Express Clinic

Profession: Head Chef

Net monthly income

Rs 2,00,000

Status amp; goals

Shipra got divorced in 2008. as she was working amp; divorce was through mutual understanding,there was no alimony involved. Her Daughter Raksha,was nine year old at that time amp; her custody was given to Shipra. Being a single mother she has to fund all the goals single-handedly. her main goals are Rakshas education amp; marriage,house amp; a comfortable retirement life.

Needed

A plan that can steer her financial life towards achieving all goals. Besides daughters education and marriage,retirement corpus is the key concern

Net monthly surplus

Rs 58,000

Current Investments

Bank Account Rs 2.30 lakh

Cash Rs 2.15 lakh

PPF Rs 5.61 lakh

EPF Rs 3.43 lakh

Mutual Funds Rs 7 lakh

Equity Shares Rs 6 lakh

Current Liabilities

Car Loan Rs4 lakh

Observations

After divorce,Shipra took full responsibility of her finances as this was one of the main reasons for her divorce. She had invested in direct equities amp; mutual funds for long term goals. She has some savings in bank amp; some as cash for meetingher expenses. There is provision for an emergency fund but Shipra needs to contribute some more towards that goal.

Findings

Emergency fund

There is provisioning for emergency situations in savings bank account.

Health insurance

The family is covered with family floater policy alongwith medical benefits from the company.

Life Insurance

Shipra has a term insurance plan.

Liabilities

She wants to repay her loan on car before she purchases a property.

Existing Investments

Major investments are done in direct equities,mutual funds through Systematic Investment Plan,and yearly contribution towards PPF.

Recommendations

Emergency Fund

She needs to maintain minimum of R 5Lakh as emergency fund. As she is not getting desired support from family,she should build it on

immediate basis. She can build the emergency fund from R 2 lakh in savings account and the rest by investing in short term fixed deposit.

Express Tip: For emergency fund,especially in case of a single woman,one should not depend on relatives. Its good to have couple of layer of emergency funds which will help family to meet expenses for 12 years.

Health Insurance

The present health cover is sufficient. She should buy critical illness policy.

Express Tip:Its always good to have a separate health insurance policy other than your employer if you can afford. But first claim should be taken from group medical insurance that is provided by the employer

Life Insurance

Shipra is having a term plan,with a sum assured of R 50 lakh,which is inadequate according to her current requirements. She should immediately increase her sum assured by another R1.05 crore amp; also buy comprehensive accidental policy of R1 crore. Combined total premium would be R 27,000.

Express Tip: Insurance is very crucial in case of single mothers as complete family is dependent on single income. She should buy disability and adequate term insurance to provide financial security to her family.

Educational goal for Raksha 2019

Raksha will require R 12 lakh in current value for her higher education. Shipra can allocate her existing portfolio of mutual funds towards this goal. She should direct her investments into stocks to mutual funds.

Express Tip: Refrain from direct equity until you have the proper understanding and time to manage it. Direct equity demands too much attention amp; at times its addictive. And when you cant control yourself,it can ruin your portfolio and wipe out your savings.

Marriage goal for Raksha 2024

For Rakshas marriage,requirement is R 5 lakh in current value. Shipra can start investing R 3,800 per month in diversified mutual funds through SIP route.

Rate of return assumed 11 p.a

Express Tip: Marriage of kids should be given lower priority in comparison to goals like retirement amp; kids education. Kids will appreciate what their mother have done without getting any support from anyone amp; can manage this goal at their own.

Home Purchase 2016

Shipra wants to buy home in next 4 years,but this will not be a complete cash purchase. She needs to arrange for partial down payment amp; the rest can be arranged from 15 year home loan. She needs to save almost R 50,000 monthly in bank recurring deposits or short term schemes of mutual funds.

Express Tip: Buying home is one of the most important goal for a single women as this can work as a last resort in case she lives beyond life expectancy as per plan.

Retirement Funding 2038

She will require R 6.95 crore for a comfortable retirement. She will get some amount from her EPF,which will be almost R 3.5 crore. For the remaining R 3.45crore,she needs to invest her net cash flows in PPF amp; mutual funds through SIP.

Return assumed: Diversified Equity MF 11; Increase in savings 3

Express Tip: Factors like longevity of life,better life style and costly medical aid needs to be considered for retirement planning. For educational need,you can get assistance loan,scholarships etc,but for retirement needs no such facility is available.

Conclusion

Single woman may have to face a lot of limitations as being alone they have to constantly balance personal and financial life. Setting goals and investing towards them would be the most prudent step that will eventually make life much easier.