Name: Suresh Sharma (51) Resides in: Indore Profession: General Manager with an IT company Net annual income post Tax (R 25.80 lakh) Status & goals Suresh and Ragini reside in their own house at Indore. Ragini is a home maker. They have A daughter Smita,26,who got married last year. Till date suresh and raginis priority was good education and marriage for their daughter,FOR WHICH They have exhausted most of their savings. as they are done with this responsibility they would like to plan their finances for comfortable retirement. Both Suresh and Ragini ENJOY good health. Needed A financial plan which can help the couple channel their current income into productive avenues in order to provide for their goals Net monthly surplus Rs 1,59,000 Current Investments: Savings Account : R 3 lakh Bank Fixed deposits : R 10 lakh Equity Mutual funds : R 5 lakh Provident fund : R 27 lakh Insurance Cash value : R 25 lakh (Will get R 5 lakh maturity amount every year for next 5 years) Findings Emergency fund: Though not specifically created,Suresh has sufficient liquidity available. LIFE INSURANCE: He has life insurance cover for R25 lakh that too through endowment policies that are about to mature shortly. Health Insurance: Suresh has a health cover through his employer and a separate floater policy with a coverage of R3 lakh. Investments: He has a well-diversified portfolio and has withdrawn most of his equity-linked investments for his daughters marriage as he was worried about the stock market performance. Liabilities: Suresh does not have any liabilities,which is a positive factor. Provident fund: He has made some withdrawals from his provident fund for Smitas education. Recommendations Emergency fund: With a monthly expense of R56,000,Suresh needs to maintain an emergency fund of at least R3.36 lakh in his saving bank accounts to meet immediate needs. Express TIP: With the increase in age,emergency fund should be reviewed periodically and increased to manage the contingencies in a better way. Life Insurance: After Smitas marriage Suresh is left with very less savings,which has negatively impacted his life insurance requirement. Looking at current investments and with need based analysis he requires additional coverage of at least R1 crore. He should buy this coverage through an online term plan which would cost around R60,000 p.a. Express TIP: Your expenses and goals define your life insurance requirement,but if you have good savings then the required coverage is offset. In the younger years when you are about to start saving,insurance coverage requirement is greater. Health Insurance: The existing R3 lakh coverage and that too through a floater plan would not be enough in this rising medical cost scenario. Suresh is advised to buy additional coverage of at least R5 lakh through a separate health insurance plan for himself and Ragini. The total outgo in this case would be R27,000 p.a. Express tip: Review of health insurance coverage after every five years is very important. Increasing age may lead to health problems. Accident Insurance: Suresh should buy accidental insurance coverage of at least R1 crore with a maximum available coverage of temporary total disablement benefit. The premium for this would be around R13,000 p.a. Express TIP: Accident insurance is required primarily to cover potential disability. Retirement Planning (2042): After adjusting the current EPF balance and further contributions for the next 7 years,Suresh should start by saving R1,28,500 per month in balanced mutual funds which have equity: debt allocation of 65:35. He should also use the current fixed deposits and equity mutual funds for this goal. Rate of return assumed is 10% post tax. Express TIP: Retirement planning should always be on top priority while allocating your investments,for we actually plan for those years when we will not be getting regular pay cheques. Car (2014): Suresh will have to compromise on this goal or lower it on the list of needs. Although his cash flow situation after arranging for retirement savings helps him save enough for this,he will be left with nothing else to support any medium-term emergency and near-term functions in Smitas family. He should start saving the surplus in bank recurring deposit and review the situation after two years. Express TIP: Goal should always be realistic and achievable,and one should always evaluate on the effect of saving towards one goal on others. Smitas Family Functions (2019): Suresh should use the maturity proceeds of his insurance policies towards this goal. Every year he will be receiving R5 lakh,which he should park in some hybrid mutual fund with very low equity allocation. Express Tip: Clearly projecting future expenses helps a lot in arranging finances to achieve the goal. Conclusion One should always take holistic view of ones finances and start saving simultaneously towards all realistic goals. Concentrating on one goal at a time may hit other goals very badly. Stick to your budgets and stay focussed on your goals.
