8/13/2019 031813_08

1/1

>RECOMMENDATIONSEMERGENCYFUND:Provision of up to 6 months expenses suggestedto be maintained in savings account and fixed deposits, which isalready there

LIFE INSURANCE:Prashant needs an additional insurance cover of~25 lakh. A suitable term plan for 20 years needs to be purchased,

which will cost ~6,000

HEALTH INSURANCE: Need to increase family health cover to ~10 lakhwhich will cost an additional premium of ~12,000

ACCIDENT INSURANCE:A personal accident policy of ~1 crore with ~15

lakh TTD benefit is recommended for Prashant, which will cost~12,000

CASE STUDYEvery Monday, Business Standardanalyses one familys financesand suggests a suitable way forward

>FAMILY PROFILE

>PLANNING

Plan by: Steven Fernandes, Certified Financial Planner

THE GUPTASPrashant(36), Rohan (10), Sohan (7)RESIDEIN

BangaloreNET ANNUAL INCOME

~16.80 lakhRATING

9/10

ROHAN'S POST GRADUATION (2024):Prashant needs to allocate~10,500 in diversified equity large-cap mutual funds for this goal

Rate of return assumed: 12% in equity funds

SOHAN'S POST GRADUATION (2027):Prashant needs to allocate~9,000 in diversified equity large-cap mutual funds for this goal

Rate of return assumed: 12% in equity funds

HOME LOAN REPAYMENT (2019):Reduce the loan term to 7 years,

which will increase the EMI to ~57,326 (increase of ~18,600). This willhelp in clearing the loan by 2019

Rate of return assumed: 10.5%

RETIREMENT PLANNING (2030):Prashants EPF corpus will be worth~1.31 crore when he turns 55, if he continues to work, while his 2ndproperty will be worth ~2.52 crore at that time. This will easily takecare of his retirement needs till the age of 85 years

Rate of return assumed:8% in EPF & 10% in property

Prashant has been a prudent investor since the beginning of his career

(15 years ago). He has created a good portfolio, with concentration onproperty and small allocation to debt and equity. He now desires toplan for his sons' post-graduation and paying off his home loan. Healso wants to plan for his retirement at 55 years of age

Prashant works as a head-sales in an IT firm and lives with his twosons in a self-owned apartment. Six months earlier, he lost his wifeand employs a full-time maid to take care of his children

Basic expenses (~) Permonth Annual

Household 40,000 4,80,000

Children's education 12,000 1,44,000

Home loan EMI 38,689 4,64,268

Insurance premium 2,750 33,000

Total 93,439 11,21,268Net monthly surplus: ~46,561

>GOALS

Current annualretirement expenses*:

~4.94 lakh

Future annualexpenses:

~15.60 lakh

Corpusrequired:

~3.62 crore

RETIREMENT PLANNING

(2030, inflation 7%, life expectancy 85 years)

SOHAN'S MASTERS(2027, inflation 10%)Current value:~10 lakhFuture value:~38 lakh

HOME LOAN REPAYMENT(2019, home loan interest rate = 10.50%)Current outstanding loan dues:~34 lakh

*Considering household expenses

ROHAN'S MASTERS(2024, inflation 10%)Current value:~10 lakhFuture value:~28.53 lakh

>PRESENT STATUSEMERGENCYFUND:Sufficient funds in savings account and fixed

deposit account to take care of any near-term emergencyLIFE INSURANCE:Prashant has a total insurance cover of ~51 lakh,which is inadequate

HEALTH INSURANCE:Family is covered by employer-provided healthcover of ~5 lakh and Prashant owns an additional family floater policyof ~3 lakh. Health cover is at present adequate

INVESTMENTS:Single biggest investment is in second property, whichis more than 80% of the total portfolio. Need to invest more in equityand debt

LIABILITIES:At present, paying ~38,689 for a ~35 lakh home loan,taken in 2011 for 15 years to fund the purchase of his second property

Assets ~ Liabilities ~Savings account 1,50,000 Home loan 34,00,000Fixed deposit 2,50,000EPF 6,50,000Equity mutual funds 2,25,000Self-occupied property 93,00,000Invested property 50,00,000

1,55,75,000 34,00,000Net worth 1,21,75,000