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Case Study: Family Profile

Prashant is a 36-year old head of sales with two sons aged 10 and 7. His wife passed away 6 months ago. He makes Rs. 16.8 lakhs annually and wants to plan for his sons' education, paying off his home loan, and retirement. The summary recommends increasing his life and health insurance, allocating funds to equity mutual funds to cover his sons' education goals, paying off his home loan within 7 years, and relying on returns from his EPF and property investment to fund retirement needs.

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157 views1 page

Case Study: Family Profile

Prashant is a 36-year old head of sales with two sons aged 10 and 7. His wife passed away 6 months ago. He makes Rs. 16.8 lakhs annually and wants to plan for his sons' education, paying off his home loan, and retirement. The summary recommends increasing his life and health insurance, allocating funds to equity mutual funds to cover his sons' education goals, paying off his home loan within 7 years, and relying on returns from his EPF and property investment to fund retirement needs.

Uploaded by

kill_my_klone
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CASE STUDY

Every Monday, Business Standard analyses one familys finances and suggests a suitable way forward

THE GUPTAS
Prashant (36), Rohan (10), Sohan (7)
RESIDE IN NET ANNUAL INCOME RATING

Bangalore

~16.80 lakh

9/10

>FAMILY PROFILE
Prashant works as a head-sales in an IT firm and lives with his two sons in a self-owned apartment. Six months earlier, he lost his wife and employs a full-time maid to take care of his children
Basic expenses (~) Per month Annual

Household Children's education Home loan EMI Insurance premium

40,000 12,000 38,689 2,750

4,80,000 1,44,000 4,64,268 33,000

Total

93,439

11,21,268

Net monthly surplus: ~46,561 Prashant has been a prudent investor since the beginning of his career (15 years ago). He has created a good portfolio, with concentration on property and small allocation to debt and equity. He now desires to plan for his sons' post-graduation and paying off his home loan. He also wants to plan for his retirement at 55 years of age

>GOALS ROHAN'S MASTERS


(2024, inflation 10%) Current value: ~10 lakh Future value: ~28.53 lakh

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

HOME LOAN REPAYMENT


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

RETIREMENT PLANNING
(2030, inflation 7%, life expectancy 85 years) Future annual Current annual expenses: retirement expenses*: Corpus required:

~4.94 lakh
*Considering household expenses

~15.60 lakh
~

~3.62 crore
~

Assets

Liabilities

Savings account 1,50,000 Fixed deposit 2,50,000 EPF 6,50,000 Equity mutual funds 2,25,000 Self-occupied property 93,00,000 Invested property 50,00,000 1,55,75,000 Net worth 1,21,75,000

Home loan

34,00,000

34,00,000

>PRESENT STATUS
EMERGENCY FUND: Sufficient funds in savings account and fixed deposit account to take care of any near-term emergency LIFE INSURANCE: Prashant has a total insurance cover of ~51 lakh, which is inadequate HEALTH INSURANCE: Family is covered by employer-provided health cover of ~5 lakh and Prashant owns an additional family floater policy of ~3 lakh. Health cover is at present adequate INVESTMENTS: Single biggest investment is in second property, which is more than 80% of the total portfolio. Need to invest more in equity and 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

>RECOMMENDATIONS
EMERGENCY FUND: Provision of up to 6 months expenses suggested to be maintained in savings account and fixed deposits, which is already 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 lakh which 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

>PLANNING
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 will help 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 2nd property will be worth ~2.52 crore at that time. This will easily take care of his retirement needs till the age of 85 years Rate of return assumed: 8% in EPF & 10% in property
Plan by: Steven Fernandes, Certified Financial Planner

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