Amol and Asha , both 42, stay in Bengaluru with their 11-year old son and Amol’s mother, 67. Amol is a businessman, while Asha is a homemaker, and they have a high net worth of Rs 5.9 crore due to aggressive saving and investment. Amol wants to retire by 50 years and according to the financial planning team from Fincart it will be possible since he will be able to amass funds for all his goals by that time. In fact, Amol’s existing resources mean that he does not require any fresh investment for his goals.
Amol brings in Rs 1.13 lakh a month though this amount varies because business income is erratic. This also explains his negative monthly cash flow, since some expenses are taken care of as and when the money flows in. The monthly household expenses amount to Rs 51,000, insurance premium is Rs 4,307, home loan EMI (for a Rs 39 lakh home loan) is Rs 39,000 and investment (mutual funds, PPF) is Rs 47,000, leaving him with no surplus. His goals include having an emergency corpus, loan repayment, saving for his child’s education and wedding, and his early retirement.
Portfolio
Cashflow Amol can build his emergency corpus of Rs 5.4 lakh by allocating his cash and stocks. To repay the loan of Rs 39 lakh in eight years before he retires, Amol is advised to assign a portion of his fixed deposit and mutual funds. This amount will reduce to Rs 25 lakh by that time and can be repaid with these resources. As for the education expenses for his child in six years, he has estimated a need of Rs 44.2 lakh.
This can be met by assigning a portion of his fixed deposit and stocks. For the wedding in 13 years, Amol needs nearly Rs 53 lakh, but since he will retire in eight years, he can amass Rs 36.2 lakh by allocating his fixed deposit. For retirement, he will need Rs 2.19 crore and can accumulate it by allocating his PPF corpus, postal scheme and fixed deposit. No further investment is required for this goal.
How to invest for goals *Since Amol retires at 50 in 8 years, the goal for his child’s wedding will be confined to the same period. Annual return assumed to be 12% for equity. Inflation assumed to be 6%.
Amol has one term plan worth only Rs 1.15 lakh, but Fincart suggests he close this because the high value of his assets means he does not need life insurance. As for health insurance, he has a Rs 5 lakh family floater plan for his family and another Rs 3 lakh cover for his mother. Fincart suggests that he replace the family cover with a cheaper plan worth Rs 5 lakh and a top-up plan of Rs 20 lakh. This will cost him Rs 1,551 a month in premium.
Insurance Portfolio *Premiums are indicative and could vary for different insurers.
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Financial plan by FINCART
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