Name: Braham Dutt
Resides in Noida
Profession: general manager in an it company
Status & goals
Braham (42) lives with his wife Radhika (40),daughter Vinita (12) and son Vishesh (1). Braham is a very firm believer in Real Estate and so is heavily exposed to this asset class. Due to this,he never considered life insurance as priority but added many insurance policies for returns. Now,the late birth of a child and recent concern of job loss has forced him to plan for his future.
A financial plan which can help plan his childrens future,family protection and his retirement needs
Net monthly surplus
Equity-MF: Rs 2,00,000
PPF: Rs 2,50,000
EPF: Rs 3,00,000
Cash: Rs 25,000
FDs: Rs 1,75,000
Insurance Surrender Value: Rs 2,45,000
Real Estate Rs 60,00,000
Emergency fund Braham is maintaining Rs 2,00,000 in savings account & FDs
Health Insurance Family is covered through Group Insurance of Rs 3 lakh.
Life Insurance Covered for Rs 15 lakh through six traditional plans and 1 ULIP while paying an annual premium of Rs 90,000.
Liabilities Outstanding Home Loan of Rs 25,00,000 with an EMI of Rs 22,000 p.m.
Emergency Fund He should enhance his emergency fund to Rs 4.5 lakh. He can keep Rs 50,000 in savings account and rest in money market mutual funds.
Express tip Sometimes emergencies like medical or job loss can be prolonged than expected. To avoid straining your finances,its ideal to maintain minimum 6-8 months expenses in savings account,especially if you are running loan liabilities.
Daughters College Education Braham should sell his investments in the land which he inherited from his father. This will fetch him Rs 10 lakh which he can invest in Monthly Income Plans from debt mutual funds to meet the daughters education goal.
Return Assumed: 8% p.a.
Express tip Education costs are soaring and therefore its necessary to plan ahead to avoid any forced borrowings or dipping into your savings which are earmarked for other goals.
This goal can be met by allocating a monthly investment of Rs 4,000 in Diversified large cap MF schemes and Rs 4,000 in Diversified mid cap MF Schemes.
Returns assumed- 12% p.a.
Express tip Marriages are an expensive affair and when the goal is long term,its advisable to allocate investments for this goal in equity.
He should allocate his other real estate investments for meeting his second childs education goal. After repaying the loan liability and tax,he will be left with an approximate amount of Rs 30 lakh. Of this,by Investing Rs 15 lakh in equity mutual funds,he can meet the desired goal.
Return Assumed: 12% p.a.
Express tip Selection of right asset class is very important for meeting long-term goals. Any illiquid investment may deprive you with funds when the actual need arises.
This goal can be met by allocating existing equity mutual funds investment and insurance proceeds. He should invest the amount received from exiting insurance policies in equity MF Schemes.
Returns assumed: 12% p.a.
Express tip When you are selecting any investment product yourself,a second unbiased opinion may come handy in validating your research.
Brahams insurance need is Rs 1 crore. He should buy this through a term insurance which will cost him approximately Rs 40,000 annually.
Express tip A pure life insurance is the only tool which creates an instant asset for your family protection with outgo of minimum resources.
Considering the number of family members he should enhance his health insurance to Rs 6 lakh. He can consider buying a standalone family floater policy which will cost him about Rs 15,000 annually.
Express tip A health insurance serves the need of meeting cost of hospitalisation. The amount of coverage should be adequate enough to cover all the family members.
Repaying Housing Loan
Considering the age and the late birth of a child,Braham should reduce his loan liabilities. He can consider repaying it as he plans to sell his real estate investments for meeting his life goals.
Express tip Although housing loan gives relief in reducing tax liability,its a long-term commitment which should be planned wisely to avoid any default.
Braham does not have much of EPF balance since he withdrew it for meeting other needs. His existing EPF and PPF contribution will fetch him about Rs 50 lakh at his retirement. He can allocate Rs 15 lakh from his real estate proceeds towards this goal by investing it in diversified equity mutual funds schemes.
This will give him Rs1 crore at retirement. For the shortfall he will need a monthly investment of Rs 26,000 in equity mutual funds.
Return assumed: 12% p.a.
Express tip Unexpected increase in costs and lower income are risks which jeopardise post retirement years. Its essential that the resources planned for this goal should not be utilised elsewhere to avoid any disappointment.