Name: Satish Agarwal
Resides in gurgaon
Profession: Engineer with an MNC
Annual income (Rs 10.68 lakh)
Status & goals
Satish Agarwal,47,lives with his small family in Gurgaon. He works as an engineer with a MNC and his wife Rajni is a homemaker. His daughter,Suniti,16,is studying in XI standard. The couple have focussed on keeping expenses under control and have stressed on savings. They paid their home loan in 2010 and after that they have been investing regularly in debt-equity mix through mutual funds route. The couple wants to know how much to save for their daughters education and their retirement the two primary goals for the family at present.
Needed Comprehensive financial plan for their daughters higher education and their retirement
Monthly Income Rs 89,000
Monthly expenses Rs 42,000
Net monthly surplus Rs 47,000
Goals in order of priority
Sunitis Graduation (2023)
(2014 to 2017) (inflation 10%)
Current Value R3 lakh
Future value R3.30 lakh
Sunitis Post-Graduation ) (2017 to 2019) (inflation 10%)
Current Value R5 lakh
Future value R7.32 lakh
Sunitis Marriage (2022)
Current Value R10 lakh
Future value R20 lakh
Retirement Planning (2026)
(inflation 7%) (Life expectancy 80 years)
Current expenses (per month) R5.04 lakh
Future value R12.15 lakh
cor pus required R2.33 crore
Fixed Deposits: Rs 4,00,000
EPF: Rs 9,30,000
Mutual Funds – Debt: Rs 3,00,000
Mutual Funds (Equity): Rs 1.08 crore
Insurance Policies: Rs 3,25,000
Gold: Rs 4,00,000
Emergency fund: Adequate emergency fund to cover three months expenses.
Life insurance: Total life coverage of Rs 34 lakh through term plan and endowment plans
Health Insurance: Employer has provided family floater cover of Rs 4 lakh
Investments: Exposure to debt and mutual funds but no direct equity investments
Emergency fund: Amount in fixed deposits is sufficient to provide for three months of expenses.
Express TIP: It is prudent to maintain 3 to 6 months of expenses as emergency fund to face temporary uncertainties in life.
Life Insurance: Satish needs additional life cover of Rs 1 crore. Life cover not recommended for Rajni.
Express TIP: Right insurance coverage must be taken by the main earning member of the family ensuring adequate replacement income to dependents in case of any unforeseen eventuality.
Health Insurance: Satish should take a personal family floater of at least Rs 5 lakh which will cost him approximately Rs 8,000 per annum.
Express tip: Employees,especially those working in private sector,should have a personal comprehensive family health cover even if the employer provides for health insurance benefits.
Accident Insurance: A personal accident policy of Rs 50 lakh is recommended for Satish costing Rs 7,000 annually.
Express tip: Its important to have adequate disability insurance as permanent or partial disability can jeopardize your regular future income.
Planning for goals
Sunitis Graduation (2014 to 2017): The existing bank fixed deposit can be used to partially fund this goal. Additionally,Satish should start SIP of Rs 6,500 per month in debt mutual funds.
Rate of return assumed 8% in diversified equity mutual funds.
Express tip: For short-term goals,it is recommended to avoid equity exposure and go for debt funds to avoid volatility.
Sunitis Post-Graduation (2017 to 2019): Existing Debt Mutual Funds can be used to partially fund this goal. For the remaining expense,Satish should start investing Rs 5,000 per month in balanced mutual funds through systematic investment plan or SIP.
Rate of return assumed 10% in balanced mutual funds.
Express tip: For medium-term goals,it is recommended to take the middle path of balanced funds.
Sunitis Marriage (2022): Satish should start an SIP of Rs 10,500 per month in diversified equity mutual funds for securing Sunitis marriage.
Rate of return assumed 12% in equity funds.
Express tip: Diversified Equity Mutual Funds provide high returns over long-term with increasing tenor reducing the risk correspondingly.
Retirement Planning (2026): EPF,Equity Mutual Funds and existing Insurance proceeds will fund Rs 1.14 crore at retirement leaving a shortfall of Rs 1.18 crore. For this,the couple should invest Rs 32,000 in diversified multi-cap equity funds which is not possible presently. Currently only Rs 25,000 can be invested to fund this goal. Satish should keep on increasing the investment as his salary increases.
Rate of return assumed: 12% in equity funds
Express TIP: Equity investments always provide inflation beating returns over long term.
Despite Satish being the only earning member,the family has been able to create decent assets with nil liability by managing their finances well. The family would be able to meet their financial goals comfortably with a disciplined and consistent financial approach in future.
Plan By Dr Naveen J Sirohi
Certified Financial Planner,
Member of the Financial Planners Guild,India
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