Name: Manish Shah,43 Resides in: Vadodra (Gujarat) Profession: Senior vice-president with a stock broking firm Net annual income (Rs 9,34,000) Status & goals Manish wants to have a clear picture of his financial life and have his finances checked. His basic goals are comfortable retirement and childrens education. But he gives equal weightage to lifestyle goals like buying new car,foreign vacation and buying a big house Needed A plan that channelises the investments in such a way that all goals can be met Net Monthly Surplus Rs 27,830 Observations Manish is has a net worth of Rs 2.3 crore,which is distributed among different asset classes but most of his debt investments are locked-in so there will be some difficulty to meet short term goals. He is having term plans of Rs 41 lakh,but this amount is insufficient. Current Investments PPF Rs 54 lakh; Fixed Deposits Rs 8 lakh; Bonds Rs 7 lakh; Post Office Schemes Rs 36 lakh; Shares Rs 40 lakh ;Savings Bank Rs 2 lakh ;Property Rs 75 lakh ;Insurance Plans Rs 15 lakh FindingsEmergency fund Some emergency fund is available,which will be able to cover 3-4 months expenses. Health insurance Floater policy for entire family is taken but still there is scope to increase sum assured. Life Insurance Current cover looks insufficient. Investments He is using asset allocation as a tool to reduce risk and enhance returns. He should seriously think about adding mutual funds to his portfolio. Recommendations Emergency fund Has Rs 2 lakh in savings bank account which can be assigned for emergency fund and another Rs 1 lakh can be invested in short term debt fund. Express Tip: Emergency fund equal to 5-6 months of expense is a must for every person. Health Insurance Manish should increase his and Falgunis health insurance to Rs 5 lakh and Rs 3 lakh for children / parents. Express Tip: Sudden medical contingencies can be met by proper health insurance cover. Life Insurance He requires insurance of Rs 97 lakh. There is a gap of Rs 56 lakh,which can be filled by taking a term plan. He can also consider discontinuing few of the endowment plans. Express Tip: One should not consider insurance for investment or tax planning tool,as this is for providing security to the family members. Childrens Education Rishabh will enter college in 2013,for this he requires Rs 10 lakh in current value. He can allocate Rs 7 lakh from bonds and another Rs 3 lakh from Bank FD towards this goal. For Parth he can allocate Rs 5 lakh from shares and the remaining amount can be taken from post office. Express Tip: Debt instruments should be used for short term goals and equity instruments for long term goals. Childrens marriage He can allocate Rs 10 lakh from shares and the remaining amount of Rs 15 lakh can be withdrawn from Post Office schemes. Lifestyle Goals Manish wants to purchase a bigger house worth Rs 1 crore in present value; for this he can sell his existing house and can fill the remaining gap by withdrawing from post office schemes. Car can be bought by withdrawing from FDs and surrendering couple of insurance policies. Goal for foreign vacation can be filled by withdrawals from recurring deposits. Express Tip: Lifestyle goals should not be achieved by compromising main goals but by improving cash flows. Retirement Funding Manish desires Rs 1 lakh per month after retirement,which looks on higher side compared to his present income and expenses. He will need Rs 6.27 crore as his retirement corpus - he will get approximately Rs 77 lakh from EPF. The balance corpus can be achieved by allocating Rs 70 lakh towards retirement and by investing Rs 16,500 per month in diversified equity mutual funds. Express Tip: Retirement planning is one of the most important goals which needs patience and discipline to create retirement corpus in the long term. Conclusion The question is not what age you want to retire,its at what income. Prepare a plan for your financial life. Mark Twain said,Plan for the future,because thats where you are going to spend the rest of your life.
