

Current annual retirementexpenses :

~10.41 lakh


~32.88 lakh

Corpusrequired:

~5.54 crore

RETIREMENT AT AGE 65(2032) (inflation 7%) (Life expectancy: 85 years)


Household 85,000 10,20,000Daugther’s college 15,000 1,80,000

Home loan EMI 1,01,201 12,14,415


Total 2,27,785 27,33,415


EMERGENCYFUND:Sufficient funds maintained in fixeddeposits (FDs) and savings account to take care of anycontingency

LIFE INSURANCE:Pritam is covered for ~1.5 crore throughvarious insurance plans, while his wife is covered for~10 lakh through unit-linked insurance plan (Ulips).Pritam is underinsured

HEALTH INSURANCE:Each member is covered for ~5 lakh throughindividual mediclaim cover. Health cover needs to be enhancedfor the couple

INVESTMENTS:A very well-diversified portfolio, comprising anequal weightage of debt and equity

LIABILITIES:Currently, servicing a home loan of ~75 lakh taken

three years earlier. Current dues are ~63 lakh

>PLANNING FOR GOALS

DAUGHTER’S POSTGRADUATION (2018-19):Pritam needs to

invest ~10.56 lakh from FDs into accrual debt fundsRate ofreturn on debt funds: 8% post tax

DAUGHTER’S MARRIAGE (2023): Need to invest ~28,000 permonth in balanced mutual funds

Rate ofreturn on balanced funds: 11%

HOME LOAN PREPAYMENT (2020) :Some insurance maturities,due in the next two-three years, can be used to reduce thehome loan dues. Any rise in income should be used to prepay

RETIREMENT AT AGE 65 (2032): The existing Public ProvidentFund will be worth ~1 crore at retirement, considering anannual investment of ~1.5 lakh. The shares will be worth

~50 lakh and mutual funds will be ~1.21 crore. To cover theshortfall, an additional investment of ~43,000 per monthneeds to be invested in a ratio of 60 per cent equity and 40per cent debt mutual funds portfolio

Rate of return assumed: 8% in PPF, 11% in mutual funds,15% in shares.


DAUGHTER’S POSTGRADUATION(2018 -2019) (inflation 10%)


Future value:~13.31 lakh

DAUGHTER’S MARRIAGE(2023) (inflation 10%)

Current value:

~20 lakh

Future value:

~42.87 lakh


13/52


>FAMILY PROFILE

RAOsShekhar (33), Madhura (31), Swara (5), Ashwin (1)

RESIDES IN

BengaluruNET ANNUAL INCOME

~11.76 lakhRATING

6/10

Shekhar works as a marketing manager for a real estatedeveloper in Bengaluru. His wife, Madhura, is a homemaker.Their first-born daughter is a special child and requirescontinuous attendance, due to which Madhura quit her job.Their second child is only a year old. The couple is concernedabout the future of their daughter and are seeking advice on

how to plan for her needs after they are not around . Theyalso want to plan for their son’s higher education and theirown retirement.

>GOALS

>FINDINGS

>SUGGESTIONS

EMERGENCYFUND:Shekhar needs to shift ~1 lakh from equitymutual funds (MFs) to short-term debt funds, to supplement

his present savings account and FD balance, and enable himto maintain six months worth of expenses for contingencyLIFE INSURANCE:Shekhar needs to take an additional life coverof ~2.2 crore for 30 years, for which the premium will beapproximately ~48,000 for an online term insurance policy.Madhura doesn’t need additional cover

HEALTH INSURANCE: The present health insurance cover isadequate. It needs to be reviewed annually

ACCIDENT INSURANCE:A personal accident policy of ~50 lakh,with ~10 lakh as TTD benefit, is recommended for Shekhar.The premium should be ~9,000 per annum

BUYING A 2BHKFLAT (2020) (home loan interest 10%)

Asset

s ~ Liabilities ~

Self-occupied house 51,00,000 Home loan 5,46,000Savings account 1,35,000EPF 3,65,000

Fixed deposits 1,25,000Stocks/shares 1,24,000Mutual funds 3,15,000

61,64,000 5,46,000Net worth 56,18,000

Current annual retirementexpenses :

~4.89 lakh


~30.38 lakh

Corpusrequired:

~6.13 crore

RETIREMENT AT AGE 60(2042) (inflation 7%) (Life expectancy - 85 years)


Household 39,000 4,68,000

Daughter’s treatment 5,000 60,000

Home loan EMI 12,159 1,45,913


Total 60,909 7,30,913


EMERGENCYFUND:Present savings account and fixed deposit(FD) balance can take care of four months of expenses. Needto increase the contingency fund

LIFE INSURANCE:Shekhar is covered for ~21 lakh throughvarious traditional and unit-linked insurance plans (Ulips),while his wife is covered for ~5 lakh through ulips. Shekharis underinsured

HEALTH INSURANCE:Shekhar has taken a family floater mediclaimpolicy for a sum assured of ~5 lakh, sufficient as of now

INVESTMENTS:Portfolio size is small, though well-diversified

LIABILITIES:Servicing a home loan of ~11 lakh, takensix years ago. Current dues are ~5.5 lakh

>PLANNING FOR GOALS

DAUGHTER’S EXPENSES AND UPKEEP (2035): The coupleneeds to create a private trust which can take care of theirdaughter’s expenses after they are no more. Consideringtheir daughter’s life expectancy of 65 years and the presentexpenses of ~1.8 lakh a year, they will have to create acorpus of ~1.75 crore over the next 20 years. They need toinvest ~18,000 per month in balanced MFsRate ofreturn on balanced fund: 12%

SON’S HIGHER EDUCATION (2032): Need to invest ~15,000 amonth in large-cap and balanced MFs

Rate ofreturn on balanced funds: 12%

BUYING A 2BHKFLAT (2020):The couple’s existing flat will beworth ~82 lakh after five years, considering a nominal growthof 10 per cent in price. The shortfall for a 2BHK will be around~47 lakh. As the entire surplus is going for children’s goals,Shekhar needs to increase his income at least 10 per centannually to achieve this goal

RETIREMENT AT 60 (2042): The existing Employees' ProvidentFund amount will be worth ~1.87 crore at retirement,considering a five per cent annual growth in income. The shareswillbeworth~54lakh Tocoveruptheshortfall amonthly

DAUGHTER’S EXPENSES AND UPKEEP (2035) (inflation 8%)

Current value:

~ 1.80 lakhFuture value:

~ 5.70 lakhCorpus required for funding the

expenses till her age of 65 years:

~ 1.75 crore

SON’S HIGHER EDUCATION(2032) (inflation 10%)

Current value:


~1.01 crore

Future value:

~1.01 crore

Current value:

~80 lakh


14/52



>FAMILY PROFILE

THE BASUsNandan (41), Sushmita (38), Siddharth (9)

RESIDEIN


~25.56 lakhRATING

8/10

Nandan works as a branch manager for a non-banking financial

company. His wife, Sushmita, is a senior officer in a public sectorbank. They have settled in Pune since 2007 and have createdgood assets over 10 years. Their primary goal is to pay off theirhome loan taken on a second property and also plan for theirson’s foreign educational funding

>RECOMMENDATIONSEMERGENCYFUND:Nandan can maintain the present savingsaccount balance and convert it into a flexi FD account.Additionally, ~2 lakh from FD can be maintained for contingency

LIFE INSURANCE:The couple is adequately covered

HEALTH INSURANCE:The present health insurance cover isadequate. This cover can be reviewed after two years

ACCIDENT INSURANCE:A personal accident policy of ~1 crore forNandan, with ~15 lakh as TTD benefit, is recommended. ForSushmita, ~50-lakh accident cover, with ~10 lakh as TTD benefit,is suggested. The annual premium for this should be ~18,000


Son’s education 12,000 1,44,000

Home loan EMI 49,743 5,96,915


Total 1,43,160 17,17,915


>PLANNING FOR GOALSSON’S EDUCATIONALFUNDING (2023-2027)A monthlyinvestment of ~45,000 needs to be done. This amount can beinvested in large-cap and balanced mutual funds

Rate ofreturn on large-cap and balanced funds: 12%

PAYING OFFHOME LOAN (2020) Equated monthly instalmentcan be increased to ~70,000, which will reduce the tenure toseven years. Annual bonuses can be used to pre-pay and closethe loan in the next five years

CONSTRUCTING HOLIDAYHOME (2020)The existing mutualfunds can be used. Additionally from the current FDs,~4.50 lakh will need to be invested in balanced mutual

funds for this goalRate ofreturn on balanced fund: 12%

SON’S MARRIAGE (2032)The existing large-cap sharesportfolio can be used

Rate ofreturn on shares: 15%

RETIREMENT AT AGE 60 (2034) The existing EmployeesProvident Fund will be worth ~1.50 crore at retirement,considering a five per cent annual growth in income. The secondproperty will be worth ~5.20 crore. The surplus income afterhome loan payments are over from 2020 onwards can be usedto enhance this corpus by investing in balanced mutual funds

Rate ofreturn assumed: 8% in EPF, 12% in mutual funds, 10%

in property Plan by Steven Fernandes, certified financial planner, chief planner,


>GOALS

Current annual

retirement expenses:~8 lakh

Future annual

expenses:~29 lakh

Corpus

required:~5.85 crore

RETIREMENT AT AGE 60 (2034)(Inflation: 7%) (Life expectancy: 85 years)

SON’S EDUCATIONALFUNDING (2023-2027)

(Inflation 10%)

Current value:


~1.11 crore

PAYING OFFHOME LOAN (2020)(home loan rate 10.5%)

Current dues:

~20 lakh

CONSTRUCTING HOLIDAY HOME (2020) (Inflation 10%)

Current value:


~40.25 lakh

SON’S MARRIAGE(2032) (Inflation: 10%)

Current value:


~1.01 crore

>FINDINGSEMERGENCYFUND:Present savings account and fixed depositbalance can take care of eight months of expenses.

Contingency arrangements are adequateLIFE INSURANCE:Nandan is covered for ~2.15 crore throughvarious term, unit-linked insurance plan (Ulip) and traditionalinsurance plans, while Sushmita is covered for ~20 lakh throughUlips and traditional plans. Both are adequately covered

HEALTH INSURANCE: Nandan and Sushmita have employer

group health cover of ~5 lakh and ~3 lakh, respectively.Additionally, Nandan has taken a family floater mediclaimpolicy for a sum assured of ~ 10 lakh, sufficient for now

INVESTMENTS:Portfolio is well-diversified in various asset classes

LIABILITIES:Servicing a home loan of ~45 lakh taken two yearsearlier for the second property. Current dues are ~42 lakh

Asset

s ~ Liabilities ~

Savings Account 3,20,000 Home loan 42,00,000EPF 12,34,000

Fixed deposits 8,00,000Stocks/shares 9,13,000Mutual funds 18,34,000Self-occupied house 1,10,00,000Invested property-1 85,00,000NA land 17,50,000Tot

al 2,63,51,000 42,00,000

Net wor

th 2,21,51,000


15/52

CASE STUDY Business Standard

analysesone family’s finances andsuggests a way forward

>FAMILY PROFILE

THE DIASesMark (48), Neil (15)RESIDEIN

BengaluruNET ANNUAL INCOME

~13.44 lakhRATING

7/10

Mark runs a small restaurant in Bengaluru. His wife died last yearafter battling cancer for several years and his son, Neil, studies inninth standard. He wants Neil to pursue hotel managementand, therefore, wants to plan its funding. Mark also wants toplan for his son’s marriage and wants to hand over therestaurant business to his son, when he turns 60 himself

>RECOMMENDATIONSEMERGENCYFUND:Mark can maintain ~3 lakh in the present

savings account balance and convert it into a flexi FD account.The rest can be invested for his son’s education

LIFE INSURANCE:Mark needs to take a term insurance of ~50 lakhfor 15 years. The annual premium for this will be around~20,000

HEALTH INSURANCE:The present health insurance cover isadequate. He also needs to do a yearly medical test

ACCIDENT INSURANCE:A personal accident policy of ~25 lakh forMark, with ~7.5 lakh as temporary total disability benefit, isrecommended. The annual premium for this should be ~4,000


Son’s education 6,000 72,000


Total 53,000 6,36,000


>PLANNING FOR GOALS

SON’S EDUCATION (2018-2022)From the existing FDs andsavings account, ~11 lakh can be invested in a combination of short-term debt funds and balanced mutual funds (MFs), in aratio of 40 per cent debt and 60 per cent equity. Additionally,~22,000 needs to be invested every month as a systematicinvestment plan (SIP)in balanced MFs for this goal

Rate ofreturn on this portfolio: 11%

SONS MARRIAGE (2025) Monthly SIPsof ~20,000 need to beinvested in large-cap MFs

Rate ofreturn on large cap funds: 12%

RETIREMENT AT AGE 60 (2034) The existing Public ProvidentFund (PPF) will be worth ~53 lakh at retirement, considering anannual investment of ~1.5 lakh. The existing MFs and shareswill be worth ~19 lakh and ~35 lakh, respectively. The ~10-lakhFD will be worth ~32 lakh at retirement. To make up theshortfall, an additional ~23,000 needs to be invested in MFs, ina ratio of 60 per cent equity and 40 per cent debt. Currently,~17,000 can be invested for this goal. With an expected incomegrowth of 10 per cent, the additional surplus can be used toinvest for this goal

Rate ofreturn assumed: 6% in FDs posttax, 8% in PPF, 12% in

mutual funds, 15% in shares



>GOALS


~4.72 lakh


~10.63 lakh

Corpusrequired:

~2.14 crore

RETIREMENT AT AGE 60 (2027)(Inflation: 7%) (Life expectancy: 85 years)

SON’S EDUCATIONALFUNDING (2018-2022)(Inflation 10%)

Current value:


~41.92 lakh

SON’S MARRIAGE(2032) (Inflation: 10%)

Current value:


~46.68 lakh

>FINDINGSEMERGENCYFUND:High amount of liquidity maintained in theform of savings bank account and fixed deposits (FDs)

LIFE INSURANCE:Mark is covered for ~18 lakh through varioustraditional insurance plans, which is inadequate

HEALTH INSURANCE:Mark and Neil are covered for ~10 lakh and~5 lakh, respectively through individual health plans

INVESTMENTS:Portfolio is well-diversified in various assetclasses, with an allocation of 30 per cent to equity and the restinto debtLIABILITIES:No liabilities

Asset

s ~ Liabilities ~

Savings account 6,45,000PPF 9,86,000Fixed deposits 17,65,000Stocks/shares 6,54,000Mutual funds 4,89,000Self-occupied house 95,00,000Restaurant premises 1,15,00,000Tot

al 2,55,39,000 0

Net w

or

th 2,55,39,000


16/52


17/52



>FAMILY PROFILE

THE PINTOsKenneth (39), Anita (39), Ajay (5)

RESIDE IN Vasai, nearMumbai

NET ANNUAL INCOME~16.80 lakh

RATING4/10

Kenneth works as a cook on an international cruise liner for

seven months in a year.His wife, Anita, is a homemaker. Dueto good inflows, the couple had never focused on saving andinvestments. Even after 12 years of service, Kenneth has notbeen able to create a sizable amount of assets. Having realisedthis of late, the couple wants to put their finances in order andplan for future needs better

>GOALS

>FINDINGS

A

sset

s ~ Liabilities ~

Savings account 3,43,000 Home loan 25,00,000Fixed deposits 8,50,000Stocks/shares 45,000Mutual funds 3,50,000

Self-occupied house 60,00,00075,88,000 25,00,000

Net worth 50,88,000

>RECOMMENDATIONS

EMERGENCYFUND:Kenneth needs to maintain ~1 lakh in a jointsavings account and the rest can be moved to a flexi fixeddeposit (FD) account

LIFE INSURANCE:Kenneth needs to take a cover of ~2 crore. Heshould take an online term insurance for a 20-year term,which will cost him ~50,000 annually. Anita does not needadditional cover

HEALTH INSURANCE:Kenneth should purchase a family floatermediclaim for a sum assured of ~5 lakh and supplement itwith a top-up cover of ~10 lakh. The premium for this will be

~18,000


~ 5.64 lakh


~11.87 lakh

Corpusrequired:

~3.09 crore

RETIREMENT PLANNING (2026)(Inflation 7%, Life expectancy 85 years)

BUYING A HOLIDAYHOME

(2020) (Inflation 10%)


Household 47,000 5,64,000

Home loan 29,014 3,48,172

Child’s education 9,000 1,08,000


Total 90,514 10,86,172


EMERGENCYFUND:Nearly four months of expensesmaintained in savings account, which is adequate

LIFE INSURANCE: Kenneth has a total insurance cover of~13 lakh, while Anita is covered for ~2 lakh from traditionaland unit-linked insurance plans (Ulips). Kenneth isunderinsured

HEALTH INSURANCE: The family is not covered by any healthinsurance policy

INVESTMENTS: Nearly 70 per cent of investments are in debt,while 30 per cent is in equity. Need to increase equity exposure

LIABILITIES: The couple is servicing a home loan, with ~25 lakhdue and the balance tenure is 12 years

>PLANNING FOR GOALS

AJAY'S EDUCATIONALPLANNING (2028 - 2032):Kenneth needsto invest ~21,000 per month in large-caps and balanced funds

Rate ofreturn expected: 12% post taxon this mutual fund

(MF) portfolioPAYING OFFHOME LOAN (2020): The couple should make aprepayment of ~5 lakh from the FDs maturing this year. Theyshould also reduce the term of the loan to five years, whichwill result in increase of their equated monthly instalmentto ~42,500, which is manageable

Home loan rate considered: 10%BUYING A HOLIDAYHOME (2020):The remaining surplus of ~16,000 on investment for five years in balanced MFs willfetch ~18.60 lakh, including the future value of the existingMFs. This is way short of the targeted amount. Kenneth willhave to take a loan for the balance amount, which will

affect his early retirement plansRETIREMENT PLANNING (2026):Assuming he does not go forhis holiday home, the surplus of ~16,000 can be invested inMFs, fetching him ~24 lakh, including the existing MFportfolio. The EMI savings after loan repayment can beinvested in balanced MFs for the next six years tillretirement, to fetch him a corpus of ~45 lakh. There will stillbe a huge shortage. Kenneth will have to increase hisretirement age or increase his income and investments if hewants to retire early

Rate ofreturn assumed: 12% in mutual funds portfolio



Current value:

~25 lakh

Current value:

~35 lakh

Future value:

~1.09 crore

Future value:

~56 lakh

AJAY’S EDUCATIONAL

FUNDING (2028 - 2032)(Inflation 10%)

Current value:

~25 lakh

PAYING OFFHOME LOAN

(2020)(Inflation 10%)


18/52


>FAMILY PROFILE

THE SINGHsPranay(39), Vanita (38), Pushkar (12)

RESIDE IN

Navi MumbaiNET ANNUAL INCOME

~13.80 lakhRATING

7/10

Pranay works as a manager - HR with a plastics manufacturing

company. His wife is a homemaker and they have a son,Pushkar, currently in seventh standard. The couple have beenprudent with cash flow management and investments, andhave been able to create decent investments. The couple’s firstpriority is to pay-off their home loan and create aneducational corpus for their son’s higher studies. Their final

priority is planning for retirement.

>GOALS

>FINDINGS

A

sset

s ~ Liabilities ~

Self-occupied house 1,15,00,000 Home loan 23,50,000Savings account 1,45,000EPF 8,34,000Fixed deposits 4,35,000Equity mutual funds 12,35,000

1,41,49,000 23,50,000Net worth 1,17,99,000

>RECOMMENDATIONS

EMERGENCYFUND:Apart from the existing balance in savingsaccount, a separate flexi FD of ~1 lakh (out of total FDs) can bemaintained in savings accountLIFE INSURANCE:Pranay needs an additional insurance coverof ~1 crore. A suitable term plan for 20 years tenure will cost~20,000 p a. Vanita does not need any additional insurance

HEALTH INSURANCE:The present cover is adequate and can beincreased later

ACCIDENT INSURANCE:The present cover is adequate and can beincreased later

Current annual retirement

expenses (consideringhousehold expenses andmediclaim premiums):

~ 4.80 lakh

Future annual

expenses:~17.36 lakh

Corpus

required:~3.6 crore

RETIREMENT PLANNING (2034)(Inflation 7%, Life expectancy 85 years)

HOME LOAN PREPAYMENT (2020) (Inflation 10%)


Household 39,000 4,68,000


Home loan EMI 27,635 3,31,620Insurance premium 5,800 69,600

Total 77,435 9,29,220


EMERGENCYFUND:Adequate amount maintained in liquidform mainly in savings account and fixed deposits

LIFE INSURANCE:Pranay is covered for ~50 lakh through terminsurance and traditional insurance plans, which is notadequate. Vanita has an insurance cover of ~5 lakh

HEALTH INSURANCE: Employer-provided ~3 lakh cover and aseparate family floater health insurance of ~5 lakh

INVESTMENTS:Very well-diversified portfolio with equalallocation to debt and equity

LIABILITIES:There are home loan dues of ~23.5 lakh, with abalance term of 14 years

>PLANNING FOR GOALS

SON’S GRADUATION:Pranay should allocate ~5 lakh fromequity mutual funds into balanced mutual funds and alsostart SIPs of ~6,000 in the same funds for this goal

Rate ofreturn assumed: 11% in balanced mutual funds

SON’S POSTGRADUATION:Need to invest ~16,000 per monthin large and multi-cap funds for this goal

Rate ofreturn assumed 12% on this portfolio

PREPAYING HOME LOAN IN 5 YEARS TIME: Pranay shouldreduce the term of his home loan to seven years, which willentail an EMI of ~40,000, which can be comfortably serviceddue to good surplus. Annual bonuses can then be used toprepay the loan within five years

Presenthome loan interestrate : 10.5%

RETIREMENT PLANNING (2031):Pranay’s EPF will fetch him~1.80 crore at retirement while his equity mutual funds willgenerate ~.54 lakh. To bridge the shortfall, he will need toinvest ~13,500 in a 70:30 ratio in equity and debt mutualfunds. At present, after allocating funds for other goals, anyfurther allocation for this is not possible. Once the home loan

is fully paid, the resulting saving of EMIs can be diverted forthis goal.

Rate ofreturn assumed: 8% in EPFand debtfunds, 12%in equitymutual funds




Current dues:~23.5 lakh

Future value:~14 lakh

Future value:~25.70 lakh

SON’S GRADUATION(2020 TO 2022) (Inflation 10%)


SON’S POSTGRADUATION(2023 TO 2024) (Inflation 10%)


19/52



>STATUS & GOALS

NAIRsPadma (38), Avinash (38), Vidya (10)

RESIDEIN

Dombivli, MumbaiNET ANNUAL INCOME

~12.60 lakhRATING

6/10

Padma works in the accounts department of an Information

technology company, while her husband is a freelance webdesigner operating from home. Their daughter, Vidya, ishearing impaired from birth and attends a special school.The couple wants to buy a 2BHK apartment and plan fortheir daughter’s educational goal. Retirement is their lastpriority.

>GOALS

>FINDINGS

A

s

set

s ~ Liabilities ~

Savings account 8,95,000 Home loan 2,38,000Fixed deposits 3,24,000PF 3,46,000Mutual funds 85,000Self-occupied house 4,20,00,00

5,85,00,00 2,38,000

Net worth 56,12,000

>RECOMMENDATIONSEMERGENCYFUND:The couple can maintain the savings bankamount for the time being. After purchase of the house,~1.5 lakh to be maintained in a joint bank account foremergency

LIFE INSURANCE:Considering the expense replacement

method, Padma needs to take a term insurance cover of~1 crore, while Avinash should take a term cover of ~50 lakh. Thetotal annual premium will be ~25,000 for online term plans

HEALTH INSURANCE:Padma should apply for a family floaterhealth policy of ~5 lakh . The annual premium for this will be~12,000


~4.44 lakh


~15 lakh

Corpusrequired:

~3. 68 crore

RETIREMENT PLANNING(2035, Inflation 7%, Life expectancy - 85 years)


Household 37,000 4,44,000


Home loan 5,527 66,324

Daughter’s expenses 7,000 84,000

Total 52,110 6,25,324


EMERGENCYFUND:A huge amount is maintained in savingsaccount for payment towards a new house

LIFE INSURANCE:Padma has a total insurance cover of ~7 lakh,while Avinash is covered for ~2 lakh from traditionalinsurance plans

HEALTH INSURANCE:The family is covered by Padma’s employergroup mediclaim cover of ~3 lakh

INVESTMENTS:Nearly 90 per cent of investments are in debt

instruments, with a small allocation to equity. After buying a2BHK flat, investments in equity can be gradually started forlong-term goals

LIABILITIES:The couple have a home loan liability of ~2.38 lakhon their existing house

>PLANNING FOR GOALSBUYING A 2BHK:Their existing flat will fetch them ~42 lakh.They need to utilise ~8.5 lakh from their savings and FDaccounts for prepayment of their existing loan and new housepurchase. They will have to take a loan of ~8 lakh for fiveyears. The equated monthly instalment will be ~17,917. Homeloan rate considered at 10.25 per cent

DAUGHTER’S COLLEGE AND POSTGRADUATION:The coupleneeds to invest ~16,500 in balanced mutual funds. Rate of return assumed at 12 per cent in balanced mutual funds

DAUGHTER’S MARRIAGE (2030):~6,000 needs to be investedin large-cap funds

RETIREMENT PLANNING (2035):Padma’s existing employees’provident fund (EPF) will be worth ~80.75 lakh at retirement.Her existing mutual funds will be worth ~8.20 lakh. For theshortfall, ~32,000 needs to be invested in a mutual fundsportfolio, with 60 per cent in equity and 40 per cent in debt,currently not possible due to other goals. When the home

loan gets paid off, after five years, the resulting saving of EMIscan then be invested for retirement

Rate ofreturn assumed:12% in mutual funds portfolio,8.5% in EPF.



Current value:



~41 lakh

DAUGHTER’S COLLEGE & POSTGRADUATION(2023-2027) - Inflation 10%

Current value:

~7.5 lakh

DAUGHTER’S MARRIAGE(2030) - Inflation 10%


20/52



>STATUS & GOALS

JOSHIsSujay (37), Pratibha (35), Shalini (6),Priyal (3)

RESIDEIN

Panvel, MumbaiNET ANNUAL INCOME

~9.60 lakhRATING

5/10

Sujay is a systems design engineer in an informationtechnology infrastructure company. His wife, Pratibha, is ahomemaker but intends to start working in the next oneyear, after a gap of three years. The couple, with theirparents’ assistance, had purchased their self-occupiedproperty seven years ago. They are planning to buy a biggerhouse. They also want to plan their daughters’ educationand marriage

>GOALS

>FINDINGS

A

sset

s ~ Liabilities ~

Savings account 65,000 Home loan 0Fixed deposits 4,25,000EPF 2,56,000Mutual funds 4,48,000

Self-occupied house 39,00,00050,94,000 0

Net wor

th 50,94,000

>RECOMMENDATIONSEMERGENCYFUND:The couple can maintain the savings bankamount for now. Additionally, they need to maintain aseparate flexi FD of ~85,000 for an emergency.

LIFE INSURANCE: Sujay needs a term insurance cover of~1.20 crore, while Pratibha does not need any additional lifecover at present. A suitable online term insurance for Sujaywill cost ~22,000.

HEALTH INSURANCE: The present cover is adequate. Theyshould review the health cover every two years.


~4.68 lakh


~22.18 lakh

Corpusrequired:

~4. 48 crore



Household 39,000 4,68,000


Children’s education 6,000 72,000Total 53,167 6,38,000


EMERGENCYFUND:Good amount maintained in savingsaccount and fixed deposits (FDs) to take care of anynear-term emergency.

LIFE INSURANCE:Sujay has a total insurance cover of ~40lakh, while Pratibha is covered for ~5 lakh from traditionalinsurance plans. Some traditional policies need to be

surrendered.HEALTH INSURANCE: The family is covered by Sujay’semployer group mediclaim cover of ~3 lakh. They also havea separate family health floater cover of ~5 lakh.

INVESTMENTS: Good balance of debt and equityinvestments

LIABILITIES: They don’t have any liabilities as of now .

>PLANNING FOR GOALSBUYING A 2BHK(2015):Their existing flat will fetch them~39 lakh. They should utilise ~5 lakh from FD and mutualfunds and take a loan of ~8 lakh. The equated monthly

instalment for 10 years will be ~10,572 and can be easilyserviced.

Home loan rate considered: 10%.

SHALINI’S COLLEGE & POST-GRADUATION (2027-2031): Thecouple needs to invest ~13,000 a month in large-cap mutualfunds.

Rate of return assumed: 13% in large-cap mutual fundsPRIYAL’S COLLEGE & POST-GRADUATION (2030-2034): Thecouple needs to invest ~11,000 a month in multicap mutualfunds

Rate of return assumed: 13% in multicap mutual funds

SHALINI AND PRIYAL’S MARRIAGE (2034 & 2037):~6,500 amonth needs to be invested in balanced mutual funds,presently not possible due to utilisation of surpluses forother goals

RETIREMENT PLANNING (2038): Sujay’s existing Employees'Provident Fund (EPF) will be worth ~1.04 crore at retirement,assuming he works till 60 years. To achieve the balance

corpus, he needs to invest ~22,000 a month in mutual fundsin equity and debt at a ratio of of 70 per cent and 30 per cent,respectively. This is not possible at present. Any annualbonuses or salary increments should be used to invest for

Current value:

~15 lakh

Future value:

~71 lakh

Future value:

~60 lakh

SHALINI’S COLLEGE & POST-GRADUATION(2027-2031) - Inflation 10%

Current value:

~52 lakh

Current value:


~80 lakh

PRIYAL'S COLLEGE &POST-GRADUATION(2030-2034) - Inflation 10%

Current value:

~10 lakh

SHALINI AND PRIYAL’SMARRIAGE(2034 & 2037 ) - Inflation 10%

BUYING A 2BHK(2015)(2034 & 2037 ) - Inflation 10%


21/52



>STATUS & GOALS

PAIsKrishna (52), Lekha (50), Komal (15)

RESIDEIN

Andheri, MumbaiNET ANNUAL INCOME

~32.28 lakhRATING

9/10

Krishna is an electrical contractor and runs a successfulbusiness in Mumbai, while wife Lekha works in a publicsector bank. Komal, their only daughter, is currentlystudying in the 10th standard. Good income, coupled withfinancial discipline, has enabled the family to create goodinvestment assets over the years. The couple's primary goal

is to fund the educational needs of their daughter, followedby her marriage.

>GOALS

>FINDINGS

A

sset

s ~ Liabilities ~

Savings account 3,54,000Fixed deposits 12,00,000PPF 16,00,000Mutual funds 85,00,000Shares 8,45,000Self-occupied house 3,00,00,000Commercial property 85,00,000

Second property 65,00,0005,74,99,000

Net wor

th 5,74,99,000

>RECOMMENDATIONS

EMERGENCYFUND:The couple can maintain ~2,00,000 in their joint account and move the rest to a flexi FD, which takes careof three months of emergency.

Life Insurance:Considering the expense replacement

method, Krishna is adequately covered and backed by goodinvestments. Lekha’s cover is also sufficient.

Health Insurance:The present cover is adequate. They shouldreview the health cover every year.


~10.10 lakh


~24.30 lakh

Corpusrequired:

~4. 10 crore

RETIREMENT PLANNING

(2028, Inflation 7%, Life expectancy - 85 years)


Household 84,000 10,08,000


Daughter’s education 10,000 1,20,000Total 1,15,917 13,91,000

Monthly income:~2,69,000 Net monthly surplus:~1,53,083

Emergencyfund:Good amount maintained in savingsaccount and fixed deposits (FDs) to take care of any majoremergency.

Life insurance:Krishna has a total insurance cover of~2.20 crore, while Lekha is covered for ~10 lakh fromtraditional and unit-linked insurance plans.

Health Insurance:The family is covered for a sum assured of ~10 lakh through a family health floater plan.

Investments:Good diversification across assets and a goodcorpus as well.

Liabilities:They have no liabilities as of now.

>PLANNING FOR GOALS

KOMAL'S COLLEGE AND POSTGRADUATION(2018-2022)

The couple needs to set aside ~24 lakh from their mutualfunds portfolio in balanced funds for this goal. Additionally,~6 lakh from their fixed deposits can be used in the first yearof senior college.

Rate of return assumed: 11% in balanced funds and 6.5%post tax in FD's

KOMAL'S MARRIAGE (2025)

~28,000 needs to be invested every month in balancedmutual funds

FOREIGN VACATION (EVERYYEAR)This goal can be easily met by investing ~24,000 every monthin recurring deposit or ultra-short debt funds to create anannual foreign travel fund.

RETIREMENT PLANNING (2028)

Krishna's existing Public Provident Fund will be worth

~75.75 lakh at retirement, assuming he contributes ~1.5 lakhevery year. Shares and mutual funds combined will be worth~2 crore at retirement. The invested property will be worth~2.24 crore.

Rate ofreturn assumed:11% in mutual funds portfolio,15% in shares, 8% in PPF, 10% on property


Current value:


~53 lakh

KOMAL’S COLLEGE &POSTGRADUATION(2018-2022) - Inflation 10%

Current value:


~65 lakh

KOMAL'S MARRIAGE(2025) - Inflation 10%

FOREIGN VACATION (EVERYYEAR)Approximate budget~3 lakh


22/52


>STATUS & GOALS

VERMAsNeeraj ( 41), Ishita (39), Paras (10)

RESIDEIN


~14.40 lakhRATING

7/10

Neeraj is a manager (sales) in a real estate company. His wife,

Ishita, is a homemaker. Their son, Paras, is studying in theseventh standard. Neeraj has some decent savings, as he hasbeen investing prudently for some years. His first priority is topay-off his home loan and create an educational corpus forhis son’s higher studies. Planning for retirement is his lastpriority.

>GOALS

>FINDINGS

Asset

s ~ Liabilities ~

Savings account 1,85,000 Home loan 23,50,000

EPF 5,75,000Fixed deposits 5,40,000Equity mutual funds 13,25,000Self-occupied property 1,05,00,000

1,31,25,000 23,50,000Net wor

th 1,07,75,000

>RECOMMENDATIONSEMERGENCYFUND:The existing savings accounts can be

converted into a flexi FD account. Additionally, ~1 lakh fromexisting FDs can be earmarked for emergency.

LIFE INSURANCE:Neeraj needs additional insurance cover of ~1 crore. A suitable term plan for 20 years will cost ~20,000per annum. Ishita does not need any additional insurance.

HEALTH INSURANCE: The present health insurance cover canbe increased to ~5 lakh, which will cost additional ~6,000per year.

ACCIDENT INSURANCE:A personal accident policy of ~1 crore,with ~15 lakh as TTD benefit, is recommended for Neeraj. Thepremium for this should be ~12,000 per annum

Current annual retirement expenses (considering household

expenses and mediclaim premiums):~5.05 lakhFuture annual expenses:

~18.26 lakhCorpus required:

~3.91 crore



Household 41,000 4,92,000


Home loan EMI 27,635 3,31,620


Total 79,552 9,54,620


EMERGENCYFUND:Adequate amount maintained in liquidform, in savings account and fixed deposits.

LIFE INSURANCE:Neeraj is covered for ~60 lakh through a

term insurance and traditional insurance plans; notadequate. Ishita has an insurance cover of ~5 lakh.

HEALTH INSURANCE:Employer-provided ~3 lakh cover and aseparate Family floater health insurance of ~5 lakh for family.

INVESTMEN

Documents

Business Standard Case Stuies